BlueCat brothers claw their way to IT success
August 18, 2005
If you ask Michael Hyatt how he and his older brother Richard got the ball rolling on their multimillion-dollar security business, he'll say video games -- and a shortage of pocket money.
"When I was in Grade 5 we didn't have a lot of money, so Richard would write our own video games so we wouldn't have to buy any," says the president and chief executive officer of Richmond Hill, Ont.-based security appliance maker BlueCat Networks Inc. "Our best ideas have always come out of necessity."
Richard's coding skills have evolved since then. In 1996 at the age of 24, he developed a risk assessment software program for sites with hazardous substances at the suggestion of his father, a chemical engineer. The result is a thriving operation called Dyadem International Ltd., which has 65 employees under his father's leadership, $2-million in profit in its most recent fiscal year, and annual revenue growth of 100 per cent.
In 2001, the brothers formed BlueCat Networks, developers of "the world's first plug and play DNS [Domain Name Server] appliance." The 52-employee company broke even its first year and is now generating a $2-million profit and more than 150 per cent growth year over year.
BlueCat competes with some heavy-hitters -- Cisco, Nortel, Lucent and F5 in the DNS space, and companies such as IronPort and CipherTrust in e-mail appliances. But it's also attracting some heavy-hitting customers, including Fortune 500 companies -- Dow Chemical Co., BP PLC, Chevron Corp., ADP Inc. (its first client), and ACNielsen. BlueCat's client roster also covers various branches of the U.S. military for classified and non-classified networks in the Pentagon, the U.S. Air Force, and the Office of the Secretary of Defense.
"Even Donald Rumsfeld uses it," jokes Michael Hyatt.
BlueCat was built without venture capital funding, although it still receives offers that are universally rejected, its founders say. According to Mr. Hyatt, the company's exploits have always been self-funded.
"We founded Dyadem out of our house. Our first address was Suite 2, which was really the second floor. At that time we didn't even know what venture capital funding was, and since then we've done it on our own."
The development of BlueCat's DNS product recalls the brothers' early days of video gaming.
"We had to get our own DNS server and purchased one from a large company. We were so appalled by the way it worked and how difficult it was to configure, we decided to make our own," Mr. Hyatt says.
According to research company Giga Group, 68 per cent of public DNS servers in Fortune 500 companies are misconfigured. Mr. Hyatt notes that DNS servers are arguably the most overlooked part of a security scheme, and it's a growth industry in these times of rampant hacking, viruses and data-theft scams.
"DNS servers represent the No. 1 entry point for hackers and a potential contributor to identity theft," Mr. Hyatt says. "Many malicious attacks are performed by hackers that use a DNS server they control to send out fake addresses to other DNS servers. Surfers can be directed to the poisoned DNS server simply by entering the URL of a well-known website."
The brothers developed what became known as Adonis, BlueCat Networks' flagship DNS/DHCP (Dynamic Host Configuration Protocol) appliance that secures networks from protocol attacks such as spoofing, ID hacking and cache poisoning. More than 1,000 units have shipped to date.
The beauty of Adonis, Michael Hyatt says, lies in the complexity of the product category and the simplicity of the solution. "We've taken a complex critical part of the network and make the solution simple and secure. You just set it and forget it."
Linda Weaver, chief technology officer for Smart Systems for Health Agency, a provider of IT services to the health provider sector, says that as an agency that manages a lot of DNS services, BlueCat's technology complements its overall security strategy. "One unique feature is the split DNS views. It allows for separate routing of internal network traffic through our private network from public Internet traffic, which is routed through the firewall and intrusion detection perimeter."
BlueCat also makes the Meridius Security Gateway Appliance, an anti-spam device that acts in real-time to "sniff out" spam attacks (Mr. Hyatt says it has close to a 100 per cent detection rate). The newly launched Proteus product is a self-managed, turnkey IP address management (IPAM) system for designing, deploying and managing enterprise IP-based networks.
According to Mr. Hyatt, being small has never been an obstacle to success even in the demanding market for government and corporate security. "We're often up against giants that have $30-million to $50-million in venture capital, but it doesn't stop us beating them in deals."
As he points out, at the end of the day, it's all part of the way the Hyatts have done business since their grade school days. "My brother and I have never had a job. We just made our own companies. We're completely unemployable," Mr. Hyatt says. "Richard gets a technology idea. I sell it. We're like the Field of Dreams concept in reverse -- if they don't come, we build it."
