DISA Deal D-Day Approaches
On Friday, a long-awaited request for proposal (RFP) from the U.S. Defense Information Systems Agency went public -- and vendors everywhere went into high gear, eager for a piece of what's arguably the most important government networking contract in twenty years.
"People are on this. The RFI [request for information] went out a year ago and the vendor day was packed. It's major," says one hopeful participant, who spoke on condition of anonymity.
Friday's RFP relates to the much-discussed Global Information Grid Bandwidth Expansion (GIG BE) project, DISA's vision of a global telecom network for the U.S. Department of Defense, which DISA exists to serve (see Dreams of the DISA Deal).
The RFP has two parts: The first relates to a dark fiber network that will form the basic infrastructure for the project. That RFP has been circulated, and bidding closed on May 16, with a range of carriers and fiber suppliers responding. The second portion calls for specific hardware to run on the network. Documentation for it was finally published late Friday, but vendors have waited months for it.
Industry eyes are glued to the hardware RFP for a number of reasons. First, there's the money. The GIG BE hardware RFP represents a key opportunity for equipment vendors suffering from the carrier spending drought -- for some, it may be a chance at staying alive.
Estimates of the project's value varies. In a note to investors this morning, analysts Steven Levy and Tim Luke of Lehman Brothers wrote they expect the RFP to result in $800 million to $900 million in spending over the next two years for "initial deployment."
Others differ. "It's a tad open-ended," says Tom Nolle, president of the CIMI Corp. consultancy. "But I think it's about a three-year commitment worth between $500 or $600 million or so." He says he's not comfortable making estimates beyond that but thinks it likely the project could wind up being twice that amount.
DISA had not gotten back to us at press time with answers to questions on specifics of the RFP. But Levy and Luke say they think the full contract covers 72 nodes to be rolled out over a seven-year period.
DISA is asking for equipment in four major categories: "core and edge Internet Protocol Routers; Multi-Service Provisioning Platforms; Optical Transport System; and Optical Digital Cross Connect Switch." Network management and service assurance products are also being called for.
The RFP process is being overseen for DISA by Science Applications International Corp. (SAIC) (which owns Telcordia Technologies Inc.) -- and it's strict. Vendors have just 12 days from May 23 to ask questions about the RFP documents. Final responses must be in within four weeks. No extensions are permitted. Trials are expected to start this year.
Observers say the network schedule is ambitious and the government will only consider equipment that can be demonstrated to work today. This could make the RFP a kind of proving ground for next-generation networking gear -- as well as a bellwether for other networking projects.
"It's very similar to some carrier RFPs. It's kind of a preview of what service providers might do," Nolle says. RBOCs such as Verizon Communications Inc. (NYSE: VZ) and SBC Communications Inc. (NYSE: SBC) are readying nationwide packet-based networks (see How Will Verizon Go National?). IXCs like AT&T Corp. (NYSE: T) and Sprint Corp. (NYSE: FON) are moving that way, too. The GIG BE could provide a lot of information about what to expect.
Who's up to win? That's the question everyone will ask over the next weeks. Levy and Luke have already handicapped their picks, including Alcatel SA (NYSE: ALA; Paris: CGEP:PA), Ciena Corp. (Nasdaq: CIEN), Cisco Systems Inc. (Nasdaq: CSCO), Juniper Networks Inc. (Nasdaq: JNPR), Lucent Technologies Inc. (NYSE: LU), Nortel Networks Corp. (NYSE/Toronto: NT), Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), and Sycamore Networks Inc. (Nasdaq: SCMR).
Nothing's guaranteed, the Lehman analysts say. Cisco, for instance, may be the world's biggest routing vendor, but unless it gets its next-generation core router to market, and fast, it may fall behind. "Specifically, the RFP suggests that the core routers in the GIG BE network need to support at least an aggregated 640Gbps throughput and Cisco's current GSR core routers can only support an aggregated 320Gbps," Levy and Luke write. "We believe it is critical for Cisco to bring HFR (huge fast router) to the market in a timely fashion."
Cisco wouldn't comment on the analysts' speculation that it may release HFR at next week's Supercomm 2003 tradeshow in Atlanta.
Lehman's list may not include key contenders, say some observers. The list of public companies likely to answer the call is apt to contain quite a few more. CIMI's Nolle says partnerships could come into play with this RFP, like the one between Juniper and Lucent (see Lucent Partners With Juniper), as vendors seek to fill in gaps in their responses. Mergers could also be a factor: Nolle thinks this RFP has been the catalyst for talk surrounding Laurel Networks Inc. (see Laurel: Startup Holdout? and Marconi and Laurel in Talks ).
There's also room for dark horses. Marconi Corp. plc (Nasdaq/London: MONI), for instance, has a long history of U.S. government contracts and could have some surprises in store, Nolle says.
At least one analyst says that whichever way this RFP goes, it won't be the end of the story. "This is the first RFP of many, some of which we know about and some of which we don't," says Frank Dzubeck, president of Communications Network Architects. The government's been working to overhaul its network since Sept. 11, 2001, he says, and since national security's involved, there's a level of secrecy that's lacking in other arenas.
But Dzubeck says the level of excitement surrounding the project points to the amount of technology activity in Washington these days. "There's tremendous sales activity," he says.
— Mary Jander, Senior Editor, Light Reading
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