Taking Routing to the Edge

There’s no disputing the fact that edge routers are hot.

The graphic below, from a recent Light Reading report, shows that edge routers were hot when carriers were building out their networks. They are staying that way during the current period of financial uncertainty – when carriers are looking to optimize their existing networks, rather than grow new ones. What’s more, they will still be hot once we move to the next phase of network development – when next-generation gear will really start to take off in service provider networks.

This puts edge routers in a unique position versus other technology categories, the popularity of which tends to fluctuate based on the carrier fiscal environment.

Why is this?

A lot of it has to do with carrier capital expenditure – or how much money service providers are spending with equipment vendors, and on what type of equipment. The networking industry is, after all, a Great Chain of Being – with service providers at the top. When they spend money, it goes to equipment manufacturers, which in turn spend money with component vendors.

The next graphic, which comes from a report written by Light Reading’s paid research division, the Optical Oracle, shows the capex environment up to the end of the last century (or “BBB,” Before the Bubble Burst). It depicts an unsustainable model of investment. Carriers were spending too much money, with too little return:

Carriers subsequently awoke to the error of their ways, slashed capex spending... and the bubble burst.

The next figure, also from Optical Oracle, shows the situation “post-bubble.” It summarizes capex plans for the 12 leading service providers in the U.S. and shows that they are going to continue slashing capex for the foreseeable future:

What makes edge routers unique is that, while they are not immune to the vicissitudes of carrier capex, they are less susceptible to it than are other equipment categories. And that’s what the next slide shows:

On the top, the bad news: Compared to 2000, 2001 was a disastrous year for networking equipment vendors in general, and router folks took it on the chin just like everyone else – with revenues actually dropping in 2001 and only picking up slightly this year. RHK Inc. switching and routing analyst Kelly Dougherty blames the steep decline in 2000 on the fact that service providers "were ratcheting down capital expenses and looking to reduce excess capacity in their networks."

On the bottom, the good news: Sales of IP aggregation routers (edge routers) represent a disproportionate amount of overall router sales. In fact, RHK is forecasting that by 2004, sales of edge routers will have leapfrogged sales of core routers, to account for nearly 60 percent of router vendors’ revenues – compared to 37 percent in the year 2000.

So why is it that edge routers have remained relatively immune to the capex crisis? And why is the edge router market growing, when everything else is contracting?

It turns out that while most networking vendors (and investors) spent the last three years fixated on finding ways to build optical networking products that could add massive amounts of bandwidth to service provider networks, the changing economic climate meant that service providers themselves have been searching – with a sense of increasing desperation – for devices that would allow them to do more with the capacity they already have.

Hence the recent rampant interest and activity in edge routing.

Vendors (and, again, investors) have finally caught on en masse to the need for innovative products designed to help carriers build out the edges of their networks with equipment that costs less to buy and run and simultaneously positions them to deliver a bundle of new revenue-generating services in the future. (This has resulted in some noteworthy strategic about-faces. Redback Networks Inc. [Nasdaq: RBAK], for example, recently refocused its R&D from next-gen optical equipment to edge routing.)

The result is that edge router vendors are now bringing to market a slew of products designed to deliver a bulletproof “double business case”: both saving money for service providers (via smaller, faster, cheaper form factors), and making it for them, through support for revenue generating services that include – but are by no means limited to – application-based quality of service (QOS) and virtual private networks (VPNs) based on IPSec or Multiprotocol Label Switching (MPLS).

As noted, the upshot of all this is that market researchers expect service providers' spending on edge equipment to leapfrog spending on their overbuilt core networks.

Editor's Note: Light Reading is not affiliated with Oracle Corporation.
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nemo 12/4/2012 | 10:32:10 PM
re: Taking Routing to the Edge One minor correction: the Laurel Networks router is called the ST-200 (two hundred), not ST-2000.

HFSeer 12/4/2012 | 10:30:35 PM
re: Taking Routing to the Edge Motorola? Please! If you're going to
count the BSR64000 CMTS as an edge router,
then you'd better include Arris (Cadant
acquisistion) and ADC (Broadband Access Systems
acquisition). At least they have sold boxes...
Mike Lazar 12/4/2012 | 10:22:50 PM
re: Taking Routing to the Edge
As a recruiter, I have dealt with this company almost from its inception in 1999. I am kind of curious about the current state of the company as this company's internal happening sounds like a grand soap opera worthy of most convoluted plot award.

In 2000, I dealt with Shankar rao, and I think, Sumesh (?) in software. By the end of 2000 - I was told they are no longer there as a result of some internal power politics. The in 2001, I dealt with Raghu in software , Ning in Hardware and Alex Hanthworne in marketing. I checked back a couple of days ago, and I am told that these guys are also no longer here. It looks like there is a yearly bout to out one another from the company, and no body seems to last above one year. I have never seen any other example of more self defeating start up. Does any one know if they have a product or what is happening inside, and why management keep playing revolving chair? I need to advice a client of mine.

jamesbond 12/4/2012 | 10:22:47 PM
re: Taking Routing to the Edge Let me tell you my friend's experience. He interviewed there recently. I don't know the names but following demonstrates the quality of the folks there -

One guy argued with my friend that when a forwarding table has two entries and
and if the router receives a packet with ip
dest, longest prefix match should
yield <> entry as a result!

Further he claimed that the manager wasn't aware of RFC 1812! How can a company supposedly building a router not know about
rfc 1812? What are the QA folks testing software

seeker 12/4/2012 | 10:21:00 PM
re: Taking Routing to the Edge Corona is a joke really. I interviewed at Corona last year and the quality of the people there is less than average. One of the architect there was fresh out of college and spent couple of years doing testing at Broadwing. I know one thing, in term of IP, these guys don't have a clue.
telecom 12/4/2012 | 10:20:49 PM
re: Taking Routing to the Edge I would be surprised if the company is what you describe after 3 years or so in existence. I think they do have a product.

I also talked with these guys. Some of them I talked to are nice folks. Startups typically have internal politics especially if it is Indian/Chinese executive company.

I found it strange they could have some routing/mpls director who would not even listen while talking to people. Listening is an important attribute of a succesful manager. You don't have unilateral opinions especially if you are PhD from university with no real software development experience. He is probably are not qualified to be a manager/director of a software project though with the level of experience I have that would be a rash generalization .But this guy came across to me as some one who should not be development team leader. He is more suited to write papaers and argue with fellow theoretical friends.
John Casper 12/4/2012 | 10:18:59 PM
re: Taking Routing to the Edge Hey telecom, I am very surprised with your comments because I have known their protocol group software director for quite some time- he is one of the best guys to manage a team in the industry (undoubtedly, there are others too). As an old friend, I have to say that he is clear headed, very knowledgeble in the networking area, and great fun to work with.

I used to work with him several years go, and he wrote some of the best code in the company so I don't know how did you get your impression. I still keep the C++ object code library for network socket programming, he wrote way back in early 90 one of our company's products. I think your impression is based on short meeting in which people may or may not be in their best mood. Also, remember many smart people specially with Ph.Ds come out very opiniated at first, until you know them a bit more intimately. Undoubtely, every one can do a bit more by being a better listener. I hope he will see this mail.

Any way, coming back to Corona - you are right they have a well engineered product, and I believe, if the company can keep its current engineering team intact unlike previous years management in-fighting, and be somewhat lucky, they have a good shot to be a contender in the edge routing, IP services industry.
George Lucas 12/4/2012 | 10:18:57 PM
re: Taking Routing to the Edge telecom, from you message it appears that you interviewed there, and didn't get the job. I wud say try again. for the next time remember, that generally smarter and busy people don't have patience and time to listen to long circuitous stories, instead they like precise and summarized information. time management is the key of their high productivity and focussed approach to the management. as per my experience, dumber the manager more detailed response he would expect since he needs to comepensate lower intelligence with more words, more lengthy reports and more repeatitive meetings.
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