Juniper CTO: Open Source Software Can Be Profitable
Making money on selling software
CW: So what do these changes mean for you as a company? What different kinds of skills do you have to bring on board, or are the skills already there?
BK: First of all, as a company, Juniper has always built software, that's the core to it. Of course, it has sold them as part of the hardware, but developing mission-critical software has been in the company's DNA, so that's not a whole lot of change. The change that the company is going through is ultimately you need an 'ops' skill set, just 'dev' is not enough because more often than not, you need to be able to stand up a cluster or stand up an NFVi stack and then operate it to start with, and then maybe hand off to a customer. It's a new skill set, but at the same time, it's a great service model that they actually like.
The second part of this is when you're building for open source, which we do, your development model is different. If you're really true to open source, then you have to build and do software releases in a way that is true to that. [That means] you're putting these on open source GitHub and you are allowing the community to drive the development and then you are consuming it so that the development model is different. Which again is not new to the company because Contrail has been doing it for a while, but we're adopting this across the board with P4 and other things. So that model is changing.
CW: How do you replace the profits you might once have gotten by selling hardware, by this other business model?
BK: In terms of monetization, that's a great question. There is a perception rightly or wrongly that open source ultimately reduces the ability for companies to monetize. I actually think it's a mistaken conception for the reason that I said. Open source is not free. Somebody is ultimately building and operating this for you. So our view of that is when it comes to hardware, if the hardware is a commodity, we just use commodity hardware. There is no reason for Juniper to build it. We actually buy it from the same set of folks that, if you were to go and consume, buying commodity hardware yourself, you would buy it from.
When it comes to software, there is still a lot to be said about building reliable, fault-tolerant software that you can base your mission-critical systems on. What you really monetize is the software that you sell. In some ways I can think of, with the most complex software that Juniper used to sell, even if it was selling hardware, ultimately you were monetizing the features that run on the box. Ultimately that's not that different in terms of a model. It's just that the way that software is packaged and sold is changing.
The third piece, which is probably the most important one, is we absolutely expect over time our mix of pure software revenue versus pure hardware revenue is going to change toward more pure software revenue, which as a company, we're absolutely excited about because it opens up a lot of different ways of monetizing the intellectual property that we're building. That is changing as well.
CW: Okay. Do you think the industry has yet figured out though how that pricing changes? I find when I talk to people, depending on who you talk to, you get some very different ideas about how things are going to be packaged and sold and how to handle software licensing, for example.
BK:: The industry is most definitely figuring it out, for sure. I would say that some have figured it out better than others. We have been giving this quite a bit of thought for a while and we have also sold pure software for quite some time. While I would not claim that as an industry we have all figured out what is the best model that works, as Juniper, we have done quite a bit of work in really figuring out how it changes our revenue and margin profile and how we monetize software and what's the best mix that ultimately works. But you're right in terms of perpetual versus licensing model. People are still in the midst of figuring it out. It's not completely figured out.
PART TWO: Juniper on the edge -- Coming soon.
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