Feel like starting a company but you don't have time to cook up your own routing software? That's the kind of thing NextHop Technologies Inc. has in mind -- routing software for the systems company on the go.

Today, NextHop announced version 9.3 of its routing software that plugs into a hardware platform and -- voila! -- becomes a router. It also announced a partnership agreement with IBM Corp. (NYSE: IBM), which is planning to incorporate the routing code on its NP4GS3 network processor.

This latest version of the software from NextHop, which owns exclusive rights to the routing code originally developed at the University of Michigan, focuses on scaleable routing on the edge of the network.

The software scales the number of routing peers that can be supported in a device from 24 to 150. It also supports up to 500,000 unique routes. And it allows support for up to 64,000 interfaces per device. The software, which supports the full range of routing protocols, including RIP, OSPF, BGP, IS-IS, as well as IPv6, can be used in products like edge routers supporting VPNs, broadband, and DSL aggregation. It can also be used in DWDM platforms, LAN switches, third-generation wireless devices, core routers, firewalls, and servers. The company says it is addressing a market worth more than $1 billion.

"We aren't going after the core router market," says Edward M. Cluss, NextHop's president and CEO. "It's already dominated by Juniper and Cisco. But there is a big opportunity for us in the edge market."

Development of the routing code -- known as "GateD" -- that's the basis of the NextHop product started back in 1987 as part of a University of Michigan research project led by developer Sue Hares. Three years after the project began, the software, which was then open source and free to anyone, was deployed by a customer. By 1995 vendors from all over were using GateD software to develop products. As a result, several of them banded together and formed the Merit GateD Consortiom, so that they could pool resources and share improvements on the code. But by 1999 the consortium model wasn't able to provide improvements rapidly enough, so they decided to allow the software to be commercialized. In 2000, Sue Hares, now the company's CTO, took her exclusive rights to the GateD software and founded NextHop.

As GateD grew up, several vendors used pieces of the code to build routers. The most famous and successful implementation of early GateD software came from Juniper Networks Inc. (Nasdaq: JNPR), which used the code to build its Junos routing software. Other vendors like Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7), Charlotte’s Web Networks Ltd., and Hyperchip Inc. have also used versions of GateD to start development of their core routers(see Hyperchip Hypes Its Hardware). And several edge routing companies like CoSine Communications Inc. (Nasdaq: COSN), Luminous Networks Inc., Redback Networks Inc. (Nasdaq: RBAK), and Riverstone Networks Inc. (Nasdaq: RSTN) are currently NextHop customers.

Up until this point, vendors using GateD have had to do a lot of tweaking to the control plane software in order to fit their particular boxes' needs. But with this latest version of code, that will no longer be necessary, according to Dennis J. Tsu, vice president of marketing for the company.

"Our customers are telling us that they don't want to have to do that much customization," he says. "They want something robust enough to just plug into the box and it works."

Startups could potentially save millions by not having to hire a team of expensive software engineers to write code from scratch. And they could bring their products to market much faster. The same principal holds for established vendors.

But is selling third-party software for something as integral and important as routing a good business to be in?

"I really don't know," says Tony Li, chief founder of Procket Networks Inc. and one of the most respected routing engineers around. "I can tell you that long ago I thought about doing something similar and weighed the advantages of being a software vendor and being a systems vendor. Systems certainly looked more attractive, just from a business standpoint. The software vendor has the challenge of getting the real value for their contribution. That's pretty tough. But if Sue has figured this out, more power to her."

Then there's a question of whether or not service providers will buy gear knowing that the vendor did not develop the software itself. Some critics say that this might pass in the enterprise, but in the carrier world it would never fly.

"Sure it sounds good -- you don't have to hire 30 engineers," says David Ginsburg, vice president of product management and marketing for Allegro Networks Inc., which developed its software for its edge router in-house. "But if a service provider found out that someone other than us wrote our software, they would tell us to get out."

Even Juniper, which started building its code with an early version of GateD, agrees that using a plug-and-play version of third-party routing software could be a very tough sell to carriers.

"I think it would be difficult to convince a carrier, particularly in the core," says Kevin Dillon, director of product marketing for Juniper. "Ownership and accountability are very important when dealing with carriers."

But one of the company's venture capital investors argues that NextHop is not just any software company. Sue Hares has been working on GateD since 1987 and is highly regarded in the routing world, says Rob Coneybeer, a partner of New Enterprise Associates (NEA) and NextHop board member. He claims that NextHop's routing software is as robust as software from Juniper or Cisco Systems Inc. (Nasdaq: CSCO).

"Their software is pretty solid," says Coneybeer. "I'm sure there are lots of people out there who would love to OEM Juniper's software. Sue Hares may not be as well known as Tony Li, but in the routing world people know her and they respect her work."

The company has managed to save $7 million of the $11 million venture money it has raised so far, says CEO Cluss. Last year the company generated revenues in the single-digit millions, and he expects that number to triple this year.

NextHop isn't the only company selling third-party routing software. Companies like IPinfusion, WindRiver, Virata, NetPlane, and FutureSoftware also offer solutions (see NetPlane Opens Up IP Routing).

- Marguerite Reardon, Senior Editor, Light Reading
http://www.lightreading.com