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ROUTERS: The One-Brand Show

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DQC Bureau
New Update

While the growth has come down, there are no doubts about who the market leader is. Cisco led with 80 percent market share by value during 2000-01 and is expected to maintain its leadership this year as well leaving very little space for others. Of course, Nortel, MRO-Tek, Motorola, Juniper, D-Link, 3Com, Convergent, BPL, Apcom and Kaybee Infotech have been working very hard to grab a larger share of the market pie.

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The result is that Cisco's market share came down from 83 percent in 1998-99 to 80 percent in 1999-00. However, among large and medium ISPs (both A and B category), Cisco remained the only vendor doing business.

Nortel was the biggest gainer last year with its market share going up to 6.3 percent from 3.6 percent. Companies like Cabletron, D-Link, Compex and Intel too have improved their performance but marginally. 

Complex market conditions 

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Major demand for routers came from WAN projects of big corporates. Equal amount of demand has also come from ISPs -- new as well as the existing ones involved in expansion -- and IT-enabled service providers. 

This brings into play various categories of channel partners. Cisco operates through SIs, distributors and other certified dealers (premier partners). Some leading network integrators like Datacraft and Wipro import routers in bulk and cater to the high and medium-end customers like A and B class ISPs and big corporates. Distributors sell directly to premier partners (80 percent) as well as end-users (20 percent). 

While Juniper and Apcom sell solely through channels, Bangalore-based MRO-Tek gets half of its sales through direct selling. Almost 40 percent of the high-end router sales come from

SIs. 

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Though none of these companies were able to give a clear picture about the share of router sales to ISP segment, S Nautiyal, Director, Spark Technology and Testing Pvt Ltd, Delhi says, "Nearly 20 percent of our router sales come from the ISP segment, and that is about Rs 1 crore per annum."

Cisco - the pioneer 

Some sections of the market believe that it is the first-mover advantage that has given Cisco an edge over all other brands. But that is not all. Cisco has a strong hold over the software designed for its routers. Its routers work on Cisco Group Management (CGM) Protocol and come loaded with a proprietary Inter-network Operating System (IOS) IP platform, having expandability to other feature sets on the same hardware. "This is the key aspect that keeps Cisco ahead of others," says

Nautiyal.

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These features are ideal for enterprises and ISP backbone environments providing ease of installation, configuration, troubleshooting and compatibility with existing network equipment and protocols. Says P M Prabhu, MD, PAM Network Ltd, Bangalore, "Other companies push their routers as a hardware product, whereas Cisco's routers are more of a total solution."

Cisco has yet another factor playing to its advantage. There are more people trained on Cisco routers, than all the other brands put together. 

Unleashing a price war 

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While Cisco's claims are centered round technology and quality, there are others who are leveraging on their pricing. Anand Mehta, Marketing Manager, D-Link, which caters to mid and lower ISP segments, says, "We manufacture and market routers that are technologically as capable as Cisco routers, but are priced comparatively lower." For instance, D-Link 1162 fixed port router is priced at Rs 55,000 whereas its Cisco counterpart 1720 modular router is priced at Rs 95,000. D-Link's ISDN router and Cisco 801 router are priced Rs 16,000 and Rs 39,000 respectively.

Says Karthik Natarajan, Sales Manager--India, Juniper Networks, "Our technology is our edge over our competition. Juniper routers have the ability to forward 40 million packets per second (nearest competition is about five million) and a stable OS called

Junos."

Cabletron also has aggressively priced its high performance switch routers. Compared to other routers in this category, its SmartSwitch router is 20 to 30 percent less per port. Despite the unleashing of a price war by the router vendors, end-user prices have remained largely stagnant in the past eight to nine months. This is mainly because there is more price competition among channels than the vendors. 

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However, in medium and high-end router market a slump in price does not lead to rise in demand, and vice versa. It is in the low-end segment that price points affect demand much more. 

Future - bright or bleak?

Though in some quarters there is a feeling that the demand for routers will slow down due to unhealthy competition and price war among ISPs, most believe that government policies have had positive impact in the router market, though indirectly. 

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The government has allowed private ISPs to access the international bandwidth directly, reducing/removing (phase-wise) the monopoly of VSNL. The subscriber base is also increasing and new services like VPN and MPLS have also turned on. Besides, companies are largely moving into LAN and WAN, which require traffic to be routed securely and efficiently, which will boost requirements of routers. 

Traditional routing products are no match for the high-bandwidth requirements of today's networks. Software-based routers, though richly featured, are slow and unable to address the latency and quality of service issues required by next-generation applications. "To address these new requirements," says Sumanth Paturu, Director of Hyderabad-based ISP ARM Ltd, "we need products that deliver both performance and functionality." Value-additions like firewall or mail servers will further push its demand. Sales of low-end routers are likely to go up with ISPs beginning to offer routers along with connectivity packages to small ISPs. 

The networking industry is looking forward to a faster growth in the southern and western regions of the country. Some believe that the north is also as important as the other two regions. They hope the new policies of the government will boost the industry in all these three regions, except the east, which is believed to be under-performing.

Saji MP in Mumbai  with inputs from Sunila Paul in Bangalore and Mohit Chhabbra in New Delhi

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