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April 24, 2002
U.K.-based carrier Cable & Wireless (NYSE: CWP) today announced plans to offer IP-based virtual private network (VPN) services jointly marketed by Cisco Systems Inc. (Nasdaq: CSCO) and based entirely on products from that vendor (see Cisco, Cable & Wireless Team on IP).
Significant? Certainly. C&W has long been perceived as a strong customer of Juniper Networks Inc.'s (Nasdaq: JNPR) products.
Normally, there's nothing unusual about carriers opting to have two different and competing vendors equip their networks. But Cable & Wireless says it's offering a Cisco Powered Network, which is a specific type of marketing relationship with Cisco in which the carrier agrees to promote its exclusive use of Cisco products in return for access to Cisco's marketing help and 7,000-odd VARs and resellers worldwide.
The big question: If Cable & Wireless has signed up for this kind of exclusive relationship with Cisco, where does that leave the carrier's previously announced IP network from Juniper (see Juniper Building Out Global IP Network)?
Cable & Wireless says it's using each vendor's products in completely distinct networks. Juniper routers are being used for services on the public Internet, while Cisco gear will be used for private "virtual LANs" managed by Cable & Wireless. The carrier also says it didn't displace Juniper in favor of Cisco. "We're growing our Juniper deployment," a spokesperson insists.
The company hints that marketing issues, not technical ones, led to its decision to support two different vendors in these networks. C&W appears to think Cisco has better marketing machinery in place to reach enterprise customers, the key buyer of IP VPNs for corproate use.
The carrier says the new Cisco offerings will build on IP LAN services now available in the U.S. and U.K., as well as on IP WAN services featuring quality of service (QoS) guarantees, which are presently offered in the U.K. to customers such as Marks & Spencer retailers.
By the end of this quarter, Cable & Wireless says it will combine all this into one managed LAN/WAN VPN package leased on a per-user basis to companies in Europe, the U.S., and Japan.
"We will help customers save 20 to 30 percent over their existing networks," a spokesperson for the carrier says. "We take care of everything -- voice, data, video to the desktop. And we'll monitor and fix the network as needed."
Sounds great, but so far the announcement has generated as many questions as it's answered, especially those concerning Juniper's role.
Juniper has this to say: "Cable & Wireless is still a valued Juniper customer," according to Adam Stein, director of corporate marketing. He says the enteprise customers that have attracted Cable & Wireless to Cisco are the same ones Cisco offers all its service provider partners. "I don't think it's healthy to play service providers off against one another that way," Stein asserts.
Cable & Wireless concedes that neither Juniper nor Cisco is particularly pleased about the other's presence at C&W. "The reality is that we do have two partners. That's part of the deal," says Dave Garbin, Cable & Wireless senior director of strategic network planning. He reiterates the marketing aspect of the choice for Cisco: "It's not just about which router is best. You have to look at the whole business."
Some sources foresee problems down the road, as Cable & Wireless may find itself restricted by the Cisco Powered Network deal from adding equipment to different points in its network. "I can see potential problems," says Counse Broders, principal analyst at Current Analysis. His colleague and senior analyst Sandra O'Boyle says, "I think this kind of arrangement could leave you vulnerable. Is the pricing fixed for four years? The carrier couldn't go to another vendor."
Garbin says he thinks the entire package is a "net plus" for both Cisco and Cable & Wireless, and he doesn't foresee any regrets in the future. Indeed, despite the risks, by managing to hold onto deals with both Juniper and Cisco, Cable & Wireless may have found a way to have its cake and eat it too -- a key benefit of being a large global supplier. By agreeing to dedicate part of its IP network to Cisco equipment, it gets the benefit of Cisco's marketing goodies without having to worry about sacrificing its agreement with Juniper -- at least, so far.
Curiously enough, spokespeople for Cisco and Cable & Wireless deny knowledge about any vendor financing or minimum purchase orders involved in this agreement, although such requirements are typical of Cisco Powered Networks. Both acknowledge, however, that the deal is "worth hundreds of millions of dollars" to both parties over its four-year duration. And Garbin says there are conditions in the agreement with Cisco that will work to C&W's advantage. Access to Cisco's channel distribution alone would be worth a sizeable commitment of business to many carriers.
Analysts say today's announcement benefits Cisco by ensuring a certain level of commitment from a leading global carrier. Cisco also gets yet another platform for touting its IP wares for managed voice, data, and video services. This is a strategic area for Cisco.
Despite the potential value to Cisco and Cable & Wireless, analysts say the carrier hasn't done a good job of answering the most important question of all raised by today's announcement: What is the value to customers?
"A lot of other carriers have similar services," says Current Analysis's Broders. Equant (NYSE: ENT; Paris: EQU), for instance, is one of several global suppliers with similar offerings (see Equant Signs 500th VPN Customer), and that's just for starters. Cisco has a lot of these agreements going. It's not clear how Cable & Wireless plans to distinguish its offerings, Broders says.
Cable & Wireless has yet to build a case as to why companies should choose its managed IP VPNs over other types of services, and a recent study seems to indicate that this question is far from resolved (see IP Services Are Too Expensive, Say Users). Although the carrier claims its VPN services could help customers save money, that has yet to be proven in live deployments.
"Applications will have a lot to do with any success Cable & Wireless has," says Sandra O'Boyle. "Many applications that could really benefit enterprises by making employees more productive are still on the drawing board."
The upshot? Cable & Wireless has much to prove before its new IP VPN service starts looking like more than a run-of-the-mill marketing exchange with Cisco, and it needs to face the conflicts raised by its support of two different vendors. How C&W answers these questions over time could have significance not only for the carrier, but for its vendors as well.
— Mary Jander, Senior Editor, Light Reading
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