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Cisco Eats F5's Dust In WAN Optimization

Infonetics reported that Cisco has taken a considerable hit in their application delivery controller (ADC) market share. They are trailing behind F5 Networks by 12 points, Cisco having dropped to 26 percent of the market and F5 Networks taking a considerable 38 percent of the ADC market. Does this 2Q09 report spell a weakness for the networking giant, or are they neglecting some important growth markets?

The application delivery controller (ADC) market is back on a growth track after a tumultuous 2009, with worldwide sales up 28 percent compared to the first quarter of 2009. F5 continues to build its lead in the ADC market, and now has a considerable lead over Cisco, a far cry from the neck-and-neck market share races of 2007 and 2008. Of the top WAN optimization vendors, Blue Coat was the only with positive revenue results (up 7 percent), though some private WAN optimization vendors, such as SilverPeak, do not disclose their numbers to Infonetics.

ADCs have become increasingly important with the growing interest in cloud computing where a well performing data center is essential to application responsiveness. If the IT industry is moving into the cloud, as analysts firms such as Gartner and IDC are predicting, then the ADC line of products will make up the most important items on the data center architects check-list. WAN optimization and load balancing are essential tools to make off-premise computing functional with minimum quality of service standards.
As data centers see their operations and processing tasks move to outsourced data centers, the paramount goal of any IT staff will be to ensure the most efficient delivery of computing services. While Cisco has the lion's share of the Ethernet switch and router market, taking 68 percent of revenue when combining their sales number's with their Linksys brand, they are losing out to the smaller specialists on some growth markets, with Blue Coat and Riverbed ahead on sales in the WAN optimization  market.
The researcher, Matthias Machowinski of Infonetics who produced the report, told us that he believes that F5 is solely reliant on their ADC market, and if they were unsuccessful here then "they would vanish," whereas Cisco is so diversified that they have a strong enough business in their "integration with network infrastructure sales."  Matthias also believes that F5 has a lot of content providers as customers, and where they will require continuous investment in their infrastructure to keep up with the growth of these services, these large customers play a meaningful role in the F5 balance sheet.
Gartner says that 2010 is going to be the biggest year for cloud computing on the 'hype cycle' and it is very possible that when the results come out for 2010, Cisco will regain considerable market share. Otherwise F5, Blue Coat and Riverbed will reach the critical mass which will guarantee them a viable future.

Matthais predicted that by 2013 the WAN optimization market will be worth $1.5 billion based on the growth of cloud computing, which will not take over the world for another few years, but if these ADC specialists continue to provide the right solutions they will certainly play a role in many enterprises. It will take a significant effort for Cisco to refocus themselves so as to stay relevant in this emerging market. As the cloud grows ADC is going to be the priority for many organizations and their cloud based architectures. Only time will tell as to who wins.