Vyatta gets round B
I just caught wind that Vyatta just received round B financing to the tune of $11M thus totaling $18.5M. The latest round comes courtesy of Capital JP Morgan Partners, Comcast Interactive, ComVentures, and ArrowPath Venture Partners.
Vyatta, in case you haven't heard, does open source routing. I've written about this before. In summary, I'm suspicious of the open source on a stick business model.
Here's my problem with Vyatta. The assertion is that because the development cost is lower, they are going to be able to offer their products for cheaper than other vendors. There are few problems here... The features that go into a low end Cisco (or similar) router are relatively simple and have long been paid for their total router sales. Furthermore, the large number of units sold by the established vendors in routing make their COGS very low. So if the engineering for Cisco is relatively low cost since the bigger products do most of the work and the low end teams need to package/refactor, they're going to have the same (if not greater) benefits than an open source router.
Take a Cisco 2801 branch office router with the VoIP software. Street price is around $2,500. A Juniper J2300 has a street price of around $1,500. A Vyatta appliance with software and support is $2,200. The Vyatta appliance has nowhere near the feature set of the 2501 and no promise of those additional features anytime soon. The software goes for between $600-$1500 depending on support. Assuming an ASP of $1000, they have to sell 1,000 units just to make $1M. For a startup, moving 1,000 units of anything is not easy especially when the "big" vendors are selling for around the same price, possibly cheaper (e.g., the J2300 vs. the enterprise Vyatta appliance).
In the end, the average user doesn't care if the source is open. The casual IT administrator can't do anything with a pile of C code on an operating system that he isn't familiar with. It's just gotta work and at the cost of a PC, if it breaks or the vendor is being flakey, it's often cheaper and easier to simply move to another vendor than to fight the problem.
I of course wish Vyatta the best of luck. However, at this point at least, I don't see a bright future for them.
Vyatta, in case you haven't heard, does open source routing. I've written about this before. In summary, I'm suspicious of the open source on a stick business model.
Here's my problem with Vyatta. The assertion is that because the development cost is lower, they are going to be able to offer their products for cheaper than other vendors. There are few problems here... The features that go into a low end Cisco (or similar) router are relatively simple and have long been paid for their total router sales. Furthermore, the large number of units sold by the established vendors in routing make their COGS very low. So if the engineering for Cisco is relatively low cost since the bigger products do most of the work and the low end teams need to package/refactor, they're going to have the same (if not greater) benefits than an open source router.
Take a Cisco 2801 branch office router with the VoIP software. Street price is around $2,500. A Juniper J2300 has a street price of around $1,500. A Vyatta appliance with software and support is $2,200. The Vyatta appliance has nowhere near the feature set of the 2501 and no promise of those additional features anytime soon. The software goes for between $600-$1500 depending on support. Assuming an ASP of $1000, they have to sell 1,000 units just to make $1M. For a startup, moving 1,000 units of anything is not easy especially when the "big" vendors are selling for around the same price, possibly cheaper (e.g., the J2300 vs. the enterprise Vyatta appliance).
In the end, the average user doesn't care if the source is open. The casual IT administrator can't do anything with a pile of C code on an operating system that he isn't familiar with. It's just gotta work and at the cost of a PC, if it breaks or the vendor is being flakey, it's often cheaper and easier to simply move to another vendor than to fight the problem.
I of course wish Vyatta the best of luck. However, at this point at least, I don't see a bright future for them.
posted by Steve Shah at 9:55 AM
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