This sounds like a text book example on disruption, as Cisco is focusing on high-end performance and beating Juniper on the high end.
As broadband deployments and new IP services such as IP telephony increase traffic on the Net, carriers find themselves on the cusp of a major equipment upgrade cycle. Carriers are already looking toward next-generation routers that will provide more capacity and flexibility and better reliability. Cisco's answer to the next generation core is the CRS-1, a hefty, expandable router that took four years and $500 million to develop. After years of speculation, the product finally came out of the shadows in May. The router, outfitted with a new operating system, was designed to replace Cisco's aging Gigabit Switch Router 12000 routers. Due to long testing and sales cycles, the CRS-1 has only recently begun shipping. Cisco claims that it has sold the product, which costs $500,000 to $1 million, to four customers. It also said it's being tested in more than a dozen carrier networks. So far, the company has not announced who the customers are. When the product was first announced, Sprint, Deutsche Telekom, NTT Communications and MCI were testing it
It is disrupted in the low end by XORP, a new, open-source routing software. The idea of the Extensible Open Router Platform -- "XORP" -- is to give enterprises better routers by running open-source software on commodity hardware. Intel, Microsoft, and the National Science Foundation are backers. The edge isn't just the price (free), but the option for users to customize the software to their own needs. Network routing could also be included inside a server or other devices. It's the brainchild of Atanu Ghosh, a researcher at the Computer Science Institute in Berkeley, California, who released the initial XORP version this past summer and the product is getting R&D support from some heavy players, including Intel and Microsoft. With more companies using routers for network protection and always looking for the most efficient product, a cheaper option than a Cisco machine is welcome news.
…But just like the Linux operating system in servers and PCs, open-source software in networking equipment could become a viable competitor over time. No question, computer networking is a bigger challenge for open-source enthusiasts because networking gear is a bit more complicated than a plain old PC. Networking products can be split into two main categories, switches and routers. Switches determine the most efficient path for everything from streaming videos to e-mails to instant messages. Cisco dominates that segment with a market share north of 70%...
…As more and more routers and switches go into corporate offices, the push for cheap alternatives based on open-source software is likely to pick up steam. "The driver behind Linux is the same as the driver behind open-source routing. As soon as something becomes ubiquitous, it gets much easier to commoditize it. And that's what most [customers] want," says Tom Nolle, CEO of network-infrastructure consultancy CIMI Corp. in Voorhees, N.J. As always, cost is a driving force. In the U.S., 1.5 million business sites route data that work with common Internet protocols, Nolle says. The average data rate these business sites support is less than 200 kilobytes per second, and they control that with gear that commonly costs thousands of dollars. The average consumer-broadband connection, by comparison, is over 800 kilobytes. "You can look at those numbers and say a consumer router costs $79," says Nolle. "How long is it before routers for these 1.5 million sites cost $79?"…
Cisco appears vulnerable to an open-source threat over the long haul. Chip giant Intel, which already makes silicon packages meant for networking, would love to supply makers of switches and routers with generic chips and circuit boards, thus displacing the customized integrated-circuit designs used by Cisco. If all that sounds familiar, it should -- a similar dynamic has driven the rise of Linux. None of this will happen overnight. But a one-two punch from low-cost open-source routing hardware and software could eventually become a major drag on Cisco's thriving business.
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