F5 Networks was originally best known as a provider of load balancer hardware, a market that has evolved to become known as Application Delivery Controllers (ADCs).
While ADC network hardware is still the majority of F5 Network's revenue, that's not where the company is growing or where its future path is headed. Increasingly the path forward for F5 will be found in software, with a big push coming from the company's NGINX division. F5 acquired NGINX for $670 million in a deal announced in March 2019.
The impact of a declining hardware market isn't just anecdotal, it's also borne out in F5's financial results. For the first quarter of fiscal 2020 the company reported systems revenue of $170 million, which is an 11% year-over-year decline. Systems accounted for approximately 72% of product revenue in the quarter. In contrast software revenue grew by 50% in the quarter.
NGINX Controller 3.0
F5's software efforts include software version of its ADC offerings, but the big hope from the company is growth from NGINX and more specifically from the new Controller 3.0 release.
"Controller is our orchestration and analytics solution for NGINX,"François Locoh-Donou, President and CEO of F5 Networks said during his company's first quarter 2020 earnings call. "It simplifies how enterprises manage, monitor, and automate large scale NGINX deployments."
Controller is particularly important as it brings together capabilities that F5 was working on prior to its acquisition of NGINX. Locoh-Donou noted that F5 was working on a cloud-native virtual ADC offering that featured an application-centric design. Immediately after the close of the NGINX acquisition in May 2019, F5 merged the team working on its cloud-native project with the NGINX controller development team.
"Controller 3.0 shifts the center of gravity from the instance of infrastructure supporting the app, to the application itself," he said. "When we look at the future of F5, we're more confident now than ever before that NGINX will be a meaningful software growth driver."
The Shape of Things to Come
NGINX isn't the only vendor that F5 Networks has recently acquired. On Jan. 24, F5 completed the acquisition of Shape Security in a deal valued at approximately $1billion. Locoh-Donou commented that Shape Security is a leader in anti-fraud and abuse protection, solving a mission critical problem for large enterprises.
"With Shape, we will expand our ability to optimize and protect customers' applications in an increasingly complex multi-cloud world," he said.
Sean Michael Kerner is a senior editor at EnterpriseNetworkingPlanet and InternetNews.com. Follow him on Twitter @TechJournalist.