The Route Game

Forget Intel versus AMD! Don’t even think about Sun Microsystems versus Microsoft or PeopleSoft versus Oracle. The real David-and-Goliath battle of Silicon Valley is going on between Cisco Systems and Juniper Networks, two companies that make routers, which most of us will never see but use every single time we send an email, download a torrent or simply read an RSS file.
boxr15.jpgWhen no one thought Cisco could be beaten in the router market, Juniper has clawed its way up and has become clear and present danger to Cisco’s router business. In the core routing, Juniper’s share was up 6% to 38% while Cisco lost ground, down to 57% from 61% in Q2 2004. In the edge routing, where Cisco is supremely in control, Juniper posted healthy gains: up to 25% from 19% in Q2, while Cisco ceded 5% market share to 62%. Cisco, historically when faced with market share loss reacts with a scorched earth attack. Bay Networks – remember anyone? Cisco knows that at this moment despite the market share gains, Juniper is a little vulnerable. The integration of the Net Screen Technologies acquisition is proving to be less than optimal and might be keeping the management a little distracted.

Lets step back for a minute though. From 1996 through May 2004, Juniper made hay of the fact that its routers were more reliable and faster, and could handle more traffic than anything Cisco could throw at the market. The JUNOS software that ran on Juniper routers was more reliant than some of the problems with Cisco’s Internet Operating System (IOS) software.
In May 2004, Cisco decided to shut everyone up for good and released its mega-router, CRS-One. (No relation to rap artist, KRS-One.) Secretly the router had been dubbed, Huge F***king Router, which I had written about in my story on Cisco for Business 2.0, last year!) It was only a matter of time before Juniper would respond; and it did. On December 3rd with TX Matrix! (Press release)
Actually TX-Matrix is a very clever piece of hardware. Taking a page out of four-way servers, Juniper developed “TX” which is a transaction hub into which its hot-selling T 640 routers plug in and act like, one Huge F**king Router with the capacity to handle 1.28 terabits per second. In comparison, Cisco’s CRS-1 can handle 46 terabits per second. With time, Juniper plans to develop capability to plug in eight T-640 routers. Anyway Juniper justified the performance lag to the fact that the market for such mega routers is not really mature right now.
Avici Systems, which has managed to garner less than 2 percent of the total market for high end routers felt that TX merited a response and their spokeswoman send me a detailed email saying why Avici’s products are better. “You’ve heard the term, Day Late and a Dollar Short. Well, Friday’s TX Matrix announcement by Juniper Networks is “three years late and at least 1.25 Terabits short.” Based on market pressure, Juniper today felt the need to re-announce a product that was introduced in 2001,” she said. (Avici’s approach allows up to 14 units of any model to be interconnected, supporting up to a 5.6 Terabit level.)
She does have a point, because Juniper is the last router maker to deliver this multi-chassis system. Still what it does is increase the performance delta between Juniper’s T640 and Cisco’s 12XXX series of routers. “Cisco’s new CRS-1 has not yet taken off,” writes research firm, Current Analysis, “This means Cisco is very dependent on the 12XXX series to continue to generate revenue from its installed base and win new networking opportunities.” Mark Sue, who tracks the router and other telecom gear for RBC Capital Markets thinks that Juniper’s cautious approach is good because the market is not fully developed and only a handful of locations need more than terabit/second kind of capacity.
Three days later Cisco came back and announced three new customers: Pittsburg Supercomputing Center, Telecom Italia and Japan’s National Institute of Informatics. Softbank is the marquee customer for CRS-1, and is deploying it on its massive triple-play broadband network. (Light Reading) Still these are early days for what Sue estimates could be a multibillion-dollar market.
But these capacity-technology machinations are only the most obvious part of the story. There is something more intense going on. For instance, earlier this year Cisco was quick to announce that it had won a big chunk of a mega-million dollar contract from China Telecom. The morning after, Juniper said, it had a big portion of the contract, along with Huawei, a Chinese equipment maker. You can read all about it here.
Lets take some more of recent announcements and try and put them in perspective. This week Cisco made two major announcements. First it acquired a little known start-up called, BCN Systems, put it under the aegis of its router group, with special emphasis on voice-over-IP applications. BCN actually is a pivotal play in the Cisco-Juniper rivalry. It has recruited a lot of talent out of Juniper. By buying the company, Cisco has bought enough intelligence to counter Juniper’s edge on software.
Cisco has also persuaded Tony “Route Man” Li to come back to the mother ship. (link) Li is very familiar with Juniper’s router, for he was one of the architects of Juniper’s JUNOS software. Li, if you remember had started Procket Networks, which despite flaming out, had a product that could trump Juniper Networks’ fast selling products. Now with Li back in the fold, and Cisco in firm control of Procket assets, the Routezilla, can swing for the fences and take down Juniper. I think is a classic Machiavellian move, and kudos for Cisco’s Senior VP Mike Volpi for pulling this off. And if all that was not enough, Cisco inked a deal with Fujitsu to increase its presence in Japan, one market where Juniper has met with much success.
This bitter fight between the two giants doesn’t surprise me at all. Router is the critical piece of our present and future connected lives are the router. Yes, that very same router, which started out life as a small piece of software running on Digital Equipment workstations! (For a more comprehensive history of Router, visit WikiPedia). Cisco’s role in turning router into a smash hit product is outlined in my book, Broadbandits: Inside the $750 Billion Telecom Heist.)
Actually with the worlds of home entertainment, wireless, wire line and computer all merging, I personally feel that the focus is going to shift from brute packet routing to packet handling, i.e. intelligence. The routers will need to develop a brain of their own in order to handle different types of IP traffic – video, voice, data and god knows what else. And there will be an ever more need for routers. It is why you have Cisco fighting with Juniper, and others like Alcatel, Huawei, Avici Systems and several others trying their best to get in on the action.