Q & A With Virtela CEO Vab Goel

Though his real full-time job is being a partner for the venture-capital firm Norwest Partners, Vab Goel also currently wears the CEO hat for networking services startup Virtela Communications, which sells global managed IP virtual private network (VPN) services.

Far from being just a money overseer, Goel has a hands-on networking background. Before joining Norwest in 2000, Goel was vice president for emerging technologies at Qwest, where he built relationships with companies like Juniper and Corvis, among others. Prior to that, he helped build the strategic IP infrastructures at Qwest and before that at Sprint.

Networking Pipeline sat down with Goel recently to get his take on a range of topics, including why mid- to larger-size enterprises should outsource their network plumbing, and why Juniper's purchase of Netscreen does not signal a return to the boom years of networking buyouts.

Networking Pipeline: We have to spend some time talking about Juniper's purchase of Netscreen. Does this mean we're back to the boom?

Vab Goel: It's very important to fill up the holes in your strategy. Sometimes, if you don't fill up those holes right on time, it can become an issue of survival. That said, I do not think it's "back to the boom." It'd be a mistake to see the numbers [for the Netscreen deal] and say this is the trend going forward. That's what got us into trouble in the past, thinking that it's a race to build companies so you can have a fast IPO or a fast acquisition. There are no shortcuts. If you look at both companies, they both executed very well. They are both strong in different markets, so it's a good fit. I do not think there's going to be too many of these types of deals.Networking Pipeline: But won't there be more consolidation overall?

Goel: Yes, we're going to see more consolidation. At the end of day, it gets very expensive to have a direct sales force out there selling one certain product. You really need to give them more than one or two products to sell. The companies who get [acquired for] premiums will be the ones who executed well. That's a very clear differentiator.

Networking Pipeline: If Juniper thinks it needs security expertise in-house, what does that mean for a security outsourcing

firm like Virtela?

Goel: It is a clear validation of two things: More and more enterprises are adopting IP VPNs. This is a validation that other service providers probably want to get into this business, so that validates the whole Virtela business model. What it means directly for Virtela is kind of interesting, since we do business with both of the companies. Now, maybe we'll have a single point of contact for both Netscreen and Juniper products.

Networking Pipeline: But is the purchase a sign that enterprises want to buy networking gear and security gear from one vendor? Cisco is talking about doing end-to-end services, do they want to be like IBM?Goel: It's one thing to buy boxes. What's more important is how you integrate them, how you run the network on a 24x7 basis. Yes, Cisco wants to sell an end-to-end product line when it comes to networking. But to think they want to be an IBM? I'm not sure that I agree with you there. One of the biggest things for IBM is services. Virtela is a strong parter of IBM global services. They do a great job of integrating hardware and software, and not always from IBM.

Networking Pipeline: Is it hard for a Virtela to convince enterprises to do VPN outsourcing, because the company's just a startup?

Goel: Our biggest obstacle is, does the enterprise want to outsource. Once they decide they do, then "who are you, Virtela" doesn't come into play anymore. It used to come in play, back in 2000, when money was free and there were a lot of promises. Now, it's different. Telcom companies aren't going to provide [these kinds of managed] services -- they are laying people off. We have partners like IBM who resell our services. We have a strong customer base.

Networking Pipeline: Is there an outsourcing market for mid-size enterprises, who may want things like secure, global VPNs, but they don't have a big enough staff to build it themselves?

Goel: Our customers are mainly mid- to large-size enterprises who have global needs. CIOs [at those companies] are recognizing they shouldn't be spending time trying to keep the network up. Their time is much better spent working to integrate the back-end systems to make their enterprises more efficient. But they've never had the option to outsource network services. If you asked AT&T, will you also manage my circuit to MCI? They won't do it. Now, you can get one firm to really manage your services.The service providers have done a great job of building the plumbing for IP networks. They have also done a very, very poor job of delivering services on top of it.

Networking Pipeline: As a group, VCs have notoriously short attention spans. Are you going to stay on as CEO of Virtela, or is the company looking for a full-time CEO?

Goel: Let's put it this way: I have a full-time job at Norwest. I also have a full-time job at Virtela. So yes, we are looking for a CEO, but I'll stay on as chairman. Our strategy at Norwest is to be pretty hands-on. If a startup has a board that's not involved, it's going to be hard for them to make it. That's how it used to be, and that's how it should be.