The VAR Guy

As networks and applications converge with one another, many pundits are focused on the looming showdown between Cisco Systems and Microsoft. But there are plenty of subplots worth following in the unified networks market. One of them involves Microsoft channel veteran Steve Hale (pictured), who is quietly working to build the networking industry’s next $1 billion company.

Hale joined F5 Networks as VP of channel sales in July. The company specializes in application-centric networking. “This isn’t just a hardware story,” said Hale, during a meeting with The VAR Guy in a Manhattan hotel lobby last week. “There’s a very strong software and development platform story here.”

No, F5 isn’t in the application business. Rather, the networking company focuses on making third-party applications — Microsoft Exchange Server, SharePoint, unified communications, etc. — perform better over the network.

So far, that messaging is connecting with customers. For its fiscal year 2007, revenue rose 33 percent to $525.7 million. Backed by a growing partner ecosystem, Hale hopes to play a key role in transforming F5 into a $1 billion company (annual revenues) over the next few years.

Hale certainly has been moving fast. A few days after landing at the company this past summer, he hosted F5’s annual partner conference. Then, he made some subtle changes within his organization — deemphasizing “channel sales” and promoting the term “partner.” His updated title (now VP, North America Partner Organization) now reflects those changes.

How will Hale engage partners over the next few months? Glad you asked. F5 is “betting the business on partner capacity,” he said during the morning chat with our resident blogger. “Training is the lifeblood of any partner ecosystem, so you’ll see us double down on training.” F5 announced a first step toward that training initiative in October 2007.

More recently, the company has expanded its product portfolio to enhance the performance of Microsoft Office Communications Server, Oracle and SAP applications.

Don’t Forget Virtualization

Next up, Hale plans to help F5 partners push deeper into the virtualization market. Toward that end, F5 acquired Acopia Networks in August 2007. More details about the virtualization effort will surely surface at F5’s annual partner conference, scheduled for July 28-30 in New Orleans. Last year’s event attracted roughly 300 partners. This year, Hale hopes to push that number closer to 400.

Rather than pitch products endlessly at the event, Hale hopes to put partners center stage at the event — allowing them to share best practices and case studies with each other.

With its focus on application performance, F5 Networks has a compelling story to share with partners and customers. After all, even Cisco CEO John Chambers spends much of his time evangelizing networks as the platform for next-generation applications. But that’s both a blessing and a burden: The unified communications shouting match between Cisco and Microsoft threatens to drown out other voices in the networking industry.

Still, Hale has faced some of these challenges before. While at Microsoft, he had to help the software giant make the challenging leap from desktop applications into server environments. Despite entrenched competition from Oracle and other big software companies, Hale ultimately helped Microsoft build enterprise-class relationships with Accenture, Electronic Data Systems (EDS) and other influential systems integrators.

Now, Hale is hoping to deliver an encore at F5 networks. Oh, and he may also need to battle an economic slowdown. Jefferies & Co. last week downgraded F5 shares to “hold” from “buy” based on concerns over the economy. In particular, the firm said F5’s heavy reliance on North American sales and financial services customers could be a drag on earnings.

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