All: From the Newbridge thread:
Networkers Push Ahead To Next Level - Layer 3
Date: 1/7/98
Author: Michele Hostetler
Some makers of networking gear are marrying their industry's hottest
product - switches - with an old standby - routers - in hopes of
creating a profitable union.
And they'll use the product to take aim at their biggest rival.
The product is called a Layer 3 switch or routing-switch. Its makers see
it as a thrust against Cisco Systems Inc. Cisco isn't making true Layer
3 switches. That's because Layer 3 could take sales away from its
existing products, analysts say.
''Cisco has the most to lose from Layer 3, at least near-term,'' said
John Armstrong, an analyst with market researcher Dataquest Inc. in San
Jose, Calif.
Cisco built its business on routers, devices that route data over
networks. Routers are the backbone of the Internet. San Jose-based Cisco
became the largest maker of networking gear because of its lead in
routers.
But the single language of the Internet, ironically, is making Layer 3
switches possible. That threatens Cisco, because routing-switches are
faster and cheaper than routers.
Layer 3 also cashes in on switch popularity. Sales of switches -
products that give networks a speed burst - are growing faster than
routers. Layer 3 combines the power of routers with the speed of
switches.
The big wave of Layer 3 switches will be rolled out this year by 3Com
Corp. and Bay Networks Inc., both based in Santa Clara, Calif.,
Cabletron Systems Inc. of Rochester, N.H., and a host of start-ups.
Cisco is tweaking its products to include Layer 3 software. Still, its
lack of a true routing-switch spells opportunity, say rivals.
''The Cisco router is running out of gas,'' said Ron Sege, 3Com's senior
vice president of local-area-network operations. ''I think this makes
Cisco more vulnerable than any other trend that's occurred in a long
time. They've never been challenged by a frontal assault on their
routing business.''
Layer 3 products transmit data through the more sophisticated third
''layer'' of networking, rather than the standard second layer.
Layer 3 switches are about five times faster than routers, but cost
one-third the price, says Dataquest's Armstrong. An average Cisco router
sells for $100,000, while a 3Com Layer 3 product costs $30,000, he says.
3Com, and perhaps Bay, are well-positioned in the coming Layer 3 battle,
says Martin Pyykkonen, an analyst with Furman Selz LLC in San Francisco.
The industry awaits Cisco's response. Now, Cisco is moving existing
customers to newer router technologies such as Gigabit Ethernet, which
is 10 times quicker than so-called Fast Ethernet. Ethernet is the most
popular networking platform.
''Cisco won't get dinged if it manages the transition (to faster
products),'' Dataquest's Armstrong said.
Cisco doesn't plan to lose any business to Layer 3, says Jayshree Ullal,
vice president of Cisco's enterprise business line. She says Cisco will
continue to stress performance, services and products that let different
kinds of traffic -multiprotocol data - run on the same network. The
latter isn't the strong suit of Layer 3 switches.
Routers are evolving, not being replaced, Ullal says. She says Cisco's
new Gigabit Switch Router includes Layer 3 technology. It's a different
way of filling the same needs that rivals are targeting with Layer 3
products, she says.
3Com, the No. 2 play in networking, might have the most riding on Layer
3. Success with its Layer 3 line, called CoreBuilder, would show 3Com's
prowess in landing large customer accounts and threaten Cisco, says
Furman Selz's Pyykkonen.
''CoreBuilder could be the (industry's) key product in the next six
months,'' Pyykkonen said. ''But it's going to be tough to sell against
Cisco.''
In the next year, 3Com wants to grab up to 30% of Cisco's $1 billion
router business, says Sege. That would be a huge jump. Cisco had 56% of
the worldwide router market in the third quarter, compared with only 6%
for 3Com, says Dataquest.
Sege says corporate users are buying 3Com's Layer 3 equipment to augment
their older Cisco routers.
Bay also is gunning for Cisco with its Layer 3 products, called Accelar.
''(Layer 3) represents an opportunity to change the rules in the
market,'' said Basil Alwan, Bay's director of product management for
Accelar.
Layer 3 routing-switches let customers move data faster and more
efficiently.
There are seven layers in moving data on networks. Layer 1 is the
physical cables and wires. Layer 2 refers to the ''bridges'' that let
data communicate among computers, printers and other devices. Layer 3 is
a more sophisticated level of data communication. It more specifically
moves data among applications and users. Layer 4 priorities network
traffic to an even greater degree. Layer 4 products are in the works.
Layer 3 brings better voice and video quality and ''enables
next-generation networks,'' said 3Com's Sege.
Such ''intelligence'' is essential for tomorrow's networks, say
analysts.
''At some point . . . you can't have enough bandwidth, so we have to get
smart,'' said Mark Leary, an analyst at International Data Corp., a
Framingham, Mass.- based market researcher. ''Layer 3 is the next wave
of technology. For users, it makes life simpler and cheaper.''
The rise of the Internet and its language -internetworking protocol -
makes Layer 3 switches possible, Dataquest's Armstrong says. In the next
two to three years, IP will comprise nearly 90% of all network traffic,
he says.
Routers have had to contend with a wide array of protocols. Layer 3
handles only IP traffic. That's one big reason they're faster than
traditional routers.
''Ultimately, we're seeing IP becoming the universal transport,'' Bay's
Alwan said.
And that, he says, will push Layer 3 sales.
1998 Investors Business Daily, Inc.
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