Anatomy of Innovation: Exodus Founder B.V. Jagadeesh (Part 6)

SM: How did you plan your exit from Exodus?

BVJ: Towards the end of my tenure at Exodus I started making a lot of investments in other companies. As part of the CTO duties I met with a lot of people who would come and pitch ideas. We were one of the big successes of the time. There were a lot of people looking to us for mentorship and funding. The NetScaler founder approached me about his project, which came out of Sun Microsystems. The technology would eventually dramatically optimize data centers. That is why I got excited about it.

SM: In what way?

BVJ: Under the old methods, when an end user was at their house and they accessed a website the internal communications happened based on the original TCP protocol. That protocol was built for long-lasting sessions like telnet. HTTP, which drove the Internet, was about one transaction at a time. The inefficiency that a server had to take to handle that was different until NetScaler came into the picture. They broke the inefficiency and brought in a significant amount of offloading from the server. You could optimize bandwidth and server overhead.

As a result, in one instance we had MSN evaluating our product. When they were launching MSN 8 they were looking to deploy 72 servers. NetScaler technology allowed them to bring it down to 16. That is a pretty huge ROI.

SM: So you thought the technology was compelling enough to go take the CEO job there?

BVJ: I was compelled to invest and I thus became a member of the board. The technology was being refined and was meeting challenges in terms of getting the product out. In the middle of 2000 I became the CEO. We went through lots of ups and downs, mainly downs in the beginning.
I took over as the CEO and got the product out by 2001. Right at that time we hit 9/11. The whole Internet bubble collapsed. This product, which was meant for hyper Internet growth, started to see the decline of the Internet. Internet traffic declined, the number of servers online declined, and companies went out of business.

I was having a conversation with the Charles Schwab CTO and was trying to pitch NetScaler. He pulled out the statistics of the traffic that they had in 2000 and the projected traffic for 2001 and 2002. It was obviously hockey stick growth. I pitched the solution and then he pointed out that he had built his infrastructure to handle the type of traffic he saw in 2000, and his real traffic was much less than he expected. He told me if I wanted I could take some servers with me. There was no point in saving servers because they had too many.

SM: You became a solution looking for a problem.

BVJ: That is exactly what happened. This is what is called the innovator’s dilemma. We had to reposition the company. We had to make tough decisions and reduce expenses, and we had to make bold moves. We opened an Indian R&D center. The dollars we had in the bank would only last so much longer. We had to use the cash wisely.

SM: How much money did NetScaler raise?

BVJ: At that time it had raised about $50 million. We had to make that money last until the new product emerged that would allow us to reposition ourselves.

SM: What was the new product?

BVJ: It was based on the same technology. We re-engineered new functions, which brought in dramatic bandwidth reduction capabilities as well as security functions. Security was becoming hotter. Those two together gelled very well.

This segment is part 6 in the series : Anatomy of Innovation: Exodus Founder B.V. Jagadeesh
1 2 3 4 5 6 7 8