Ex-3Com chief Krause set to tackle telecom

So what’s an enterprise-enriched guy like Bill Krause doing running a carrier-focused “superrouter” company like Caspian Networks Inc.? Attempting to meld the genius of an Internet pioneer with highly energized people developing a product that Krause says may “change the rules of the game.”

“I was excited about the opportunity to make a contribution,” Krause says of Caspian, which will enter trials next month with two of the five largest global carriers. “I want to provide an environment where people can contribute in a positive way. It’s high risk/high reward.”

Krause, who faced off with potential carrier customers at SuperComm 2002 in Atlanta this month, recently became Caspian’s CEO after six months leading Internet outsourcing firm Exodus Communications Inc. He is perhaps best known, however, for his tenure as president and CEO of 3Com through that company’s high growth years from 1981 to 1990. Under Krause’s leadership, 3Com grew from a venture capital-funded start-up to a US$600-million publicly traded data networking company with operations worldwide.

Before 3Com, Krause spent 14 years at Hewlett-Packard in various marketing and general management assignments. His last position at HP included worldwide responsibility for the company’s personal computer business.

Caspian brought Krause onboard to help the company go to market. He replaced Bill Sickler, who led Caspian since its founding in 2000 through US$262 million in funding.

But Caspian is now entering a new phase, company investor and board member David Liddle recently said, so it needs to become a sales and marketing-driven company with a marketing-oriented, customer-facing CEO. But aside from the six months at Exodus, Krause’s background consists of 30 years in enterprise networking.

Krause cautions not to discount him as a carrier-savvy marketeer.

“AT&T was both HP’s and 3Com’s largest customer,” he says. “The second- or third-largest customer for HP was Pacific Bell. At 3Com, the third- or fourth-largest customer was Bell Labs. NYNEX (an ancestor to Verizon) was also a huge customer. I’ve had service providers for customers for 30 years.”

It would also be a “disservice,” Krause notes, to lump all of Caspian’s potential opportunity into the service provider bucket. Any organization that provides network services is a potential customer – carriers are just the “low-hanging fruit,” he says.

“The (U.S.) federal government is spending much on network services, especially post-9/11,” Krause says. “Everything we’re doing now that costs $1 million will cost $100,000 in eight to 10 years for smaller companies at the network edge.”

It would also be a disservice to characterize Krause’s role at Caspian as solely one to take the company and its products to market, despite the reasons stated in the company’s announcement of Krause’s appointment.

“I came here to help build a great company,” he says. “A company that would stand the test of time, be an icon in this industry and outlive its founders.”

The task at Caspian is not unlike the one Krause took on at 3Com, where he built an enterprise-focused Ethernet powerhouse that combined the brilliance of Ethernet inventor Bob Metcalfe with a talented, focused and determined set of engineers, developers and marketeers. Given 3Com’s current financial state, however, the jury’s still out on whether 3Com will outlive it founders.

But the Caspian/3Com connection runs deeper. Liddle was Metcalfe’s boss at Xerox PARC when he was working on Ethernet. Caspian CTO and Founder Lawrence Roberts, considered one the founding “fathers” of the Internet, reviewed Metcalfe’s doctoral thesis. And it was Liddle who approached Krause about the Caspian opportunity as Exodus was selling off its assets to Cable & Wireless.

Krause says he does not consciously seek opportunities to run companies founded by industry pioneers, like Roberts and Metcalfe. But having a pioneer at a company might help sway his decision whether to climb aboard.

He finds particular satisfaction in melding the genius of the founding visionary with engineers and developers who are “hungry to win.”

“I don’t look for those situations,” Krause says. “But I want everyone to get the benefit of their advice and counsel. I have to be very clear about what their role is.”

Therein lies the challenge.

At 3Com, Metcalfe was chairman of the company when Krause came aboard. His position intimidated some engineers and developers who thought Metcalfe’s suggestions on product development amounted to an edict, Krause says.

At Caspian, Roberts is the CTO. He holds no higher office or title.

“People can seek his advice and counsel, but it’s not an edict to follow,” Krause says.

Also, people like Roberts and Metcalfe possess strong personalities and egos. Working with them could prove challenging, Krause acknowledges, so his duties involve balancing the intellect/egoist equation.

“How do you get the maximum benefit of that genius?” Krause says. “I want to leverage the smart but minimize the difficult” character traits.

And the timing of Krause’s arrival at Caspian is also interesting. He came to the company shortly after it landed US$120 million in new funding, a huge amount in this capital-constrained environment.

Is something big about to happen with Caspian? Not anything bigger than what’s happening industry-wide, he says.

“The first 10 years of the Internet has been the novelty phase,” Krause says. “The build-out is just beginning to happen. All the major IT system are migrating from client/server on private leased line, ATM and frame relay, to Web-based on IP. The bad news is, technology companies are in the doldrums and there’ll be no recovery this year. The good news is we’re seeing a recovery in enterprise verticals. It will work its way back to bandwidth, carriers and equipment suppliers.

“Caspian has not a better box, but a unique box that changes the rules of the game,” he says. “We have to make sure we guard our cash and get the product to market with a sufficient number of customers in early trial, and ramp up at the same time.”