 Hi everybody, we're back. This is Dave Vellante of Wikibon. This is theCUBE, SiliconANGLE's continuous production here of O'Reilly's Velocity Conference. We're here in Santa Clara, I talk about web performance. Lot of people trying to solve some really hard problems collectively, you know, one individual, one firm, not even Google can really solve this problem. It's a lot of big discussions today about that. Vic Chaudry is here. He's the vice president of product management and corp dev at Keynote Systems. Vic had a great keynote, no pun intended this morning. Vic, welcome to theCUBE. Thank you very much. Yeah, so you were talking in your keynote about, you know, how do you even know where the problem is? You know, is it my server? Is it my network? Is it my Java code? So that's a big starting question, you know. Exactly. So talk about that a little bit. Well, as you know, you're sitting here with a laptop right now and you're in an environment that's completely controlled by some IT guys over here. So the performance of your website, the Velocity Conference which is open right now depends on your PC or the Mac device and it depends on what smartphone you might be using to access it on the network. There's so many different variables. So just starting point, where do you start? Is it the browser or is it the native app or is it your device or is it your laptop? I mean, that's just a starting point for the question. Right, and so talk a little bit about how you answered that question in your keynote. So at Keynote as in Keynote Systems or at the Keynote as in the Keynote app yesterday? Kind of both. Okay. So in the keynote today, what I really talked about was that you have to be able to understand performance and how it traverses through your entire ecosystem. So from the end user's perspective, all the way down to your infrastructure applications and just figuring out where the performance problem is. Is it in your application stack? Is it in the browser? Is it in your device? Just knowing where it is starting point, ground zero for us. Yeah, now in your discussion this morning you encouraged the audience to think big. So you're a big thinker, right? You've been in this business for a while. We were just talking off camera about some of the interviews you did back in the dot com days. Very exciting, right? We wouldn't have traded those days for anything. We're happy we were there for a while. But you ask people to think big and you talked about big companies that are thinking big. Oracle, Amazon, Google, Akamai, Facebook. Talk about those examples and share with us why they're good examples of companies that think big. Oracle, right? I mean, Oracle's a big thinker. They're putting the database. They want to be the database for everybody. Talk about those think big. What do you mean by that? Sure, so let me take Oracle as an example because I started my career as a rookie engineer at Oracle and that time it was a 800 person company and it grew to 50,000 over the five years I was there. And what Oracle did really well is they said, we'll take a problem which is you need a database to run your business. But that database could be running on a Vax machine, it could be running on a Windows PC, it could be running on a mainframe and it must work exactly the same no matter where it is on. And that was really important for IT organizations but it was a big problem to be able to write code that worked across all these machines. Yeah, okay, now fast forward to today. What's sort of the web example? Facebook is an example of that. Amazon and what's changed? I mean, things are more complex. Right, so in the consumer world it's clear that expectations are, it's got to work on a PC device like a browser, it's got to work on a mobile device and so consumers have all these expectations about how usable it is and how fast it is but in the IT infrastructure world what is changing is the fact that you can run your IT in the cloud like Amazon web services can or you can be sales force and you can say run your business in the cloud. So that's the big idea, that you can run your entire IT and your business, your sales and marketing all in the cloud and that's hard to do. Yeah, so the cloud on the one hand simplifies things for developers because it gives them access to world-class resources but on the other hand there's security issues, there's network issues, there's things like hybrid cloud which complicate things. So talk about that aspect a little bit. Okay, so let's take a look at hybrid clouds. There are, we work with a number of different customers that are managing data and traffic at huge scale. These are like some of the top internet companies. The who's who of Silicon Valley today. And one of the interesting trends is that many of these companies are taking their physical data centers and transforming their 11th, for example, data center into a completely public cloud. So they're using Amazon web services, TerraMark, Rackspace, they're using all of the above so they can have a very fault tolerant website. And the whole idea is at one point they don't need physical infrastructure but being dependent on those three companies if you are a massive website is a risky business proposition. So you've got to be very sure that it's going to work fault tolerant. Well, in injecting all these fault tolerant domains into the system adds complexity, right? It adds complexity, it causes network congestions, it causes slowdown, so if you go to a website and you look behind at the source code you'll find a lot of third party services that are being added to these sites. And there's some data that shows that as many as 20 different third party services are added to many popular consumer websites. That slows things down. Yeah, so I'm looking at your customer list now. You got, I mean, from YouTube as a customer, you got AAA, 21st Century Insurance, REI Sears, I mean, Knight Ritter, Cisco, I mean, eBay. Sure, yeah. What are these companies doing with your service? How's that, how's it working? What these companies are doing with our service is helping very quickly understand right now what is the user experience of somebody who's coming to their website or their mobile application and they know exactly if it's slow, where it's slow, why is it slow, and they can remediate that within minutes. So they use us to be an early warning detection system. That's what they do with Keynote. So talk a little bit more about that because the remediation gets my attention, right? Because that's ultimately what I want to do. Tell me I have a problem if I can't solve it. So, obviously part of your value proposition is fast identification. Like you said, where do you even look? So you help me figure out where to look and I isolate that problem. But talk about the remediation piece. How does that work? What's the best practice there and what role does Keynote play? In the area of performance, the best practice there is to use CDNs so that you can use a third party to be able to offload traffic to the location or the origin or where all your consumers are. That's one good practice. The other practice is really re-architecting your website so that it's making as few round trips as possible. So that's an application development challenge. And those are two very good best practices. Other ones are beginning to use cloud data centers so that you can very quickly switch from one cloud data center to the next in order to move traffic over there. These are three ways in which other companies are doing it today. Can we talk more about mobile? I mean it's a relatively new trend in our business but it seems like it's been here forever. Right. It's hard to remember the pre-mobile days, isn't it? So, and specifically smart phones. So talk about how that's changed your customer's business and how have you responded. So this goes back to what I talked about this morning about think of the big problems and think about how you can solve them because we started thinking actually in 2000 about mobile devices even before they became consumer friendly. So today over 50% of our revenues comes from companies, the same companies you mentioned, testing and measuring their experience on mobile devices. That's a huge shift that's happened. And on the mobile frontier is the device? Is it the browser that's running there? Is it the network? Those are the starting points. Is it the way your application is constructed? So if I went to the keynote website, I mean does it work well on a mobile device? Is it reformatical for that? These are the big problems that customers are facing. Yes, a mobile sort of sent us backwards a little bit. I mean it's forward in some respects in terms of web performance and the user experience. It was backwards for a while. It's starting to catch up. Where do you see it going? You think we're going to solve this problem and how long is that going to take to really make the user experience where we need it to be? We have a long way to go in mobile performance and making that user experience good. And the user experience, today Google talked about how it takes twice or three times as long depending on your location to be able to load a mobile website as opposed to a PC based website. So that's the state of the industry today. But experience is not just about performance. It's also about does it work on my mobile devices? There are a thousand different phone models out there with different screen sizes and different configurations. Does it actually work? What about native apps? So the experience really goes well beyond the website and performance that goes into usability, it goes into functionality and that makes up a whole good experience. So you also have a corp dev role. So you're into M&A. I do. You've done your due diligence and acquired a number of companies. Talk about that role at Keynote and talk about your M&A strategy. Sure, well that was really fun. It was very near and dear to my heart. I'm a product guy, but I joined the company to do M&A. And this was 10 years ago when we said, look, we are a company that does X today and we're solving an important problem. But how do we begin to appeal to the larger enterprises? So we've done about 17 different acquisitions of technology companies and managed all of those acquisitions with a great team. And the company really knows how to integrate them. So as a result, many of the mobile acquisitions we did, as I said, account for about 55% of our revenues today. So what are you looking for in acquisitions? You're looking for tech. You're looking for market share. We're looking for people that really take us into adjacent areas. And that's the number one thing. So TAM expansion really is what you're trying to do. Absolutely, total addressable market and we really feel like we've doubled that by addressing new markets, going from performance, going to mobile to testing. And so today we are in the testing business as well. It's not just performance, but it's does it work? Does it functionally work on your mobile devices? What's the market like these days? Is it smoking hot? Is it a little bumpy? Is it bubble-licious? How would you describe it? Well, the entire market here seems to be very bubble-licious, but that's just the flavor of the day. So it's spoken as a true buyer, by the way. Right. You know, when we take a look at the... If you're selling, you'd say it'd be undervalued. Right, right. You know, we look at a long-term trend and we find that the market for web performance is growing at roughly about 15% a year, which is about where we are tracking today. The market for mobile experience and mobile testing is growing at a much faster pace of about 30 to 40%. So we see a lot of investment going into the area of helping you assure your mobile experience. And we hope that reflects in our evaluation of the company over the years. How big is your TAM? Our total addressable market, that's a great question. So on the web performance side, it's about, if you count up the revenues of all the companies, that's $200 million today. That's our existing market. That's just being served today. That's being served today. And the entire application performance management market is about a billion dollars. So these are not huge markets. They're not 10 billion like CRM is, but they are very strong and fast-growing niches. For mobile testing, that entire market is going to be a $2 billion market, and we may have $30 million of it today. So the mobile testing itself is going to dwarf the traditional application performance management. We think there's much faster growth in that business, absolutely. Yeah, so that's your strategy, is to go hard into those markets that are growing faster and expand your TAM that way. Yes, that is true. And as you say, it should be reflected in your evaluation. It kind of already is, right? You guys are, let's see, you got a $260 million market cap. And what are revenues, $100 and change, $120? We were 125 in fiscal 2012. Trailing, right. So we're trailing. So it's decent, it's decent, but I would say that- You'd like to see it up there a little bit more. Of course, and we really believe that. You think you're undervalued. We should be at a much higher value that reflects how our customers look at us. Yeah, right. And we're confident we'll get there. Well, you're solving some of these hard problems. You said you encouraged the audience today, go after the billion-dollar ideas, that's what you're doing. Absolutely, that's right. Yeah, and there are billion-dollar ideas in here, and we're just, we're sort of halfway there, but we need to get even bigger and stronger, and we need to figure out where is the buck headed. So there's other adjacencies that you're going to go after that will continue to expand that, Sam, right? Beyond even the mobile testing piece. Is that right? I would say for the next couple of years, you're very, very focused on mobile, mobile testing and web performance. Because we feel like we have much to do in terms of executing in that business itself. So we're very happy with where we are. But, you know, to a cooperative guy, I guess never say never. What's happened is that out of the 17 acquisitions that we've done over the last few years, we begin to slow down the pace and do bigger acquisitions every two to three years instead of doing lots of small little ones. And that's really the time expansion for us. Yeah, and so it sounds like you're getting pretty good at it. I mean, that's part of art, isn't it, for science? And we've had some great successes, we've had some spectacular failures, and you learn from those. I feel like we have a really good team that knows how to integrate acquisitions. And that starts with strategy and being very clear and focused. Into what you want the team to be able to do. And that's the hardest part, because when you're acquiring new minds, they think differently, and they're thinking differently is good. And yet it has to be in the context of what our strategy is to grow the marketplace. Are you, when you acquire a company, I mean there's a couple approaches, one you can kind of keep a federation, the other is to tightly integrate them, and I guess the third is depends. Right. Which category would you say you're in? So we are in both. And the reason is that, for example, we have a subsidiary in Germany called Seagos that sells to telco operators. So we kept completely separately. But the keynote, the enterprise division that sells to enterprises, like the companies you mentioned, we, whenever we take acquisitions, we might keep them separate for a short while, but then we integrate them very quickly. And we really have to, because we're going after a cloud business in the enterprise. And so if you want to go after the cloud business, you want to be a SaaS company, you have to really change the way the service is delivered to the client. It has to be easy, it has to be really fast, it has to be running on all the cloud servers, it has to be scaled from being inexpensive to the right value. So that's SaaS business. So performance testing has changed a lot over the last decade or so, right? It used to be a very manual, almost like mechanical Turk-like. There's a lot of bodies. Yes. Talk about how that's changed and how you guys have adapted. That's a great question. I feel like the biggest way it's changed is that performance monitoring and performance testing was usually all about the servers and your internal infrastructure. So what's changed the most is that companies now recognize, thanks to the internet, that it's really important to test the performance that your users are experiencing. That's been the biggest one. But the other way that it's changed is the fact that we have this proliferation of browsers, i.e. various versions of i.e. Chrome, 26 different versions of Chrome. We have Firefox, Opera, we have mobile devices, different mobile browsers. So the way it's changing tablets, so the form factor is really changing. And that's the biggest, biggest change in understanding how to deliver great performance and scalability. All these devices is a very hard problem to do. Now, how do you actually deliver your product or service? Is it a SaaS? You alluded to it's a SaaS based primarily? We sell SaaS as well as systems. So the core SaaS services work in the following way. We have a global infrastructure, a network of computers, as well as mobile devices. These are real devices, real phones, connected to real networks, real PCs connected to the internet. And we robotically run measurements from there. Now what we announced today was the beta version of a real user monitoring service, which is a whole new way of taking performance measurements. And what we do there is we sort of like Google Analytics for web performance. We tell you directly in your browsers, you put a little line of JavaScript code on your website, and we can immediately tell you how users all the way from Nigeria or Egypt to Dallas are experiencing a website right now. So what are you seeing in terms of geographical differences and how are developers, you know, adjusting for that? I mean, it's not a homogeneous flow, is it? Right, no, it's absolutely not. We're seeing huge variations. But bar in large, we feel that the internet is working really well. And you just see problems in isolated geographies. And when you see problems in the isolated geographies, it is because you haven't really architected your data centers or your applications to pay attention to all the traffic that has to go from India back to your data center and back, or from New York City to all your data center and back. So geographical problems are bound. Other things we see, gosh, Internet Explorer 6 performance is seven times worse than it is for Chrome. But there's lots of users coming on Internet Explorer 7 because they're business users. So we can now measure that. Right. On a mobile device or a browser, the answer is worse. Which is things can take 60 seconds to load a webpage. I've been trying to get on the Velocity Conference webpage on my T-Mobile Prism device, which is not a really fast smartphone. And it is abysmal to get onto that site. Okay, so what's next for you guys? What should we be watching? Well, we are very excited about real user monitoring because it is just as much as our synthetic monitoring business, which we has run up to $125 million today in fiscal 2012. We feel we should be able to grow as much in real user monitoring over the next few years. So we're very excited by addressing that market right away. Excellent. My last question, Vic, is talk to the developers in the audience. What's the biggest piece of advice that you would give them, the action item that you'd ask them to take in terms of this whole web performance, web monitoring sphere? The biggest advice I would give to developers is that begin to come to places like Velocity so that you can understand the techniques you can use to make your sites and your native applications blazingly fast. Google said that a blink of an eye, 250 milliseconds, is really all it takes for a user to make an impression on a website. And if you can't load your page in 250 milliseconds, you're out of there, the user's out of there. That's a really high bar, a very low bar, really. So there's work to be done for developers. Yeah, right. We're probably 10 blinks of an eye today. Exactly, exactly. So people think one second or two seconds is good enough, it's not. You've got to be in that 250 second range. All right, Vic, thanks very much for coming on theCUBE. Really appreciate your insights. Good luck with your initiatives, with your M&A and getting us down to 250 milliseconds. We can't wait. Thanks very much. Thanks for having me here. All right, keep it right there, everybody. This is Dave Vellante. We'll be right back with theCUBE live from Velocity. This is theCUBE.