The advent of the Internet as a mainstream business technology initially spelt euphoria for the established networking vendors, who suddenly had a market with seemingly limitless growth potential opening up. Cisco, king of the router market, in particular benefited from the expansion of the Net out of its academic heartland.
Growth in Internet usage will be the main driver pushing sales of standalone routers up by 90 per cent over the next five years, according to research by Frost & Sullivan, which says this market will be worth $3.3 billion in 2003. But the downside for Cisco and its traditional rivals is that the Internet is also provoking a massive shakeout in the wide area networking market. Internet start-ups are attacking their ground from one side, while the telecomms equipment makers are moving in from the other. For the first time in years, the corporate netowrking infrastructure is becoming a free for all.
As so often, small companies can be pawns in the giants? battles. This week, a privately held start-up, Juniper Networks, announced plans for a next generation router that promises to alleviate Internet bottlenecks - along with $40 million in financing from the very telecomms heavyweights that are aiming to grab a slice of Cisco?s cake for themselves. Ericsson, Northern Telecom, Siemens/Newbridge and Internet service provider Uunet all joined Cisco?s arch-rival 3Com in placing funds and technical support behind Juniper.
Juniper?s product will compete directly with the 12000 model, nicknamed Big Fast Router, that Cisco currently has in beta test. This is clearly the main reason why so many big names and unlikely bedfellows should align behind an unheard of company from Silicon Valley. ?The explosive growth and use of the Internet is causing traffic bottlenecks, quality issues and performance constraints. This is creating a whole new class of datacommunications devices,? said Juniper chairman Scott Kriens.
He is basing his strategy to take on Cisco on the premise that voice and data networks and suppliers are rapidly merging around the Internet. He claims that current data network equipment such as conventional routers are unable to scale up to meet the demands of superfast traffic carried by new fibre optic networks. As Internet service providers start to behave like telephone companies - charging according to time of day and reliability of service, but guaranteeing almost constant availability - so a new class of network equipment will be needed, argued Kriens at this week?s launch. Although there are few technical details available yet, Juniper promises a traffic controller that handles voice and data and also sends out bills for usage to subscribers.
Richard Palmer, director of product marketing at Cisco, claims it has been working for two years on such a device and billing capabilities will be an option with the Big Fast Routers. But he recognises that the rest of the industry has spotted a potential opportunity to knock the giant off its pedestal, even while he remains bullish. ?The partners that have invested in Juniper have realised they better hustle if they are gonna catch us up,? he commented.
Juniper may have thrown into sharp relief some of the competitive issues arising from the growth of the Net, but it is certainly not the only start-up looking for a share of the network giants? market - and many of these are attracting significant backing from established vendors and from venture capitalists. A record quarter for VC investment in the US was largely driven by Internet start-ups, according to Price Waterhouse figures for the three-month period ended in June. In that time, VC investments rose by 14 per cent, even on a strong quarter in the year earlier quarter, and reached $3.2 billion, with technology accounting for the whole of that increase and for $2.3 billion of the total. Within that, Internet-related companies doubled their funding to $561.5 million.
Clearly, the advantage that these small companies have over the giants is flexibility and speed to market. For instance, Colorado-based Compatible Technologies recently shipped routers featuring advanced tunnelling technology ahead of Cisco and 3Com, which are working on a similar approach. Tunnelling is a method of setting up secure virtual connections by including authentication, such as a digital signature, within each packet - which is then treated by the router as a normal IP packet. Compatible plans to license its Secure Tunnel Establishment Protocol software for use with other vendors? routers, thus - like Juniper and others - inflating its own importance in the market by providing a quick route for larger partners into a new technology area.
Tunnelling is a good example of the standards war that is breaking out around the Internet infrastructure, with Cisco and Microsoft heading up one camp with Level 2 Tunnelling Protocol, against 3Com?s Virtual Tunnelling Protocol. While users may find the acronyms confusing and frustrating, these standards wars are a key battleground for the major vendors - and noone plays the politics game better than Microsoft, which is also moving into previously unfamiliar remote networking territory as it sees the massive growth of the Net market.
Microsoft has already signed a series of strategic alliances with Cisco and this week announced plans to include tunnelling capabilities in its NT 4.0 operating system. The OS will feature virtual private networking facilities based on technology Microsoft calls Basecamp. This allows dial-up or leased line connections to the Net or remote sites to be replaced with secure and dedicated VPN links, supporting the Point to Point Tunnelling Protocol.
But Microsoft is not alone in incorporating VPN support in its mainstream products. Networking, telecomms and firewall suppliers are all racing to grab a portion of this market. In the coming few weeks alone, we will see announcements from Intel, Checkpoint and firewall specialist Raptor Systems. Intel,for instance, has added encryption capabilities to its Express routers, to allow secure long distance connections to the Net using tunnelling technology. And while analysts say Intel still loses out to Cisco in scalability, they are watching with interest the VPN and tunnelling features promised in Novell?s Border Manager Internet software, to be released on 17 September.
But the analysts warn network managers not to get carried away with the hype. While the vendors battle for turf in the Internet market, promising standards, speed of access and secure links, the technology is still new and unproven and users should take things cautiously. ?Full function access to applications is a long way off for someone who?s not looking for a big integration project, or who doesn?t want to be on the bleeding edge,? warned Rick Villars, an IDC analyst. Issues such as efficient user tracking and administration have not yet been fully addressed. In other words, the market may be a free for all right now, but users would do well to wait until the dust settles a little.
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