Quarry Snares $38 Million

In today's tight-fisted market, attention's drawn to startups that command big funding. That's why scoring $38 million in a third round of financing is a bit of a coup for startup Quarry Technologies Inc. (see Quarry Bags Another $38 Million).

Now the company must prove itself in an increasingly competitive market, where success isn't guaranteed to even the spiffiest startups.

Quarry, with 140 employees, is developing what it calls an "IP service edge switch," which is designed to divvy up carrier IP bandwidth into VPNs (virtual private networks) for business customers (see Quarry Mines IP For Gold ). The switch, which Quarry says handles data rates to OC48 (2.5 Gbit/s), deploys standard IP functions like MPLS (multiprotocol label switching) and DiffServ in order to configure QOS (quality of service) for customer networks.

The latest funding will be used to get this product out the door, Quarry says. The round was led by 3i Group PLC and Jerusalem Venture Partners. It included previous investors, Arch Venture Partners, Dow Chemical Co. (NYSE: DOW), Walden International Investment Group, and Verizon Communications (NYSE: VZ). A new investors is Corvis Corp. (Nasdaq: CORV). The round brings Quarry Tech's total financing to $66.5 million over a two-year period.

Quarry seems ready to meet expectations, which are high. Its switch, dubbed the iQ8000, is in beta trials and will start shipping "next month." (No information has been given out on where the beta sites may be.)

But Quarry faces growing competition. Confronted by reduced capital budgets, carriers seem finally ready to consider QOS as a means of squeezing more out of their existing broadband infrastructure -- instead of turning to the simpler solution of buying more bandwidth. As a result, vendors who previously hung back a bit on MPLS and QOS are getting aggressive about it as a source of new business.

Leading the pack are industry heavyweights such as Cisco Systems Inc. (Nasdaq: CSCO) and Nortel Networks Corp. (NYSE/Toronto: NT) that also are making IP service switches (see Optical Taxonomy, page 9).

Indeed, Cisco's just upped the ante by announcing a whole series of products that simplify QOS configuration in its routers (see Cisco Advances on MPLS, DiffServ). Among the new offerings available to carriers in the latest version of Cisco's IOS router operating software, are traffic engineering algorithms, the ability to automatically shrink and grow QOS streams according to traffic levels, and a high-speed rerouting function that competes with Sonet for getting links up and running after an outage. All of this is being augmented by interface software that is meant to simplify the complexities of setting up QOS in carrier networks.

Cisco says its new gear is being trialed by Global One, an independent subsidiary of France Telecom SA, and by French research network CRIHAN.

Quarry's response to all this is two-pronged. First, as its support by Corvis seems to show, Quarry plans to fit into existing networks, alongside switches and other networking gear -- including routers like Cisco's. Quarry says it will offer these boxes a means of offloading complex QOS tasks.

Interestingly, Quarry's claims to augment other gear raises another spectre: MPLS interoperability. Up to now, support of standard methods of creating QOS aren't guaranteed to work seamlessly together. Indeed, vendors routinely conduct interoperability tests to iron out the kinks (see MPLS Mavens Tout Progress). So claims of working with other gear may be more complicated than they seem.

While trying to fit into carriers' existing nets, Quarry also will seek to beat Cisco and other router vendors at the MPLS game by being faster and more granular in its security features, QOS control, and monitoring.

For instance, Quarry plans to showcase its ability to provide the level of detailed data required to hook into sophisticated carrier billing systems by announcing relationships with a variety of billing vendors "sometime soon."

Whether Quarry succeeds remains to be seen. Still, its funding is not only a clear vote of confidence by its backers but an indication that market trends are favoring the kind of solution it aims to provide.

- Mary Jander, Senior Editor, Light Reading http://www.lightreading.com