Carriers Weigh Savings With Cisco CRS-1
At the launch event yesterday for its CRS-1 router, Cisco Systems Inc. (Nasdaq: CSCO)
demonstrated an array of futuristic services that its new, massively scaleable box will enable telcos to provide -- from videoconferencing to multiplayer gaming (see Cisco Unveils the HFR). Dazzling as those services may be, carriers are also interested in the savings they stand to gain from a piece of equipment that aims to change the way they buy and replace routers.
Typically, carriers purchase routers much as corporations buy PCs, replacing older boxes with newer, faster ones every five to seven years as microprocessor speeds improve. That’s a far cry from the way phone companies have historically bought switches for time-division multiplexed (TDM) voice traffic. Once a phone company installs a TDM switch, it may stay in a network for up to 20 years, during which administrators add incremental upgrades to it.
Cisco is taking a step toward that traditional approach with the CRS-1, which is designed for a lifetime comparable to that of a TDM switch (see Chambers Expects Cisco Dominance). “Once we put it in place, we don’t want to move it for one to two decades,” said Cisco CEO John Chambers in a speech yesterday, echoing the requirements customers gave the vendor as it built the CRS-1. The vision is this: Instead of replacing routers every five years, carriers add new linecards and software modules to the CRS-1 to meet changing demands and introduce new services. But the tool-shed-sized box stays in place.
Will it really work that way? “Let us pray,” says Jack Wimmer, VP of network architecture and advanced technology at MCI Inc. (Nasdaq: WCOEQ, MCWEQ). On the surface, the notion of buying linecards and software updates instead of new routers seems simply like spending the same money on one set of Cisco products instead of another. Not so, says Wimmer, who expects to reap significant savings in capital and operating expenditures from the CRS-1. “It’s a lot more cost effective than fork-lifting a whole box out and putting a new box in,” he says.
With a new box come new management systems, new maintenance, new operations, and new training for administrators, all of which cost more than adding new linecards and software incrementally as demand dictates, Wimmer says. MCI has not yet deployed the CRS-1 but plans to begin testing it once it ships in July.
The flipside of this argument is that carriers might have to pay even higher prices for new linecards, software, and so on, once they've committed to a long-term strategy based on the CRS-1. Right now, however, this doesn't seem to bother carriers too much. Cisco reaped a gross margin of 68.8 percent in its latest reported quarter, and yet it got high ratings from carriers in the market perception survey conducted by Heavy Reading, Light Reading's market research division, last September (see Cisco Delivers, Sees 5% Growth in Q4 and Cisco Winning Market Perception War).
The only carrier that has put the router into production so far is Sprint Corp. (NYSE: FON), which began testing the CRS-1 a year ago. The carrier is using a single-chassis configuration of the box as a core router connected to an OC48 line at its facility in San Jose, Calif., where it has previously used gigabit switch routers (GSRs) from Cisco.
“Where the large benefit comes in is one CRS-1 replaces eight GSRs,” says Kathryn Walker, executive VP of network services at Sprint. Sprint will study its CRS-1 in San Jose for the rest of this year before determining whether to install more of the systems in its network. Once this decision is made, Sprint would deploy the CRS-1 in its "densest locations," says Walker, and "redeploy the GSRs we have today to other places in the network that don’t have as much capacity."
Sprint will pay special attention to whether the savings in capital expenditures from replacing GSRs outweighs the operating expenditures from installing and maintaining the CRS-1.
— Justin Hibbard, Senior Editor, Light Reading