Blue Coat CEO admits "We're in different market segments..."

"...our pure WAN op revenue as defined by just storage acceleration and general acceleration is I think less than a couple percent of our overall product revenue."

-- Brian Nesmith, CEO Blue Coat in 23 November 2009 earnings teleconference

In any emerging market there are vendors who are the true technology innovators, who through hard work and perseverance create truly innovative products that deliver real value to customers.  At the same time there are often vendors in neighboring spaces who copy ideas from technology leaders, and attempt to give the illusion of leadership and innovation in the emerging space through creative marketing messages.

This is certainly the case in the nascent WAN optimization market.  Riverbed's Steelhead solution has allowed thousands of enterprise customers to consolidate their IT assets, realizing what can now be described as a private cloud infrastructure.  The Riverbed solution has saved millions of dollars for enterprises around the world.

At the same time there are vendors such as Blue Coat, who are established in neighboring markets--in this case web security.  Thinking that they could reproduce Riverbed's success, in 2006 Blue Coat introduced WAN optimization features into their flagship security product, the ProxySG.

But in WAN optimization, success has been elusive for Blue Coat. Their problem was that in bakeoff after bakeoff, customers consistently choose Riverbed instead of their repurposed security product whenever WAN optimization is tested and evaluated.  Of course, Blue Coat continues to have success in their core web security market, and up until recently their good fortune in that neighboring market allowed them to mask the failure in WAN optimzation.

Blue Coat will likely experience continued success in pursuing the web security market.  But after three years of fruitless attempts to penetrate the WAN optimization market, the Blue Coat CEO is finally admitting failure in competing against Riverbed.