On October 22, Riverbed acquired CACE Technologies, a network monitoring vendor. CACE provides solutions for network traffic capture and analysis and it is also a sponsor of Wireshark project, an open-source network monitoring tool that is being deployed by millions of end-users. CACE's products will become a part of Riverbed's Cascade business unit and Riverbed stated that Wireshark will remain a free tool.

This acquisition can impact Riverbed's market position in three key areas.

1) WAN Optimization

Riverbed has been experiencing a lot of success in the WAN optimization market and many of their competitors find it difficult to compete with data reduction and the acceleration capabilities of Riverbed's Steelhead technology. Even though WAN acceleration techniques alone are enabling organizations to improve application performance over the WAN, due to complexity of WAN traffic, organizations are increasingly looking for WAN optimization solutions that couple acceleration techniques with capabilities for visibility into WAN performance.

Riverbed responded to this trend by acquiring a network visibility vendor, Mazu Networks, in January of 2009. Even though the Mazu acquisition allowed Riverbed to add advanced network monitoring capabilities to its portfolio, it didn't significantly impact Riverbed's position in the WAN optimization market, as Mazu products were provided as a separate product offering from Riverbed's WAN optimization gear through the Cascade business unit. Riverbed did take several steps to tighten integration with Cascade solutions, but it hasn't provided both acceleration and visibility capabilities on a single platform, which is the approach that vendors, such as Exinda, Expand Networks, Ipanema Technologies and Silver Peak, have being using to create competitive advantages.

The acquisition allows Riverbed to enhance visibility capabilities of their WAN optimization solution by integrating CACE Pilot with their Steelhead appliances. CACE Pilot is a solution for analyzing network performance and using it to process data that is being collected by Steelhead appliances will enable Riverbed to provide WAN acceleration and visibility capabilities through the same platform.

2) Network Visibility

Riverbed's Cascade products have recently been getting more traction with end-user organizations, and adding network traffic capture capability to this group will further strengthen Riverbed's position in the network visibility market. Network traffic capture allows organizations to record and store network data and use it to learn about actual network behavior, as well as to be able to identify trends or the root cause of performance and security problems. This type of capability has significant synergies with Cascade's core technology for monitoring network and application performance and identifying issues as they occur. The combination of capabilities for analyzing historic network data and monitoring network performance in real-time will enable Cascade to be more effective in providing full visibility into network performance. Cascade's top competitors include NetScout, OPNET, Visual Network Systems (a division of Fluke Networks) and CA Technologies (through NetQoS products), as well as emerging vendors in this space such as ExtraHop Networks.

In order to put this acquisition in the right context, we should look into Riverbed's current position and prospects for the future. Riverbed has been growing at an impressive rate and, even after the last fiscal year when its annual revenues came close to $400 million, it continued to grow by 40%. Due to its continued success, Riverbed has set high expectations for future growth and the real question is: Does acquiring a company that has less than $5 million in annual revenues improve Riverbed's prospects to continue to grow at this rate?

From a technology perspective, it is evident that the CACE acquisition provides several different opportunities for Riverbed to enhance its product portfolio. However, even though integrating CACE Pilot with Steelhead appliances would provide a much needed boost in visibility capabilities of Riverbed's WAN optimization gear, it is not likely that this was the major driver behind this acquisition. If it was, Riverbed would go after companies, such as Vineyard Networks or NetDialog, that specialize in analyzing the data collected by WAN optimization appliances and are providing more advanced capabilities for analyzing WAN traffic than CACE Pilot does. Also, even though the acquisition enhances Riverbed Cascade's capabilities and provides new opportunities for growth, it doesn't give them a true edge over key competitors, most of them being well established vendors in this market.

So what is the biggest asset that Riverbed acquired from buying CACE?

3) Community

Wireshark is an open-source network protocol analyzer and users of this project constitute one of the largest IT management communities. Even though Riverbed expressed its commitment not to change the nature of this project, the fact that a fast growing public company is becoming a corporate sponsor of this community caused some concerns among users of Wireshark. It is certainly possible that at some point Riverbed turns Wireshark into a commercial product, but it is not very likely. The Wireshark community is a bigger asset for Riverbed than the Wireshark product, and just having access to this community could become a major source of growth opportunities for Riverbed. These opportunities could range anywhere from marketing and demand generation to product development and working closely with this community could give Riverbed a clear direction of their future growth.

The open-source products are changing some of the key dynamics in the IT management market and vendors, such as Splunk, Nagios or Zenoss, have found a way to grow their communities, provide significant value to users of their free open-source products and still have business success. Riverbed has changed its positioning from being a "WAN optimization" to "IT performance management" vendor and becoming a sponsor of the Wireshark community opens up numerous opportunities for Riverbed to truly become a leader in IT performance management by supporting, nurturing and driving innovation from the Wireshark community.