When Markets Collide, Remember Where You Came From

In the search for the networking market's sweet spot, manufacturers in recent years have wrestled with whether they are carrier-class or enterprise networking providers. Unless you have the resources to do both well, it is important to decide whether you are fish or fowl -- or risk missing important opportunities.

A recent report from Communications Industry Researchers Communications Industry Researchers showcases that difference.

For a brief period in 1999 and 2000, telcos bought more network equipment than enterprises. Reacting to this one-time event, networking companies anxiously positioned themselves as "carrier-class", thinking the road to prosperity was paved with large service provider contracts. In reality, however, CLECs accounts were mostly buying vendor financed equipment; RBOCs and major IXCs weren't buying if they didn't see a familiar logo on the hardware. And, furthermore, in chasing elusive carrier sales, many suppliers neglected to address the needs of enterprise customers, many of which possessed significant capital budgets and had demonstrated a real need for high bandwidth and optical equipment. Today, Fibre Channel, Ethernet, and WDM vendors have carved out niches unmet by Cisco, while the carrier market is still a handful of major buyers dealing with the same vendors they used before, during, and after the boom.

For today's networking vendor, the enterprise is clearly the place to be.

The press attention on carrier networking has obscured some technologies' true enterprise applications. Nowhere has this distortion been more twisted than the WDM market. WDM suppliers have invested significant R&D in addressing Telco requirements, but in fact, sales to enterprises over the past three years have exceeded sales to service providers.Back in 2001 and 2002, when carriers abruptly halted DWDM implementations in their long-haul networks, the market's attention shifted to the story about a supposed rapidly growing metro market for DWDM. However, while very few major LECs and PTTs were cutting large purchase orders for WDM products, large enterprises were embracing both Dense and Coarse WDM for "metro" applications. In fact, much of the service provider interest in WDM has been to build private MANs for large enterprise clients, and not for the inter-office core.

Fibre Channel is another promising enterprise technology. While SANs are often associated with disaster recovery and backup, rapid data retrieval for financial trading is sustaining much of the market's growth (as well as that of WDM). Connecting PCs and servers to LANs, MANs and WANs was the catalyst for networking growth in the 90's. In this decade, those PCs and servers are now generating a greater number of transactions and overwhelming networks with inadequate storage capacity. Fibre Channel has proven to be the protocol best suited for SANs.

GigE and 10GigE have been, and will continue to be corporate technologies, contrary to persistent wishful thinking that carriers will move their networks to Ethernet. Where telcos are using Ethernet, it is to support enterprise customers who use it for LAN extension, and not for metro core applications where SONET/SDH dominates. Furthermore, long reach equipment sales will remain slow due to the higher optics costs associated with the 1550nm and 1310nm port types. Short reach and clustered environments dominate current 10Gig shipments, a trend that will benefit the new 10Gig over Copper standard.