The Company to Beat
(article from April edition of Business 2.0)
Sycamore's Mighty Shadow
Photonics over fiber is the future of networking technology. And Sycamore Networks has become the company to beat.
By Om Malik
opmalik@opmalik.com
Many CEOs cite names such as Peter Drucker and books such as In Search of Excellence and The Practice of Management as guideposts for their managerial style. But few forward-thinking executives would admit to using a 5,000-year-old sacred text to assist them in day-to-day managerial decisions.
Gururaj "Desh" Deshpande, co-founder of current Wall Street darling Sycamore Networks, however, is not your average corporate leader. Pulling such maxims as "If it can be done, it will be done" and "All one has to do is work towards the target and forget about the fruits of labor" from the Bhagavad-Gita ? or Song of the Blessed One ? an ancient Indian philosophy text, Deshpande has almost single-handedly helped change the way networks route data, and the speed with which it's done. In the process, he has become a guru of sorts to scores of companies and investors eager to divine some of his insight.
This became apparent recently in a small Manhattan hotel conference room, where Deshpande preached his optical networking gospel. Surrounded by fast-talking telecommunications analysts, he silenced the room the instant his talk began, with many analysts leaning forward so as not to miss a word. "We are trying to change the way optical networks are built and function," he enthused. How do he and Sycamore plan to do this? Photonics.
Next-generation networks
Photonics is becoming the bedrock of the next generation of networks that use light waves (or photons) instead of electrons to transmit data over the optical fibers. Optical technology that uses photons is more efficient and much faster than traditional data-networking technology and has become many a prescient entrepreneur's latest gold mine. Everyone from Columbia, Md.-based Corvis to giants such as Nortel Networks are working furiously to develop products that make optical networks as commonplace as the local area networks that crisscross corporate America.
In order to understand what Deshpande and his team are doing, it is vital to understand the architecture of the public fiber network. The basic public network consists of three primary components ? fiber optic cable that provides raw capacity; dense wave division multiplexing (DWDM), which multiplies the raw capacity of a specific fiber by dividing a fiber strand into multiple wavelengths (see "Breaking Bottlenecks," March '99, p94); and SONET/SDH transmission equipment, which converts data traffic from an electrical signal to an optical signal for transport over the fiber network and provides the traffic monitoring and management services. In this architecture, the fiber and DWDM equipment provide nothing more than a physical transmission medium ? the "network plumbing." The ability to manage voice traffic, dubbed "intelligence of the network" by Deshpande, resides in the electrical domain and is provided by the SONET/SDH layer of equipment.
While this was a great architecture for a voice-dominated world, SONET has some shortcomings in today's data-centric world. Unlike voice traffic, which is generally characterized by slow growth and stable demand, data traffic is characterized by rapid growth and unpredictable demand. Data networks must be capable of being deployed cost-effectively and expanded quickly.
Under the current architecture, carriers must turn photons into electrons and then back to photons to switch from one router to another, or to boost the signal when it weakens over distance. These converters can cost upwards of $50,000 each.
This is the market Sycamore attacks. Eighteen months ago when starting Sycamore, Deshpande and co-founders Eric Swanson and Rick Barry wanted to build equipment that helps data flow onto optical cables and manages that flow ? the type of hardware service providers such as Williams Communications and Enron would spend millions of dollars buying.
Deshpande's thesis was that the demand for network capacity would explode and service providers would need to deliver the bandwidth capacity at the flick of a switch. In order to achieve this, Deshpande realized that Sycamore's product would need specialized software or "intelligence."
"Right now, if you need to boost bandwidth capacity, you need to call up your service provider and it takes almost six months to add more capacity," says Deshpande. His target is to cut that time to six minutes by end of this year, then to six seconds, and then make it real time. And it will all happen, he argues, in the software.
This epiphany has made Sycamore a leader in optical networking, and has helped the company reach a $28 billion market capitalization on $29 million in sales. Surprisingly, the company has outpaced better-equipped rivals such as Lucent Technologies and Nortel in a market that is estimated to balloon from $9 billion last year to $40 billion in 2003, according to RHK, a San Francisco-based market research firm.
Five products in 10 months
While most of its rivals are trying to make optical networking hardware beefier, Sycamore started out with an architecture that can be scaled up for use in the backbone networks. Using Sycamore's proprietary software, the same basic architecture can be scaled down to be used in metropolitan fiber optic networks. Sycamore also makes an optical switch that is used for optical routing and network control, a transport node that helps connect the optical networks with other type of networks, and network management software to maintain and run the optical networks.
The company's sharp focus has helped Sycamore get off the ground at a rapid clip. Eighteen months after founding the company, Deshpande and CEO Dan Smith shipped their first product. No other networking company ? Cascade Communications, Ciena, or even Cisco Systems ? has gotten out of the chute so fast.
"Sycamore dove into the metropolitan space first and then expanded into the longer haul space," says Frank Dzubeck, president of Communications Network Architects. "They have announced and shipped five products in 10 months. In the optical space, that's unheard of."
"If you look at all the announcements in the optical-networking space, there are not many who have delivered on the optical networking architecture," says Matthew Bross, chief technology officer of Williams Communications. "The others may have good ideas; they do not have any products."
Om Malik (opmalik@opmalik.com) is a writer based in New York. |
