|Frost & Sullivan Market Insight||Published: 13 Jul 2007|
Sujan Sami (SS):Can you share with our readers a brief on the genesis of InterWorking Labs, Inc., the vision for its formation and the markets that it plays in?
Chris Wellens (CW): InterWorking Labs is a spin-off of the Interop Company, the producers of the business technology conference and exhibition with a focus on multi-vendor interoperability demonstrations. The hot staging for these demonstrations uncovered many software bugs and interoperability problems, leading to the formation of InterWorking Labs and the creation of technically oriented interoperability test events and automated test suite software. Fortunately, InterWorking Labs had the full support of the Interop management team and the Interop Program Committee (the movers and shakes in the network world). The strong connection with the IETF (Internet Engineering Task Force) allowed meant that the true experts were testing the tests and assisting with the interpretation of results.
InterWorking Labs was co-founded by Marshall Rose and Chris Wellens who met while serving on the Interop Program Committee. Chris was the Director of Technology for Interop and Marshall was a Working Group Chair in the IETF for the Simple Network Management Protocol (SNMP). It was 1992 and both Chris and Marshall were concerned with the poor quality of SNMP implementations. Marshall agreed to create a set of tests if Chris would organize a group of developers into an interoperability test summit. InterWorking Labs was established in 1993 and produced its first SNMP interoperability test summit in January of 1994.
A shocking number of implementations failed the majority of the tests and there were only 50 tests! From those beginnings, SilverCreek, the official SNMP Test Suite (or SNMP tester) was created. As of 2007, SilverCreek contains hundreds of thousands of tests that cover protocol conformance, compliance, stress testing, robustness/vulnerability testing, negative, inopportune, and interoperability testing. SilverCreek is used by thousands of users worldwide.
Building on the success of the SNMP tests, InterWorking Labs developed tests for other protocols, including TCP/IP, DHCP, ICMP, and SIP.
In addition to protocol testing market, InterWorking Labs provides network emulators for creating real-world network conditions in the lab. Through its own use of Voice over IP phones and participation in SIPIT (SIP Interoperability Test events), InterWorking Labs developed technology to easily give priority to voice traffic on SMB networks. iSpeedbump, the bandwidth manager, optimizes voice traffic so small and medium business users get good voice quality.
So at this point, InterWorking Labs is in the network test, emulation, and optimization markets.
SS: In your opinion, what are some of the significant market and technology trends that will shape the future of InterWorking Labs, Inc. in the communication industry?
CW: The use of mobile devices, with streaming audio/video for mission critical (lifeline utility) applications is a major concern for the military as well as industry. The performance of these products under adverse network conditions with multiple traffic flows is a significant opportunity for network testing.
Network security is a multifaceted, multidimensional problem that continues to plague the industry. We think network security flaws will ultimately result in the complete reversal of past efforts like UCITA (which largely absolved software publishers from responsibility for the quality of their products) to significant increases in financial liability for the failure of those same software publishers to assure software quality. We believe the judicial test of the liability will come down to whether or not reasonably priced test products existed and were available to the supplier that could have been used to correct and prevent the flaws. If the answer is yes, then the supplier will be found liable and pay a substantial financial penalty. Suppliers will want to avoid this liability and this will create new demand for products to ensure quality and reliability.
We have really gone through these stages of product reliability in the communications industry:
(1) Okay if it crashes because you can reboot.
(2) Not okay if it crashes because it is "mission critical".
(3) "Lifeline utility"
Both aircraft and automobile engineering went through predictable evolutions culminating in airplane and car products becoming "lifeline utilities". A "lifeline utility" is something regarded by the general public as indispensable for the maintaining or protection of life. "Lifeline utility" products have a much higher standard of reliability than other products. Communication products that are the underpinning of corporate networks and the public network are now in that phase. Major online retailers, for example, can demonstrate multi-million dollar losses when some component of the network malfunctions due to a security flaw, Denial of Service attack, or other errors.
What this means to InterWorking Labs is considerably more demand for all of our test and emulation products.
The Company & Its Product Offering
SS: InterWorking Labs, Inc. is a key test vendor in the communication test industry and more specifically in TCP/IP and SIP. From this vantage point, what do you consider to be the growing/emerging opportunities in this space for 2007?
CW: TCP/IP works by chance and the implementations are becoming more diverse. TCP/IP is showing up in cell phones with different IP options. There is a new TCP/IP chipset that violates four RFCs (specifications) by playing games with TCP/IP timers and NATs. Some versions of Linux ignore IP packets with certain kinds of options. As these problems emerge, we expect to see more demand for TCP/IP test solutions.
SIP, the Session Initiation Protocol, is used for a wide array of Internet applications, but is best known for Voice over IP call setup. The SIP specification is too broadly defined, and needs to be significantly constrained to avoid interoperability problems. We believe the time has come for SIP version two that greatly simplifies and constrains version one.
A committee designed SIP version one and it shows; everyone was accommodated. SIP reminds me of the San Jose Trolley system; the trolley stops at every corner, instead of every quarter mile. The result is that everyone was accommodated, but the trolley is very inefficient, so it is much faster to drive. SIP was supposed to simplify H.323 (the predecessor standard), but SIP is now more complicated than H.323 with no end in sight. We expect that as consensus develops around SIP version two, there will be more demand for SIP test solutions.
In the SNMP (Simple Network Management Protocol) area, there’s an emerging opportunity with "NETCONF", a new XML based standard for configuring, controlling and managing network devices. NETCONF provides a standard Remote Procedure Call (RPC)-based programmatic interface for network devices. With NETCONF, I think we have the Rosetta stone for network management; it will be the integration point for the four different methods of collecting management information today (SNMP, HTML, Command Line Interface and SYSLOG-based data). NETCONF has huge potential and will, I think, appear in network communications products in 2007 and 2008.
SS: What have been your biggest challenges and how have you re-aligned your strategies to overcome them?
CW: The biggest challenge is consolidation in the network communications industry, more mergers and acquisitions, and ultimately fewer companies. This is a result of slowing growth and a need to achieve profits through relentless cost-cutting.
InterWorking Labs has expanded its customer base from product manufacturers (a small and getting smaller market) to IT staff with requirements for pre-deployment testing (a much larger market).
SS: What geographic markets do you see as a primary focus for present and future growth?
CW: We see significant increases in demand from both China and India.
SS: How would you rate your company’s performance in 2006 and what influenced this performance? What was your main obstacle in 2006 and how did you overcome it? Going forward, what do you expect for 2007?
CW: In 2006, our performance was tied into the development of new products. In the past few years, our customers’ budgets had been cut so substantially that even when presented with a brilliant value proposition, customers were not able to get funding for products in excess of $30,000. Thus, we invested in the development of lower priced products that could still be profitable and maintainable for us, and deliver value for our customers.
SS: Can you brief us about InterWorking Labs, Inc.’s supply chain management system in terms of distribution structure/channel and your support offered to them?
CW: Most of our products are based on intellectual property and the licensing of intellectual property, not the management or supply of hardware components. On our products that do involve hardware, we have multiple sources and use off the shelf components. Presently we sell direct in the U.S. and through distributors internationally.
SS: Who are your key customers/end users and what do you think are the key concerns that they have regarding communication test equipment?
CW: Our key customers are Alcatel-Lucent, Cisco, Hewlett Packard, Juniper, McData, Motorola, NetApp, Nokia, Nortel, Siemens, and the U.S. Government and its subcontractors. We survey them about their key concerns which are: quality/reliability, price/performance, technical support, ease of use.
SS: How do you train the consumers and end-users regarding the value attributes and proposition of your products? (Service and Support strategy by region and/or Applications, Future plans, Service locations - own/direct as well as through channels)
CW: Our marketing materials and conference presentations explain the value attributes of our products and services.
For service and support, we provide web-based training sessions and take questions from participants and we also have Flash training. Usually in the service and support area, the questions are about how to use the product and not why to purchase the product.
SS: According to you, what is the longevity of the products in the industry and how does it cater to the end user requirements today?
CW: As we grow the business in the optimization area, the longevity of the products will require constant monitoring and review. In our more traditional areas, protocol test and emulation, new releases come out and we add more tests and functionality.
SS: What is the unique value proposition of InterWorking Labs, Inc.? Who are your key competitors and what are the top 3 things that InterWorking Labs, Inc. is doing that sets it apart from its competition?
CW: InterWorking Labs has products in three areas: network test, emulation, and optimization. Our competitors and value proposition are different for each area.
In network testing, our value proposition is that we are official. This means that we go to extreme ends to make sure our tests are accurate and thorough. Our ASN white paper is a good example of this: http://www.iwl.com/resources/white-papers/advisory-board-rules-on-snmpinasnparseerrs.html
In network emulation, our value proposition is that we have the most advanced emulation capability. The more closely you can emulate the real-world in the lab, before you deploy a product, the more likely your success. We are able to do deep path testing, bi-directional network flows, and protocol and payload impairments, that no one else can do.
In network optimization, our value proposition is best value for the SMB. No one has really addressed the needs of the SMB, which is odd, because it is such a huge market. There are low end network optimizers that crash a lot and have no technical support. There are higher end products that require network engineering expertise (unavailable to SMBs) to configure all the rules and policies. Then there’s iSpeedbump; it is production quality, and lets you select a profile. That’s it and your network traffic is optimized.
SS: What do you, as a President & CEO of the company, want to accomplish in the next couple of years? How would you define success for yourself and for InterWorking Labs, Inc.?
CW: We would like to increase our scope and breadth and see at least 50% of our business from the end users, not just the manufacturers.
We want our customers to have confidence that when they add equipment to their networks, the new equipment will work, without compromising the integrity of the existing equipment and without unexpected failures.
SS: How will equipment test vendors differentiate themselves in five years time and how will that be different to today’s competitive landscape?
CW: The network/communications test market is a tough market. The total available market is small; it is not glamorous; an end user does not see it; the support costs can be very high. When you are successful in finding lots and lots of bugs, the customer response can be emotional.
Currently, the largest purchasers of network products demand evidence of rigorous testing from the suppliers. We expect this to continue and increase to the extent that as the products become more commoditized, the differentiator will be the testing process.
Key differentiators in the future will be video arcade style user interfaces, plug and play integration for soup to nuts test harnesses, and test robots.
SS: What are some of the growth strategies that your company has implemented to foray into untapped markets and expand its client base? Could you also highlight the company’s specific partnerships or alliances made in the recent past? What can we expect on this front from InterWorking Labs, Inc. going forward?
CW: There are some interesting partnerships in the works regarding major test initiatives. There are some OEM relationships that we hope to announce. We have partnerships with IXIA and Spirent, and we also have special relationships with the IETF, SIPIT, and the ILABS at Interop.
SS: Could you brief us on InterWorking Labs, Inc.’s SWOT in the communication test market today? Is there anything specific from the supply chain perspective?
a. Our reputation in the communications test market.
b. Complete and robust tests
c. Close affiliation with IETF and standards
d. Relentless pursuit of accuracy and thoroughness
e. Advanced and innovative test capabilities
a. While we are just outside of Silicon Valley, we are in an area famous for its "laid back" attitude with great surfing and the beach, so we have a difficult time finding qualified senior management.
b. Historically, we have not invested substantially in marketing. As a result, we do not get the visibility that we should.
a. The future of the market is a tremendous opportunity for InterWorking Labs - we are growing in the emulation and optimization markets on a global level
b. The "Balkanization" of the Internet means that more businesses need more help obtaining and managing bandwidth.
c. Very early on we invested in an offshore development team. We have developed significant expertise in managing that group remotely as well as managing the IP risk. Looking forward, there will be more opportunities to obtain geographically dispersed talent and put it to good use. (Also these become markets for our products).
d. Increased interest and vigilance of end users in demanding product quality is a great opportunity for us.
a. New entrants to the market who do not understand the testing business. They attack like a swarm of bees, wreak havoc, do damage, and leave. There’s a lot of this going on in voice testing as well as security testing. We will get through this once again and assist with the clean up when they are gone.
b. "Open source" tools. While there are some exceptions, most of these tools require that the user is an experienced development engineer and subject matter expert. Of course, the tool’s user discovers that he does not meet the profile and then has the challenge of explaining to his management why he needs a commercial product when the management cannot understand what is wrong with the free one.
c. Offshore companies "developing" commercial tools that they cannot possibly support. It is one thing to make fake Rolex watches; the watch wearer can always dispose of the product. It is not the same thing to make fake test tools. There is so much more to test products than copying the code. A good example of this is our Technical Support Comparison (see http://www.iwl.com/products/silvercreek---snmp/silvercreek-technical-support-comparison.html)
d. While this is not a threat to InterWorking Labs specifically, for all of our customers, use of GPL3 open source can result in "contamination".
SS: What are some of the best practices adopted by InterWorking Labs, Inc. in the market and what are some of the special initiatives taken to improve the awareness levels among end-users?
CW: Limiting the discussion to best practices in the market and just our test products:
a. We have an advisory board of experts that reviews appeals about test interpretations. This ensures fairness and objectivity.
b. We actively advise the communications market about key technology changes (see our IPV6 MIB announcement)
c. We have our development engineers get involved with customers, their requirements, and their training. (Interestingly, Intuit also does a variation on this. The theory is that it is more expedient for new product development than a marketing requirements document.)
d. We have a special website for end users, www.networkreporter.com. Whenever possible we post test results to this site that we think will be helpful to end users in learning about networking. Non-disclosure agreements prevent us from doing more.
SS: Could you highlight some of the key marketing strategies and outsourcing/contract manufacturing agreements adopted by InterWorking Labs, Inc.?
CW: We have direct sales in the U.S. and distributors internationally. We leverage the Internet for marketing as much as possible through online advertising, Flash videos, web conferences, RSS feeds, BLOGs, and so on. We participate in the Interop ILABS event in Las Vegas each year and also standard industry interoperability events such as SIPIT (SIP Interoperability Test), JITC, and so on.
SS: As a conclusion, what does the future hold for the communication test industry? What is the road map that is envisaged for InterWorking Labs, Inc.’s growth in terms of market focus, development centers and employees?
CW: We assess and measure our development centers and employees; we provide coaching and training and will continue to do so.
In terms of market focus, over the long term we are moving towards self-healing networks and autonomous agents.