IP CORE ROUTER DEVELOPERS JOCKEY FOR THIRD, LAST PLACE

In a classic good news/bad news paradox, The Yankee Group told the octet of vendors that make up the IP core router market last week that worldwide spending on their goods will finally pick up next year, growing 12% per year through 2007. The bad news: Only four of them will be around to enjoy it.

Beyond Cisco Systems and Juniper Networks, which collectively own more than 95% of the market, “the market has room for only two more survivors,” wrote Yankee Group analyst Mark Bieberich in a report that predicts the shakeout to end by mid-2005.

The game of musical chairs is already under way. Despite upping its share of the core router market from 0.3% to 1.7% in the first half of 2003, Alcatel essentially bowed out after it acquired edge router vendor TiMetra in May, quietly halting development of its own IP core router, the 7770 OBX. Alcatel may one day sell its 7750 edge router in the core, said a company spokesman, but not now. Likewise, unsuccessful IP core routers may end up being adapted for the edge, Bieberich said.

Relative newcomers Procket Networks and Chiaro Networks emerged this year to challenge the old guard with vaunted scalability. But with IP telephony in carriers' crosshairs, vendors must offer improved performance — not just big boxes — to win accounts. To that end, Avici is releasing new software this week it claims will reduce “convergence times” (or failure recovery times) from tens of seconds to about one second. Next year's software release should cut that to less than a twentieth of a second, Avici said.

The effort is overdue, said Burton Group research director David Passmore. “Avici provided class-leading scalability a few years ago but needs to refresh to remain competitive,” he said.

Three-year-old Caspian Networks also is banking on service quality with its unique “flow-based” routing method, which routes entire data streams, not just packets. By prioritizing different “flows,” carriers can put file-sharing traffic on the back burner while ensuring high service quality for packetized voice. But to sell its routers, the start-up must first sell the approach, said Infonetics analyst Kevin Mitchell. Caspian's director of marketing Dallas Kachan insisted the gear sells itself. “Carriers are falling over themselves to use this box for peer-to-peer control,” he said.

Avici has a head start over newcomers, counting Qwest Communications and AT&T as customers, as well as enterprise router giant Huawei, which is reselling its box in China. To overtake Avici, new entrants need broad-shouldered partners — Ciena or Nortel Networks, for example — to resell their gear. Procket took a step in that direction, winning distribution with Japanese resellers and a U.S. government contractor. But Chiaro CEO Ken Lewis told Telephony in August that he wants more than just a reseller.

“It needs to be a marriage as opposed to a dating relationship,” he said. “Somewhere between a serious equity play and an acquisition.”

Picking the right partners could be even more important than building the best product, Passmore said. “Survival will depend primarily on how well the sales and marketing people can gain traction with specific service providers,” he said, a point not lost on the Chiaro team.

“The next two or three quarters are the most important of our corporate life,” Lewis said in August, citing Asian markets as his top priority. “We need to close.”