Taking business transformation and disruption to the Extreme

Supporting business transformation and disruption seem to be on every supplier’s lips these days, but not many can say they are where they are today precisely because of their own business transformation and disruption. Extreme Networks can

There’s nothing like learning from experience – and maybe the best lessons are learned from the toughest experiences. It’s fair to say that, when it comes to enterprise IT, such tough experiences are generally not that uncommon, especially when the task involves business change and transformation.

Such things are ever more common these days, especially when it comes to digital transformation. There are many technology firms offering solutions to help businesses through these times – but there are not many that offer such solutions after going through rather hard lessons in their own digital transformation and subsequent business disruption. Extreme Networks is in this category.

Extreme claims to be the global leader in native end-to-end enterprise cloud-native solutions, after a series of strategic acquisitions – including assets from Avaya and Brocade, and most recently Aerohive – that changed the company beyond recognition. Changed not just in what it had to offer, but how it does business.

Extreme president and CEO Ed Meyercord told ComputerWeekly that through the acquisitions it has made, the company has invested tens of millions of dollars in its own infrastructure as part of its own digital transformation to remove friction from the business. “This ties into who we are, and where we are going,” he said. “Our purpose is to ultimately make it easier for customers to deliver a high-quality secure network experience.”

The Aerohive acquisition in August this year was seen as part of a strategy to add subscription-oriented software-as-a-service (SaaS) and cloud-based systems that will enable Extreme to drive recurring revenue and improved cashflow generation. All well and good, but with about 82% of the company’s business coming from sales partners, the changes that Extreme was making in how it addressed customers were as significant as those affecting those it relied on to generate income.

So how did Meyercord feel about the digital transformation his own company was embarking upon? To answer that, you have to ask why Extreme exists, he said. “You have these big competitors like Cisco and HP and the reality is that there is room for Extreme,” said Meyercord. “We look out and we see an opportunity to make it easier for partners and ultimately partners’ customers to deliver high-quality secure networking experiences and help them on their digital journeys and to change their customers’ and users' outcomes. In terms of our vision, it’s all about cloud today.”

FAST networking

This is something of a departure for a company that had a reputation for networking hardware, such as switches, that was really about speeds and feeds with a variety of gig Ethernet products. So what happed to drive the transformation? In a nutshell, the ability to be “FAST” in networking.

“The acquisition of Aerohive, which has been transformational for us, and galvanising in terms of where to get us to focus and where to go,” said Meyercord. “We use the words cloud-driven and FAST – flexible, agile, secure technology. And you will hear cloud companies talk about these things, but not in networking per se.

“Networking has been elusive. It’s complicated. It isn’t just about the datacentre – it’s everywhere. And that makes the enterprise very complex, so the virtualisation and centralisation of networking has taken a lot time. With Aerohive, I think we are the only player that is truly FAST.”

Meyercord said Extreme is the second-biggest leader in cloud-managed wireless LAN (local area network) services in the world, with millions of infrastructure devices attached, and is not looking to offer all its products on the cloud. He added that in terms of the end-to-end offering, Extreme would do so more quickly than anyone else, more importantly generating data that would feed insights to machine learning and artificial intelligence (AI), the latter being essential in any offering, said Meyercord.

“You’ve got to have machine learning and AI,” he added. “You have to offer the maximum flexibility for customers, and that is all about flexible deployment requirements and the depth you can bring to the cloud.”

Meyercord said the company will have all its component parts truly integrated by April 2020, when he says Extreme will be truly “off to the races”. Making sure everything stays on the right track will be chief operating officer (COO) Norman Rice, who said he recognises the bumps in the road that this process entailed but expressed confidence that those bumps were necessary for the company to achieve its goals.

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By learning how to overcome these bumps, said Rice, Extreme could look customers in the eye and say it, too, recognised business disruption and how technology could be deployed to overcome it.

Rice acknowledged that what his firm was selling was not only transforming the companies he was selling to, but Extreme itself. Rice is also in charge of mergers and acquisitions (M&As) for Extreme, a busy role of late, especially given that the company carried out its M&As with no call on advisers, or banks, or, he stressed, through “deluding” shareholders. Extreme is a transformative story, he said.

“We are talking about digital transformation and the biggest transformation that is going on is our organisation,” said Rice. “Four years ago, we were a company that had never invested in itself for years. So there was no investment in infrastructure and support and marketing. There was investment in products – it’s an engineering-centric company – but having a supply chain that can scale to multi-billions was never part of the plan.”

But was not being the first mover in the cloud infrastructure market an advantage, in a way? Rice believes Extreme was indeed lucky to be able to look and see exactly what it needed to do. “We learned that we didn’t have a lot of the [necessary] infrastructure in our supply chain,” he said. “We would use spreadsheets and meetings to figure out where stuff was in depots all over the world. Our efficiency rating was very low.

“When we made this process of evolving, we made this decision to say we have to make investment in the infrastructure of operations in order to scale and support all of the merger acquisitions [assets]. We have been able to absorb all of this change while collapsing our entire supply line into a single centre. The mergers and acquisitions forced our hand to change.”

The upshot, says Rice, is that Extreme can now look potential customers in the eye and say with honesty that it, too, knows exactly what it is like to undergo substantial change. “We’re so disrupted that we have become a disruptor,” he said.

More transformation

From an operational perspective, the company is embarking on more transformation to reduce operational friction, giving more autonomy and automation to its partner channel, which numbers almost 5,000 in Europe alone.

Looking at where income will be generated in future, Rice says Extreme will have a different mix of revenues, in particular software services, as the cloud business builds up. Specifically, he expects recurring services and software to grow from the current 28% of all revenues to 40% within the next two to three years.

“We believe we can do that by enabling our partners to have services available and being able to deliver a higher variety of services,” he said. “We believe the way that we win and take share is by offering choice and being inclusive. The opportunity is now. We believe that we are in the right place at the right time with the right story, and we need to take advantage of it.”

So how will the company cash in? Thinking about this concept, and how the changes have made Extreme appear to the investment community and Wall Street in particular, Meyercord insists that things are going to get “really easy” and that success would be putting up some double-digit growth quarters.

“Wall Street cares about cashflow and we are turning a corner as we go into calendar 2020,” he said. “And I would just say, boom – it’s going to be a huge earning year for Extreme Networks. For the investment community, that story is going to be really easy to tell. We can pound the table like a leader. We can go head to head with any of the other clouds.”

Being able to march on Wall Street and be the leader in the so-called ABC space in networking? Now that would be some transformation.

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