Router demand

|~|As corporations demand sophisticated connectivity, the need for routers continues to grow. The worldwide enterprise router revenue totaled US$859 million in 3Q05, up 8% over 2Q05 and 3% over 3Q04.

Unit shipments were up by 3% sequentially and 27% annually, according to Infonetics Research. Secure router revenue jumped by 21% between 2Q05 and 3Q05, and has more than doubled since 3Q04.Despite the mixed revenue picture, the overall demand for routers remains strong, with an expected 22% increase by 2008, when shipments will reach two million. “Router spending continues to shift toward built-in security, as evidenced by solid gains in the secure segment, the only sector with revenue keeping pace with unit shipments,” says Matthias Machowinski, directing analyst at Infonetics Research. “That’s good news for manufacturers, as this shift will help them combat price erosion,” he adds.
The router is the workhorse of enterprises and carrier networks, and Cisco Systems continues to dominate this buoyant sector. The vendor leads in IP edge router revenue with 51%, followed by Juniper Networks with 20% and Alcatel with 10% after the edge router sales more than doubled in 3Q05.

Cisco says the demand for routers is on the rise. However, it says the challenge for networking vendors is not about providing products; it is about adding intelligent features to their solutions. In order to meet the growing demand of the corporate sector, vendors have to develop products, which include intelligent functionalities. “Routers need to have more value-add functionalities. We started doing this three years ago, our products have more service functionalities and that is our differentiating factor,” says Eyad Alqadi, regional sales manager for public sector and enterprise for Cisco Gulf region.
Cisco is betting heavily on its line of integrated services routers (ISRs). The devices are built to run simultaneous services such as data, security and quality of service (QoS) at wire speeds on one integrated routing platform. The new ISRs 800 and 1800 lines are intended for enterprise customers and managed services from service providers. The value proposition of the ISRs is that they provide connectivity and concurrent services at wire speeds. Osama Shamsi-Pasha, regional IT director for MindShare MENA, shares Alqadi’s sentiments. He says routers have become much smarter compared to their limited functionalities several years ago.

“Today, IT managers do not have to make changes manually when there is a network upgrade or some changes need to be made. Routers have smart capabilities to manage those changes automatically,” he says. However, Shamsi-Pasha believes the cost of enterprise routers is high and vendors need to address that. “The cost of enterprise routers is still quite high. I do not see any reason for it. Networking vendors need to drop their prices,” he adds.

Sphere Networks says the foundation of an enterprise networking is the large area network (LAN) and wide area network (WAN). Approximately 90% of businesses gain primary communication access through these networks, and routers play a critical in role in achieving the maximum performance. “Over the next few years, more will be a huge demand for LANs/WANs products, which include mainly switches and routers, and during that period, price drops and support will [impact] the enterprise corporate computer network strategy,” says Jamil Al-Asfar, sales manager for Sphere Networks. Al-Asfar says enterprises are building hybrid networks, creating a demand for routers. “As long as enterprises require access and connection to the internet, routers will remain a key component. As routers advance with more [functionalities] such as better support for voice-over-internet protocol (VoIP) and traffic management, they will be a must have product,” he adds.

Once upon a time the functions of routing, switching and security were distributed on separate chassis, however, the traditional model has become blurred by the advent of all-in-one appliances. Routers, which offer security and switching service, are not new. Products, which provide integrated routing, switching, wireless, voice, virtual private network (VPN) and security, have been in existence for some time. What is new is the performance of these technologies. Previous attempts to deliver integrated service platforms usually resulted in a trade-off in performance or the number of connections being supported. However, today’s next generation of fast-silicon switching processors can easily meet the demands of large corporations.

There is a need for next-generation routers, and these feature-rich routers will drive the market. Performance is key as far as routing on the corporate backbone is concerned. Until recently, routers have played a comparatively simple role in global networks. Responsible mainly for forwarding packets consisting mainly of e-mail and web content around the internet, routers have had few of the stringent performance and reliability requirements placed on other types of networking equipment.

While this relative simplicity was a major factor in keeping IP network costs low, the demand is increasing for routers to perform to levels previously only achieved by other commercial forms of voice and data networks, so that new services can be deployed and additional services migrated to IP. In addition to the enhanced features required for supporting new services, the need for high levels of security over an inherently insecure network design and an ever-increasing demand for low costs has changed the internet router industry from a sector with a few large players into a highly competitive marketplace in which an increasing number of players are striving to push the boundaries.

In order to exploit the available opportunities, vendors are taking steps to enhance their technologies. 3Com has introduced its 6000-router family for enterprise customers. The solution brings WAN features and performance to the regional offices of large enterprise customers. Beneficial to customers with large, distributed networks, the 6000 series has proven to be interoperable with Cisco routers, according to The Tolly Group. “The 3Com router family helps protect networks by incorporating layered approach to security. These security and control features include radius authentication support, stateful packet inspection firewall, DoS blocking, access control lists and IPSec VPNs to provide secure networks,” states Ahmed Hafez, general manager at 3Com Egypt and Libya. Furthermore, 3Com has acquired TippingPoint Technologies with a goal of enhancing solutions and increasing its customer base.

Corporations in the Middle East are rapidly realising the benefits of network connectivity for their businesses. WAN is becoming a compelling need for banks, government departments and IT services companies. For all these organisations, a WAN connectivity plays a pivotal role in driving productivity and efficiency. The motive is to replace a wide range of network devices with one secure box. “We have a ‘wish list’ for routers, however, the stateful packet inspection (SPI) is on top of the list. It is critical for organisations like ours, which has several different branches, to have a secure IT platform and routers play an important role,” says Hisham Gouda, CIO of Genco Group, which owns five companies specialising in the distribution of natural gas.
Security is a big concern when it comes to routers as hackers take advantage of high-speed connections to launch DoS attacks against businesses and internet service providers (ISPs). Most routers have configuration tables that do not allow lots of requests from the same sending address. However, many popular websites and businesses have suffered DoS attacks.

Furthermore, enterprises also need to take precaution against the distributed-denial-of-service (DDoS) attacks. Stateful inspection firewall has emerged as an advanced security solution. Some routers use stateful packet inspection (SPI), which can be found in secure enterprise firewalls. Networking vendors have developed DoS and DDoS defense technologies, which are capable of detecting upcoming attacks, differentiating malicious and legitimate traffic, without hindering the traffic flow. “Security is crucial today. Enterprises are demanding secure IT environment, which means routers need to be robust enough to provide that security,” says Joseph Mehawej, marketing and technical sales manager for Nortel.

The booming telecommunications sector is also boosting the demand for routers in the enterprise sector. As the telecoms sector continues on its route toward the convergence of voice, data, and video services, the need for the continuing upgrade of systems is keeping the telecom equipment sector marching steadily. As wireline service providers continue to lose traditional phone customers to greater competition and paradigm shifts toward wireless and VoIP, they are refocusing on data services that advance the need for high-speed connections with greater capacity. These trends are having immediate impact on equipment makers. Also, replacing traditional circuit-switched network systems with the digital packet-switched platforms needed for IP communications has been a boon for wireline equipment vendors like Lucent and Nortel.

Nortel for example, has created an enterprise business group that focuses on product development of traditional and VoIP products, as well as Layer 2 through to Layer 7 switches, firewalls, and virtual private network (VPN) equipment. According to the vendor, the demand for routers remains strong. It attributes the growth to convergence. “In the enterprise space we can clearly say there is a demand for routers. When you move from a LAN infrastructure to a WAN, there is a change in technology, mainly because the technologies and the speeds are different on the two platforms, so routers are [required] to bridge the two technologies,” states Mehawej.

“Our multi-media readiness is our differentiating factor. We understand voice very well since we have 150 years of experience in that market. We have also introduced our secure routers with built-in multi-media capabilities. The telecommunications sector is going for managed services and the global trend today is for convergence,” he adds.
Juniper Networks, which secured 25% of the market share for high-end enterprise routers in 3Q05, says there will always be a demand for routers. Ray Mota, chief research officer for Synergy Research Group (SRG), attributes Juniper’s rapid growth in the enterprise routing market to the success of its M7i and M10i platforms. “Juniper has made a significant leap into the high-end enterprise routing market with its M7i and M10i multi-service routers,” Mota says. “The continuous growth of IP services has resulted in more dynamic IP traffic traversing today’s enterprise networks. Therefore, more organisations are turning to Juniper for increased security, performance and scalability through their new line of enterprise routing platforms,” Mota adds.

Paul Gainham, portfolio marketing manager for Juniper EMEA, says a typical enterprise network often consists of a combination of Layer 2 and 3 switches to provide LAN connectivity combined with Layer 3 focused routers to provide a WAN connectivity. LAN switches are good at providing relatively simple, high-speed connections in local environments, with speeds ranging toward 1Gbps. “Looking back, routers were deemed essential to provide a WAN connectivity. They link LANs together, providing scalable and stable features. This was due to the fact that layer 2 LAN switches, while good in local environments, do not provide the scalable traffic management and routing protocol stability that routers do,” Gainham explains. “Techniques like spanning tree and virtual LANs were never designed to be scalable for WAN protocols and despite many changes and enhancements to them, they are still LAN focused protocols [not suitable] for large scalable networks. Even layer 3 LAN switches do not provide the depth and range of features and intelligence that routers do,” he adds.

The router market is maturing. However, it is also dying. There will be no winners in the router war; the survivors will morph into something else. The router players of today are already starting to become the giants of tomorrow because they are able to figure out what the successor products to routers are. “The key point is that where integration of features and capabilities are seen as a requirement, the router will be the platform of choice for the majority of these integration efforts due to its foundational place at the heart of every enterprise network. The future of routing and routing products at the heart of enterprise networks is a healthy one,” enthuses Junipers’ Gainham. ||**||