Editor’s note:Pica8 makes the world’s first open switching system, which can be personalized to fit any application environment. Launched in 2009 in Palo Alto, Calif., its externally programmable switching operating system runs on commodity bare-metal switches to provide ultimate cost savings and customization for data centers. In this interview, CEO James Liao talks about software-defined networks as well as startup lessons learned.
Please describe your product and your market.
James Liao: Pica8 makes software that allows large service providers, enterprises and universities to build Software-Defined Networks (SDNs) by leveraging commodity switches. In a single package, PicOS™ is loaded onto commoditized bare-metal switches to best leverage white box hardware economics. It’s hardware agnostic and supports OpenFlow switching. And it allows companies to save millions on network infrastructure while building a software-defined network that responds quickly to corporate needs.
PicaOS is the only open software that allows customers to use commodity switching hardware in an SDN framework. Our software is the glue that holds together an SDN network’s hardware. We provide a turnkey open networking tool in a complete stack that is designed to integrate into an existing network infrastructure.
What was your original vision/hope?
James Liao: My original vision behind the company was to become the Microsoft of networking software. Microsoft captured the first wave of adoption by being hardware agnostic, allowing both OEM models and multiple platform support for direct sales. I saw this trend when I worked at Tandem.
Later at 3Up and Woven I saw both companies ride the wave to leverage merchant silicon for key network switching ASICs. I helped a large ODM launch its networking business and sold a majority of white boxes to the portal leaders. I realized I needed my own OS to be successful and bought the assets of XORP.
Is there a story behind your company name?
James Liao: Not really. But the “eight’’ can be thought of as an infinity sign turned on an angle. SDN helps companies scale through software, which I believe helps solve the network agility problem.
Please describe one of your company’s lessons learned and when it occurred in the time line after your launch.
James Liao: We had hoped that everyone was ready for the revolution. We wanted everyone to buy the hardware and software independently, but about 95 percent of our customers want us to sell them an integrated solution. In two years, I believe the market will have shifted and the supply chain savings will help get people to the place where they want software and hardware separately.
I think a lot of startups jump too fast and react to a blip in an adoption curve. We will see a lot more blips as SDN takes hold.
Did your company change direction at some point during product development? If so, please describe what led up to the change.
James Liao: We continue to stay as fluid as we can. Additionally, we are working deeply with a handful of customers. These customers are truly visionary and are guiding us. We see the future of SDN through their eyes. I can‘t say we changed direction as much as we continue to shape our differentiation and really look for customers that are excited to change the game with us. We have over 240 customers; and since we started shipping in 2012, I think that is a great achievement.
Who are the people behind your company (advisors, investors)?
James Liao: We have one financing round A VC, Terry Chen from Vantage Point Capital. I also added an independent board member last year, Mike Splinter, chairman of Applied Materials. We work closely with Terry and Mike for input on our go-to-market thinking and focus areas.
How did you determine the right pricing for your product?
James Liao: Software allows you to experiment more fluidly with customers. Having said that, the market has set the price in many cases already. Our base operating system sold with or without hardware is our primary business and highest-volume product. We see more growth from SDN solutions, and that allows us to build additional add-on product offerings that build on our OS revenue base. The function and the value of each add-on will be a key part of how we set pricing.
What do the next 12 months hold for your company?
James Liao: We will invest in our infrastructure to add scale and depth to the company. We also see growth opportunities because we see steady adoption of SDN, and our ability to win business will continue as long as we listen to the early adopters and build product with them.
What is your top advice for first-time entrepreneurs or startup CEOs?
James Liao: I think the most important thing I would suggest is to make sure you have critical mass at each phase of the company — the first core team, then the Round A team, and then moving to Round B and so on. Each phase has critical skill needs. Getting that piece right is a challenge.
What challenges have you encountered that you didn’t anticipate?
James Liao: We felt from our prior experiences that this would be a marathon and not a race. We see a lot of companies behaving like it is a race. With Arista going IPO soon and Cisco launching Insieme, you really have to know where you can fit in.
Describe a pitfall you were able to avoid because of a mentor or other advisor’s advice.
James Liao: Part of my vision was to not offshore part of the team after we gained critical mass but wanted to reduce our own cost structure. However, today our protocol and white box development teams are based in Beijing. All of our application development is based in Palo Alto.
Since my model was a bit different than most, I worked closely with my advisors to ensure we thought this through, as well as how to structure the company and ensure that we protect our IP.
What is one of your company’s most successful best practices?
James Liao: I think it’s the idea of fluidity. Since this is not a race, SDN is more like a marathon and is going to take a while to find real adoption, and the incumbents in many ways have an upper hand. I came from the software world and believe in agile programming. I think SDN is a market where agile product development with key customers is going to be a winning strategy.
How do you decide what software products to use in your business operations?
James Liao: I think we are typical these days; we are running everything in the cloud. As a small-medium business (40 people globally), we find real economies in cloud technology.
The one core tool that is really powerful is Salesforce.com. It is our primary and really our only business tool. Our website, which is hosted of course, is additionally our CRM, service/support and marketing platform. Having these services available to me so cost-effectively is a game-changer in itself.
What challenges have you encountered in recruiting/hiring/retaining the right talent?
James Liao: Being fair in a very competitive market. I have to do the segmenting and ranking of people that HR people do in big companies. I don’t want to have an imbalance in salary or stock options. I know this is an idealist view; I just use this as my guide and do the best I can.
James Liao, CEO, leads strategy and growth efforts for Pica8 as it shapes the SDN space. He has a proven track record in networking product innovation and development. Before founding Pica8, James led product strategy for switching and data center products at a leading original device manufacturer. He also built world-class engineering teams at both Woven Systems and 3Up Systems.
Kathleen Goolsby is managing editor of SandHill.com.