May - 2009 - issue > Top 10 most promising technology companies
Niksun From being Cowboys to City Dwellers
Aritra Bhattacharya
Tuesday, May 5, 2009
Dr Parag Pruthi is hiring city planners. “We can afford to hire some really good ones,” he says, unfazed by the global economic recession.

Pruthi’s bunch of boys is turning into city dwellers—at least that’s how he describes the imminent transition of his company, NIKSUN, engaged in providing network performance and security monitoring solutions. After years of building a strong, and unusually broad, foundation, and being proverbial “cowboys”, NIKSUN is looking to make the transition of 'moving into the city'. It is working towards becoming become a household name in the next 3-4 years—by having large scale deployments of its security products in enterprise networks around the world—and touch the $200 million mark in sales.

Over the past twelve years, NIKSUN’s security solutions have grown immensely in terms their reach, application, relevance and criticality. Founder and CEO of NIKSUN, Dr. Pruthi is convinced that despite the recession, his company is positioned extremely well to adapt to the company's rapid growth and leverage it to greater heights. Pruthi is no stranger to expansion-- NIKSUN's success is very much based on Pruthi's ability to scale the relevance of NIKSUN's original technology to various business applications-- from the branch office to the corporate enterprise network; from one product architecture to 16-17 different solutions, each offering great value and relevance to large corporate networking environments.

Minding thefts, thieves, and their movements
So, where are NIKSUN products used today?
Readers might recall news of a breach in the US’ defence network a few days ago, where the plans for the country’s most advanced fighter jets are feared stolen. Several questions—like how did the breach actually happen, why did it happen, who did it—were raised soon after reports about the theft started pouring in.

Yet, intrusion detection systems are such that they can only raise an alarm in the event of a breach; they can never answer the crucial questions that might help prevent such occurrences in future.

The problem with most legacy intrusion detection solutions out there may be illustrated with a simple example: Imagine you have an alarm system installed in your home and, while at the office, you receive a notification that the security alarm at home has sounded. You rush home and find the door ajar. Now, the security system alerted you to the fact that something is wrong, yet it cannot tell you what exactly is wrong, what was stolen or who the perpetrator was. Instead, you must inspect your belongings to notice anything missing, with no conclusive indication of the thief.

Now imagine the same thing happening with data on the internet. Only that data on the internet, when stolen, does not appear absent physically. So, despite alarms, one might never know about what data was stolen, let alone who stole it.

That’s where NIKSUN comes in. “Recently”, says Pruthi, “the intelligence department of a provincial government used NIKSUN’s analytical technology to mine data warehoused in NIKSUN's Network Knowledge Warehouse to troubleshoot incidents of identify theft. Using our solutions, the department was able to isolate the incidents of identity theft and trace the incidents back to users on the internal network. Using our solutions, the department nabbed over twenty criminals engaged in credit card theft.”

NIKSUN, essentially, achieves its tasks—of warehousing, mining and gathering intelligence from distributed network data —using a hybrid approach. Since there are new applications being deployed on any network and the nature of the applications change frequently, “the problem requires hardware-software expertise and a systems-based approach to solve many of the network monitoring, security, surveillance and forensics needs of tomorrow,” says Pruthi.

The Beginning
The genesis of the company dates back to Pruthi’s days in the Bell system. At the applied research division of Bellcore, he spent most of his time collecting data when certain products did not function as per specified models. Over a period of time, Pruthi realised that the products were not functioning as desired because the model had been drawn using faulty data— the issue lay in the way the data was measured.

“We would take sample measurements over a long period of time, around a minute,” he recalls. “I realised that if we are to do this at 10 Gigabit speeds, the task of sampling and measuring data accurately would be significantly time consuming.” Sampling also led to the loss of fine measurements, which were, and still are, crucial to the function of troubleshooting and resolving network problems.

Imagine, for instance, the police have photographs of a crime site that they want to process for forensic investigation and unearthing possible clues. The photograph however is of low resolution and zooming into it, with even the most expensive technology, is essentially useless because there just is not enough data available in the photograph to present clear and useful zooms. A high resolution photograph would have solved this problem. This accurately describes the problem that network investigation technologies faced back in the day, before NIKSUN. What was lacking was the foresight to know that high resolution data equals enough information to pin-point critical incidents occuring within very small intervals of time- microseconds- that can help resolve actual business-impacting network problems.

The problem with high resolution data though is that it becomes difficult to manage large amounts or terabytes worth of data. Pruthi’s mind was occupied with how to store hypothetically infinite data in its entirety (akin to a high resolution picture) and be able to mine it for the necessary information (the evidence or the lead).

He took a sabbatical from Bellcore and wrote a thesis on capturing and modelling data using a drastically different algorithm. His thesis was highly successful and, with a few other like-minded peers, he spun off a company to test the practicality of the thesis-- outside the lab, into the actual corporate network. The challenge in the corporate, enterprise scenario was to be able to capture, store and analyze the data at extremely high speeds while making the model scalable to different business environments and, importantly, the explosive regime of the Internet. Even back then, Pruthi had presaged that the Internet was to grow leaps and bounds in the coming years, and for any company to survive playing with data at such high bandwidth levels, the foundation needed to be strong.

The Swiss Army Knife
NIKSUN’s first product was NetVCR. The cash flow generated from selling that product was pumped into creating a new product: NetDetector. The cash flow from NetDetector was used for further R&D and funnelled into the launch of yet another product-- an extremely simple cycle that has repeated itself over the last 12 years enough times to facilitate the birth of 16-17 new products; products that are now being used by the largest corporations in the financial, enterprise, government, pharmaceutical markets, amongst others.

This has been possible, says Pruthi, because of two things. One, that the core architecture of warehousing data, mining it, and reading intelligence into it, has remained the same. What his team has done it configured it for a different set of applications, increasing speed and bandwidth efficiency with every take. Doing this isn’t as simple as it sounds; the task of building new products has taken up most of the money generated from sales over the last twelve years.

But why go on building products, pumping money almost entirely into R&D when the same could have been channelled into sales? NIKSUN, then, might have been a bigger company than it is today, from a financial portfolio perspective, with its feet firm and deep in one, albeit highly profitable, vertical. Does having too many products in varied verticals not smack of digging too many wells without finding water in any?

“We have had this debate before,” says Pruthi. “But we had the foresight to notice that consolidation amongst verticals, network architectures and applications was inevitable.”
He recalls the IT bust of 2000. Companies were lacking resources and did not have money to hire people. They wanted to automate parts of the business, and were “telling us—you have all the information in your database. We need it for our application. Just give it to us.”
“I realised then, that that’s the value we provide. Customers realised we are a Swiss army knife, and we wanted to remain that way,” says Pruthi. “The idea is not to make a few bucks in a short period of time, but to be consistent and provide value that is sustainable and critical to business.”

Furthermore, Pruthi explains, “If we limited ourselves to a single product or a single vertical, we would have been putting ourselves at risk. Markets are volatile, change is inevitable. One needs to follow market trends closely and predict and prepare for what is about to come. By going after one product, we would have missed opportunities that solidified our stance in our original market and allowed us to expand into others. Granted, this takes time, but it has been a successful business model for us. We've carved a niche for ourselves, and have built products that allow us to continue to be the market leader in what we do.”

“Our strategy has helped us diversify and has made ourselves secure for the future. The next few years is when we will begin seeing the actual results of all our perseverance,” he emphasises.

The jigsaw puzzle
Did Pruthi have a master plan when he started the company? “I did,” he responds. “Only, I needed $100 million to make it operational, and nobody would give that kind of money.”
So, he concentrated on building one product, selling it and pumping the revenue into the next product. All through, “we were trying to get the different pieces together, like a jigsaw puzzle”, he says.

There could have been other ways of doing it, he admits, like acquiring companies with similar businesses. But, as he says, “Gluing fundamentally different pieces cannot build a cohesive solution. Besides, customers stick to us because they know we have a growth and progression path that is integrated and holistic.”

NIKSUN’s customers today span large names in the financial world, who use its solutions for varied purposes like security and network management. Governments use NIKSUN products for intelligence gathering, protecting weapons systems, secret plans; service providers use it for optimising their networks, shaping traffic and finding out how much bandwidth they need for new ventures like IPTV. It also has customers in the healthcare, pharmaceutical and security businesses, among others.

“Our technology was a revolution in the security space,” says Pruthi, recalling how customers would refuse to return evaluation units, being completely awed by the sheer power of NIKSUN's technology. “But what helped us sell the revolution was a new business model.”
And NIKSUN's customers and industry analysts seem to concur with the success and revolutionary aspect of NIKSUN's technology. “By detecting and alerting to the suspicious behaviours as they happen, [NIKSUN NetDetector and NetVCR] goes beyond the reactive signature-based approach in which you must know the attack code before the system can look for and find it,” says Jerry Shenk of SANS, for example. Charles Kolodgy of IDC also has praise to offer, “By distributing multiple units throughout the enterprise and centrally managing them along with aggregated reporting and analysis, [NIKSUN NetDetector] offers unmatched levels of security,” he says.

Richard Sabatini, of Verizon Business, agrees, “NIKSUN’s NetVCR® web-based appliance is a powerful and intuitive tool that enables packet decoding using a web browser without downloading large files or extra software. This is a significant benefit that allows Verizon Business to rapidly analyze critical data traffic patterns for its Financial Markets customers to determine utilization levels and timeliness/accuracy of packet delivery. One day’s worth of multicast data can amount to many gigabytes worth of traffic. Use of the NIKSUN appliance allows us to wade through a day’s worth of traffic to isolate complex issues in a fraction of the time.”

While the norm in the security solutions business was to price according to the number of people who would use the solution, NIKSUN offered its solutions at a flat rate. It didn’t matter if thousands logged in to it, or various divisions or departments in a company used it, the cost was still the same. “That was a big plus”, says Pruthi.

Pricing has become a very big issue today, given the recession. However, this, says Pruthi, is the opportunity to revise pricing models so that solutions like NIKSUN’s can reach the SMB segment. “We must start looking for making money in indirect ways,” he says.

Keep building
Network architecture and the impact of the Internet on everyday life is getting more complicated and significant every day. In accordance, NIKSUN must also scale its products, says Pruthi. Also, the SMB and the consumer market remains yet untapped.

“We are building something for those segments...like tools for protecting children from predators while on-line and automated applications for legal firms, travel agencies, etc. Expect solutions catering those problems from us in the next 2-3 years,” he says confidently.

“Once the mass market understands us, it will pull us back to newer enterprises, which will then start buying from our solution,” he adds.
Is there something Pruthi would have done differently were he to have the option of rebuilding NIKSUN?

He ponders over the question for a few moments, and then says, “Probably, I would have held firm on my instincts on many occasions, and not given in to advice.”

He recalls how a lot of people, mentors, advised him about certain things, and he gave in, thinking they knew things best. “No one knows your business like you yourself,” he says, recalling a time when many people advised him to hire a lot of people, since company valuations can be based on headcount. “I should not have done that,” he rues, adding that today, he is a lot more self-assured. He sticks to what he thinks is fundamentally right, and trusts his instincts and his own decision making abilities.

It is these very decision-making abilities, incidentally, that are prompting him to look for city planners. He has already found some, and is in the process of finding a few more.
With them, he hopes to be able to carry NIKSUN to $200 million, within few years.

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