Caching companies are licking their wounds after a tough 2001 in which they saw revenue take a nosedive. But they are hoping for better days as businesses Web-enable more applications and content, and seek ways to boost network performance.
There was a veritable cache crash during 2001 when the once-high-flying caching companies saw their stock values plummet. For example, CacheFlow, which traded at a high of $182 at the end of 1999, is trading less than $1 these days.
Still, analysts and business users seem optimistic about the future of the caching industry, which is maturing into more than just simple warehouses for static digital content.
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Caching vendors are adding features such as security, content filtering and intelligent content management as they position themselves to be part of the next generation of corporate networks, so-called enterprise content delivery networks (CDN), which support things such as streaming media, Web-enabled applications and Web services.
"Is there a market for caching products? The answer is yes," says Greg Howard, principal analyst at High Tech Resource Consulting Group. "Where is the caching market going, though? They're looking to see where they can expand their products to fulfill other needs in the network."
Analysts suspect that while caching will remain important, the term "caching" to describe an individual market segment will likely become obsolete.
"It's a content-networking market and caching is just one piece of that," says Cindy Borovick, program director of data center networks at IDC.
"We are optimistic about the future for content networking, but any company that just wants to sell caches is going to have a hard time," she adds.
Richard Sun, network systems engineer at W. L. Gore & Associates of Newark, Del., best known for its Gore-Tex fabric, agrees. W.L. Gore is a customer of Volera, the caching and content delivery spinoff of Novell, and Sun says he sees caching as "a tack-on product, something that can't stand on its own."
"The days of pure caching are over," Sun says. "I see caching as part of a comprehensive enterprise content-delivery system."
Part of the reason, Sun says, is businesses are more cautious these days when it comes to adding new technology and caching by itself likely won't provide the return on investment that an integrated content-delivery system would. Businesses are putting more applications and content on the Web, and they need an end-to-end system to speed up network performance. They're not just looking to push randomly accessed content closer to their end users.
"I would go so far as to say that caching is dead," says Amit Pandey, senior director of marketing and strategic alliances for Network Appliance, the No.1 caching company in 2001 with a 24% market share, according to IDC. "The reason I say that is if you're an enterprise, you don't think about caching. What you think about is providing access to your applications."
For that reason, caching vendors are rolling out add-on features to enhance the functions within their caching products. Most are adding security features; CacheFlow has even gone so far as to change its strategy to focus on being a security gateway to secure Web-enabled applications.
Most now provide content management capabilities so businesses can preposition specific content in caches.
Content filtering and virus scanning also are becoming more common.
Network Appliance says it plans to more deeply integrate its storage capabilities into its caching products.
But the future is uncertain when it comes to the players in the caching market.
Analysts predict consolidation will happen in the next 18 months or so as vendors such as CacheFlow and InfoLibria attempt to hold their own against new, bigger players, such as Cisco. According to IDC, Cisco nearly doubled its market share to 9% in 2001, up from 5% in 2000.
Highs and lows
Caching technology emerged about five years ago when companies such as Inktomi, Network Appliance and Novell began rolling out devices that handled primarily HTTP traffic and were aimed at saving bandwidth and speeding Internet performance. Customers were mainly service providers that realized their exploding dot-com customer base could use the caches to support more traffic on their IP networks.
Caught up in the technology wave, the caching market swelled, and new companies were formed to share in the opportunity. But last year the market swooned as service providers stopped spending, and caching vendors were forced to turn their attention to enterprise customers.
Like most high-tech companies, caching firms saw their stock prices tank last year. Inktomi, whose stock price reached a high of $241 in March of 2000, is hovering just above $1.
Layoffs began early last year as the caching companies tried to regroup and refocus their efforts on serving the enterprise customers whose needs differ from those of service providers.
"Caching has grown from just solving the bandwidth problem to being able to guarantee the mission-critical values of enterprise applications," says Simon Khalaf, president of Volera.
"Caches are no longer in a position to treat content equally. We have to get into prioritization, security and management, and guarantee anything that happens over the network is secure, reliable and managed," he adds.
"It's definitely a big change that's being driven by the enterprise, more than by the service provider market," he says.
So while Inktomi continues to focus on the service provider market and reaches enterprise customers through OEMs such as Dell, Compaq and Hewlett-Packard, others, such as CacheFlow, have had to change course. CacheFlow cut 50% of its staff earlier this year as it focused its efforts on enterprise customers, says Frank Cabri, director of marketing at CacheFlow.
And despite a tough year - net sales in the third quarter this year were $10.9 million, compared with net sales of $21.2 million during the same quarter a year ago - CacheFlow is ranked third in the caching market, according to IDC. CacheFlow has about 15% market share, compared to Inktomi, which has 17%, IDC says.
Meanwhile, new companies continue to come on the scene, many, such as Vividon, focused on delivering streaming media, what analysts refer to as the "killer application" for enterprise CDNs. Others are taking different twists. Storigen Systems offers not just caching, but a distributed storage network to deliver rich media and online applications.
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