Software Start-Up Envisions More Integrator Alliances

By Richard McCaffery, Staff WriterRiverbed Technologies Inc., which recently attracted a wad of venture capital, is seeking new partners to market its application software for handheld computers to commercial and government customers.The Vienna, Va., firm wrapped up its first round of financing in January, landing $3.5 million in venture capital from FBR Technology Venture Partners LP of Arlington, Va., an affiliate of Friedman, Billings, Ramsey Group Inc. Riverbed plans to use the money for hiring, research and development and general corporate purposes.The company released its first product, Scout MTS, 11 months ago but still managed to ring up $3 million in sales for 1998. Its software connects handheld devices like 3Com Corp.'s Palm Pilot through computer networks to enterprise applications, eliminating the need to route information through a PC. This technology makes mobile computing faster, more practical and less expensive, said Wayne Jackson, Riverbed's chief executive officer, who is now focused on establishing a network to help market the software to commercial and government customers. "We're just starting to build an integrator network," said Jackson, whose goal is to have partnerships with five systems integrators focused on the federal market by year's end. Integrator partners include Noblestar Systems Corp., Reston, Va., and the Windward Group of Los Gatos, Calif.Riverbed also has hired Steven Roth, formerly 3Com Corp.'s head of federal sales, to manage its sales division. He started March 1.Plans call for Riverbed to release a second product this quarter, said Jackson, who expects sales of up to $6 million this year and $18 million in 2000. He also expects Riverbed to reach profitability in the fourth quarter of 1999.Riverbed has 15 employees and 12 customers, including Oracle Corp., Redwood Shores, Calif.; SAP AG, Waldorf, Germany; New York Life Insurance Co., New York; and the Sony Corp. of America, New York, Jackson said.The company started out as a project in the labs of Noblestar, the company that spun it off last August. Noblestar invested more than $1 million in development of the Riverbed technology, according to Jill Stelfox, Noblestar's chief financial officer. But the technology matured quickly, and it soon became clear that Scout MTS wasn't part of Noblestar's core business."Noblestar Systems is a professional services company," she said. "We determined our management strengths didn't have a product focus. We didn't have the horsepower to grow the company strongly."Being an independent company also made it easier for Riverbed to raise capital and attract integrator partners, Jackson said. Spinning off Riverbed could pay off in a big way for Noblestar, which led the effort to secure financing and still owns a significant minority stake.Jackson, formerly director of emerging technologies at Noblestar, stressed that integrators are key to Riverbed's success. "We need integrators taking the product and building business solutions around it," said Jackson. Harry Weller, principal at FBR Technology Venture Partners, said other vendors have tried writing software that links mobile devices directly to network applications before, but the results haven't been good. "People have been doing it poorly forever," he said, adding that handheld devices capable of linking directly to network applications cost from $1,500 to $5,000. A Palm Pilot costs about $300. "It dramatically lowers the barrier to entry" for companies with mobile workers, Weller said. One of Riverbed's first customers was OHS Health Services Inc. of Austin, Texas, a health care provider with more than 5,000 employees serving low and middle income patients throughout the Lone Star State. Riverbed's software allows home health aids working off-site to send information directly to applications running on the company's network. This gives doctors up-to-the-minute information, saves nurses from having to drive to the office to enter data and keeps OHS from having to buy PCs for all its workers. All that's needed is a Palm Pilot or other wireless device, Riverbed software and a modem, Jackson said. On Feb. 1, the company sealed a key partnership with Symbol Technologies Inc. of Holtsville, N.Y., which makes wireless mobile computers. It will use Riverbed's technology to target retail, manufacturing, transportation and health care markets. Riverbed's competitors include AvantGo Inc., a privately held company in San Mateo, Calif., and Advance Systems Ltd. of Bristol, England. Still, their technology isn't as robust, said Weller, who believes Riverbed has enough of an edge to establish a lead.The danger is competition from companies hot to develop similar technology, Weller said. On the client side, companies like 3Com and Microsoft Corp. could develop rival applications, and on the enterprise side Oracle Corp. and SAP could rise to the challenge, Weller said.The mobile computing market is still developing. The Yankee Group estimates 33 percent of large U.S. corporations will provide service and sales personnel with wireless mobile data access by 2000."The market is huge for this," said Weller, who believes Riverbed's technology offers unparalleled stability and flexibility. On the client side, the software works with many different devices, like Palm Pilots, Windows CE products or scanners made by Symbol Technologies. On the enterprise side it works with all kinds of enterprise software, whether it's made by SAP, Oracle or any other vendor, Weller said.