NW100: Which of these companies is most likely to succeed?

Which of these companies is most likely to succeed?

These young US companies could be the network stars of tomorrowSometimes corporate giants can shake things up, like when IBM produced its first PC. But often it's the small fry that have the big ideas. These 10 network companies may be small, but they're pushing some hot technologies that could vault them into the big timeName to watch Technology baseAkamai Web content distributionBluestone Software XMLCovad Communications DSLFoundry Networks Gigabet Ethernet switchingInktomi Web cachingManage.Com Web-based managementNetwork Alchemy VPN serverNextlink Communications LMDS wirelessRed Hat Linux softwareUkiah Policy-based traffic managementAkamai controls the flowHear the words 'flash flood' and you'll probably envision muddied, churning waters raging out of control, scoring deep swaths across the landscape and wreaking havoc in their wake.

The words 'flash crowd' don't have quite the same effect -- but startup Akamai Technologies has launched a business around the belief that if one hits an unprepared Web site, the devastation could be just as dramatic for the business owner.

By Akamai's definition, a flash crowd happens when a Web site experiences an intense traffic spike correlating to an event. One infamous example is the glut of people pounding the US House of Representatives site when it posted the Starr Report.

A company can usually sense when something it plans on posting on the Web is going to draw a crowd, but it has no way to predict the volume of the onslaught. That's where Akamai steps in, said David Goodtree, the company's newly named vice president of marketing.

Akamai has developed a patent-pending technology for managing traffic loads across multiple networks. Its service, called FreeFlow, pushes content as close to the user as possible by distributing it across a network of Akamai servers.

"A user might typically be one, two or three networks away from the content. With FreeFlow, if an Internet service provider (ISP) customer looks down the physical wire, the first thing he should see in the point of presence is our server," Goodtree said.

Towards that end, Akamai already has deployed 500 servers on 10 networks around the globe. By the end of the year, it will have 1000 servers on 20 networks. More will follow as quickly as the company can get them up, Goodtree said.

Akamai put FreeFlow through the wringer in beta tests involving 10 undisclosed Web content providers.

During the trial, FreeFlow handled live traffic, including several flash crowds, with "aplomb", Goodtree said. He noted that the beta traffic taxed only 1 per cent of Akamai's network, and that each beta user has decided to become a paying customer.

Akamai's prospects look great, said Todd Dagres, general partner at Battery Ventures, a venture capital firm.

"It is helping satisfy a very clear need relative to how Web-centric companies deliver content over the Internet," he said.

What's more, Akamai has an impressive management team behind it, Dagres adds. The team is led by George Conrades, who became chairman and CEO earlier this month. In various corporate lives, Conrades launched IBM's services business, led the commercialisation of BBN's research and development business, and then oversaw the integration of GTE's Internet and data communications activities following the BBN acquisition.

Akamai has $US8 million in initial funding, led by Battery Ventures and Polaris Venture Partners. The company is closing its second round of financing, so "it will have a large war chest", Dagres said.

With such backing, Akamai's sure to be more than just a flash in the pan. - Beth SchultzBluestone's XMLent futureBluestone Software sells Web application servers -- certainly not the sexiest of Internet technologies, but most assuredly where some big money is.

The application server market nearly tripled from about $US150 million last year to $US412 million this year, according to a survey by Forrester Research. Even better, Forrester is predicting that the market will grow fivefold by 2002, to $US2.1 billion.

With Sapphire/Web, an application framework that shepherds data from back-end systems to the new world of the Web, and XML-Server, which translates nearly any kind of data into Extensible Markup Language (XML), Bluestone is poised for growth, analysts believe. Bluestone Software makes our list of companies to watch on the strength of its products and its vision.

When Sapphire/Web was launched four years ago, the company was ahead of the pack with its Web focus. Last year, Bluestone was again on the cutting edge, this time with XML-Server, part of a new class of application servers made to produce, transport or store XML documents.

Bluestone's XML-Server is special because it dynamically translates non-XML data into XML. That ability helps make back-end business applications and data available for e-commerce and other Internet applications.

The company also has marketing savvy, releasing innovative, affordable tools to broaden XML's appeal, such as Visual XML, a tool kit for building XML applications.

In March Kevin Kilroy celebrated his one-year anniversary as Bluestone's president.

He was promoted from vice president of sales in March 1998 with the goal of getting the word out about Bluestone.

"At that time, Bluestone had a fifth-generation product, but no mind share," he said.

Kilroy, along with key employees hired away from the likes of Oracle, SAP and Platinum Technology, earned Bluestone a 426 per cent increase in licensed sales last year. Kilroy expects sales to double this year. How much money that increase represents is not something the otherwise talkative Kilroy is willing to discuss, blaming his silence on the quiet period demanded by Bluestone's upcoming public offering.

In the coming year, Bluestone will emphasise personalisation and content management, Kilroy said. He also expects the company to continue growing; so far, the head count hovers around 160.

One caveat: XML is still young, and analysts don't expect the market to grow appreciably this year. Still, with companies such as Dreyfus Service, Conexant (formerly Rockwell Semiconductor System) and MCI WorldCom signing on to Sapphire/Web, the company might be able to afford the wait. - Robin Schreier HohmanCovad: be ready for DSLCovad Communications' digital subscriber line (DSL) network business could explode this year.

After much preparation, the company finally has what it needs to deliver broadband Internet and corporate access over regular phone lines.

It methodically did the grunt work of winning state-by-state competitive local exchange carrier status, approval it needed to lease phone lines from traditional local carriers, the regional Bell operating companies.

It leased space for its DSL gear in RBOC switching offices.

It formed alliances with ISPs and phone companies that will resell Covad DSL services.

It issued public stock, pulling in the money it needs to finance its service rollout.

Perhaps its greatest achievement so far is lining up AT&T as an investor -- $US25 million -- and a reseller of Covad DSL services, said Eric Paulak, an analyst for Gartner Group. Covad's TeleSpeed services give customers access to the Internet or corporate networks at speeds between 144Kbits/sec and 1.5Mbits/sec.

In addition, Covad has signed up other key service providers, Qwest Communications and Concentric Networks among them, as investors and resellers. In 1996 when the company was formed, Covad took one look at DSL technology and saw what it could mean for businesses: fast, inexpensive access to corporate networks and the Internet using regular phone lines.

It decided to forgo the feature that allows an analog voice channel on the same line as the DSL datastream, because it thought business customers did not need it. Covad also focused on DSL flavours that provide symmetric bandwidth, even though asymmetric varieties offer higher speeds in one direction.

Business customers want to send and receive at roughly the same speeds, Covad thought.

So far, the company's analysis has won broad support among others in the industry. And last year, Covad's first full year offering services, it took in $US5.3 million in sales -- with services available in only seven cities.

The rollout so far gives the company access to six million potential customers. And the company has announced plans to sell DSL in 22 cities by the end of the year.

While it is enjoying success, Covad is being pursued by some formidable opponents that also bear watching, including NorthPoint Communications and Rhythms Netconnections.

But with the focus, funding and execution it has shown so far, Covad should be around for the long term. -- Tim GreeneFoundry turns on switchingFoundry Networks is what you might call LAN hardware's dark horse.

Its Layer 3 switches may not have the flash of Extreme Networks' purple boxes, and the company may not have the marketing muscle of Cisco, but Foundry has been quietly winning users with its products' low prices, high performance and range of features.

Foundry's switches make forwarding decisions at Layer 2, 3 or 4, and send data over Fast Ethernet and Gigabit Ethernet. The company has more than 600 customers today, and it is profitable -- a rarity among the Gigabit Ethernet startups that have come and gone in the past few years. Most of those startups have been swallowed up by other companies.

Extreme, Foundry's rival, has garnered much attention since it filed for an initial public offering in January, but all eyes will shift to Foundry as it files for its IPO. CEO Bobby Johnson said such an offering is imminent, although Foundry hadn't gone public by press time.

The company will also keep the heat on as it expands its product line over the next year. Foundry's flagship BigIron switch now has new WAN and copper-based Gigabit Ethernet interfaces, and Foundry will raise the capacity of its switches with wave division multiplexing later this year. The US Army's Redstone Arsenal revamped its network with Foundry switches last year, moving from a mix of switched and shared Ethernet to Gigabit Ethernet and Fast Ethernet switches.

"The bandwidth is incredible," said Bob Nance, network administrator with Amtec, which contracts with the weapons depot. -- Jeff CarusoInktomi caches onTo the Lakota Indians the name 'Inktomi' summons the legend of a trickster spider that defeats larger adversaries through wit and cunning.

In a Web of a different kind, Inktomi is outwitting its competitors with caching technology that is less than a year old.

Inktomi enters our 10 companies-to-watch list for its Traffic Server, which has already snared such service providers as America Online, Intermedia Communications' Business Internet and @Home Network. The company also aims the carrier-class gear at big enterprise companies.

AOL apparently likes what it sees.

"We are always looking to bring the very best Web experience to our members, and Inktomi's Traffic Server really helps us do that," said Wendy Goldberg, vice president of communications for AOL.

In fact, that 'best experience' is measurable. In a recent shootout of Web-page speed, AOL led a pack of 28 ISPs with an average time to download of 27.64 seconds. The runner-up, BellSouth, had a download time of 30.43 seconds. Inverse Network Technology, a benchmarking service, conducted the tests.

Traffic Server has this effect thanks to its custom thread- and event-scheduling system and an object database that can cache large numbers of Web objects. Traffic Server supports Cache HTTP 1.1 and is one of the only caching products that supports audio, streaming video, Usenet news and Network News Transfer Protocol content.

Caching is a market ripe for picking, said ISP analyst Greg Howard of the High-tech Resource Consulting Group. His research shows that more than half of the country's national ISPs plan to implement caching technology to increase network performance. Their vendor choice? Inktomi, he said.

Inktomi started in the ISP market with its well-regarded outsourced search engine service. At the root of the service is Inktomi's home-grown clustering technology, which aggregates low-cost, off-the-shelf workstations and PCs into a massive parallel computer.

Traffic Server grew out of Inktomi's clustering experience because caching requires knowledge of the Internet, traffic volumes and parallel computing.

Inktomi is using Traffic Server to attack the global enterprise market, particularly companies with their own carrier-class, mission-critical networks. It is therefore selling the product via a traditional software licensing model, in which price is negotiated case by case, said Paul Gauthier, chief technology officer and co-founder of Inktomi.

The business plan may prove to be a winner, too. As of fourth-quarter 1998, Inktomi has been generating roughly half of its revenue through Traffic Server, with the remainder coming from its outsourced search engine services. Better still, revenue is growing at a rate of 343 per cent, to $US20.4 million, according to the company's last quarterly statement. And Inktomi has been a darling of Wall Street in the past year, despite consistent losses.

Next up for Inktomi is shopping search engine services that the company will outsource to its portal customers in the same manner it outsources Web page queries. CNNfn.com has already signed up for the service for its newly launched CNNfn Power Shopper.

-- Julie Bort

Manage.Com has Web flair

Few vendors have championed Web-based management like Manage.Com.

The company has ridden the wave of excitement surrounding Web technology, creating software that lets net managers view the layout of their networks on a Web browser from any point on the network.

Manage.Com's FrontLine Manager is aimed at mid-size companies at which users have outgrown simple LAN management, yet don't require something as complex and expensive as major network and systems management platforms.

FrontLine Manager is striking a chord with some users.

"A lot of the software we had in the past was hard to use," said Robert Zeien, a network engineer at Stanford University Medical Centre and an early user of FrontLine Manager.

The medical centre tried Hewlett-Packard's OpenView, Cabletron's Spectrum and others. FrontLine Manager gave the network managers the information they needed quickly, Zeien said.

Manage.Com is focusing on tools for "generalists, rather than specialists", said John McConnell, president of McConnell Associates. Because the company's software has built-in intelligence, it can help network managers find problems faster.

While simplified, Web-based network management was a good first step, Manage.Com is trying to tackle what it sees as the next big obstacle.

"The bigger issue is taking Web management to companies doing e-business," said Bob Quillan, vice president of marketing at the company.

Managing a company's internal network is something a lot of software packages can do, he points out. The next step is to manage not just a company's intranet, but also its extranet as well. When partner companies and customers are included, the management problem becomes more complex, and security and billing issues arise, Quillan said.

Now the company's challenge is to develop tools for managing electronic businesses quickly -- as quickly as companies are adopting e-business techniques, he said. -- Jeff CarusoNetwork Alchemy whips up potent VPN brewNetwork Alchemy is taking a new approach to virtual private networks (VPN): it is starting with the assumption that VPNs will become so big and so critical that customers will need high-capacity gear that just won't fail.

There are other big VPN boxes to be sure. For instance, some vendors have boxes that handle up to 5000 VPN connections at a time. But if one of those stand-alone boxes fails, it brings down the whole VPN.

Network Alchemy sidesteps that problem with servers that load-share so, if one fails, others pick up the slack.

And Network Alchemy thinks big. Its first box, the VPN Server 5000, handles 20,000 simultaneous VPN connections. Up to 255 Server 5000s can be wired together to create a VPN that can handle a whopping five million users. Theoretically, 60 Network Alchemy boxes could handle the whole US.

For those who want to save money, Network Alchemy is planning to release a smaller server later this year.

Network Alchemy has crammed its servers with processing power to support its considerable list of security measures. The features include public- and private-key authentication, Data Encryption Standard encryption and tunnelling protocols.

The company has 35 employees and is backed by $US3 million in private funding plus $US4 million from Trinity Venture Partners.

Network Alchemy gear is based on a proprietary operating system written by David Kashtan, the company's founder and chief technology officer. The operating system, known whimsically as DaveOS, was designed just to support network security, so the code contains no unnecessary overhead.

That is a virtue, said Mike Zboray, an analyst with Gartner Group. Network operating systems such as Unix or Windows NT can accommodate security features, but they are not strong enough.

"The best bet is something designed only to do remote access. It said, 'I take packets in and the only place they go is to a private network. I encrypt and decrypt. That's it'," Zboray said.

From its claims and demonstrations, Network Alchemy looks promising.

Now we need to see if it will ultimately deliver. - Tim GreeneNextlink puts money down on LMDSCraig McCaw's Nextlink Communications was not exactly revolutionary when it started out five years ago.

Instead, the company took a nice safe road as a competitive local exchange carrier (CLEC) to small metropolitan areas.

But it has thrown safety out the window. Now the company is thinking big and taking risks, such as investing $US833 million in the still unproven Local Multipoint Distribution Services (LMDS) wireless spectrum.

Earlier this year, Nextlink spent $US542 million to buy WNP Communications, which held 40 LMDS licences. (It also paid the US Federal Communications Commission $US153 million in related licence fees.) In addition, Nextlink dished out $US138 million to get partial ownership of 42 LMDS licences from another McCaw business, Nextband Communications.

All these licences could help Nextlink quickly offer local services in new markets because LMDS eliminates the need for the company to buy or build its own network, or strike deals with the sometimes uncooperative incumbent LECs. The downside of LMDS is that it is relatively new, and carrier-class equipment is still being developed. Unruffled, Nextlink plans to have LMDS equipment trials under way by the end of the year.

If LMDS fails, Nextlink still has 25,000km of optical fibre.

In addition, Nextlink is part of a joint venture company, Internext Communications, building a $700 million fibre-optic network that should be working by next year. The Internext network will connect Nextlink's 22 facilities-based local networks and support Nextlink's frame relay and ATM services due later this year.

In Nextlink, analysts see a company clearly on the move.

"In the last six to 12 months, Nextlink has made fundamental changes in its business plan," said Michael Smith, managing director at Stratecast Partners, a consulting firm.

"Nextlink is good at offering business users local dial-tone services, but it is now trying to evolve into a much broader company with a grander vision." -- Denise PappalardoA tip of the Hat to LinuxA year ago, only a few people had heard of Linux. Now the operating system has a huge fan base, its own cutesy logo and even a Web-based mall that sells T-shirts.

Red Hat Software was an early Linux believer and is now reaping the benefits of its faith. The company dominated the Linux market last year, with 53.8 per cent of the 2.6 million software units shipped, said Dan Kusnetsky, an analyst at IDC.

That market share translates into about $US20.4 million in revenue for Red Hat. The company won't release numbers, but analysts figure Red Hat racked up about $25 million last year, with an extra $4 million to $5 million coming from Linux services.

This year should be even better. Bob Young, Red Hat CEO and co-founder, predicts a 100 per cent growth rate in the Linux market this year.

There's no way to tell how many people are using Linux, however. One version or another of Linux has been available for free on the Internet for years. You can legally buy one copy of any Linux software and put it on an unlimited number of computers.

For Red Hat, that means long-run money is to be made on services.

"We look at selling software as a commodity play --- we don't think of ourselves as a software company," Young said. He won't say how much of that commodity Red Hat is selling -- he does not have to, the company is private. But Young said, with a laugh: "We're doing so well it makes me nervous."

The company is doing well enough to hire more than 100 employees, and Red Hat itself has become a hot buy. Last September, industry giants Intel and Netscape bought a minority stake in the four-year old company.

Early this year, Compaq, IBM, Novell and Oracle also bought in, and IBM has signed an agreement to resell Red Hat Linux with some of its Intel-based hardware. Red Hat also has deals with Dell, Hewlett-Packard, Informix and Corel.

Red Hat is clearly a big name among Linux cultists. To boost name recognition within the enterprise, Red Hat last year formed the Enterprise Computing Division.

This market may be tougher to crack, as IT executives shy away from this still nonstandard operating system. But just as fans were able to sneak PCs and Macs into IS shops in the early days, Linux advocates are bringing in the operating system and not asking for permission.

"Quite often, the IT executives aren't aware Linux is there," Kusnetsky said. That may well be true: IDC estimates that 17 per cent of all new servers shipped last year ran Linux. - Robin Schreier HohmanUkiah sets policyIncomparable. That's the kind of praise Ukiah Software is receiving for its policy-based management software, which supports multiple vendors' devices.

"Ukiah is incomparable because it is a company that, right now, has no competition in this space," said Sam Alunni, president of Sterling Research, a network management ana-lysis specialist.

While Ukiah isn't the only vendor delivering policy-based management tools, it stands alone as an independent software maker. Most quality-of-service (QoS) products are proprietary and are developed by a hardware vendor for its product. - Julie Bort

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