Effort To Secure 'The Edge' Drives Enterprise-Router Market

The worldwide enterprise-router market is receiving a growth injection from IT managers who need to secure the edge of their enterprises, according to a new report from Infonetics Research Inc.

"The secure portion of the market is growing," said Neil Osipuk of Infonetics in an interview Tuesday. "IT managers need to protect the edge of their enterprises. Companies are using secure routers for corporate-wide rollouts of broadband VPNs [virtual private networks] and remote offices."

Osipuk, who is directing analyst of the market-research firm's Enterprise Routers and Switches unit, said the "secure-router segment" grew 13 percent last year and will increase to 16 percent by 2007. The remainder of the $4.3 billion wired-enterprise-router business is either flat or experiencing very low growth, he said.

According to Osipuk, router manufacturers are meeting the increased security demands by introducing a new class of router with advanced routing capabilities, but also featuring hardware and software support for VPN and firewall functions. Many enterprises are rolling out the improved secure routers in a corporate-wide manner. "We define 'secure,' in this case, as when a router ships with hardware or software support for VPN and when the router may also have firewall security," he explained.

Observing that the demand for routers with more security features is driven by the recent spate of viruses that have hit enterprises worldwide, the report states that enterprises are paying increased attention to making their growing telecommuter and remote offices safer. Osipuk said he found more router manufacturers are using Secure Socket Layer (SSL) schemes as a way to secure connections. The older method--IP SEC--is in use as the standard for encrypting traffic between remote offices and IT headquarters.As expected, Cisco Systems leads the enterprise-router market with 67 percent of total revenue and 8 percent of units sold. (Cisco controls the high end of the market.) "End users and the channel are looking for alternatives to Cisco . . . to shake up the market. That could help pricing," said Osipuk. "Cisco's near monopoly of the enterprise-router market has enabled them to dictate prices, but vendors entering and re-entering the market will likely launch a price war, which will give end-users and the channel the alternative they've been looking for. These dynamics will shake up market-share distribution over the next 12 to 15 months."

Osipuk said the recent decision by Juniper Networks to acquire NetScreen Technologies should help to inject more competition into the router marketplace, noting that NetScreen is strong in security and in VPN areas. NetScreen has a strong presence in the enterprise market with its longtime focus on corporations and on the edge of corporate networks. NetScreen has provided products with firewalls and filters designed to stop viruses, worms, and other hacker creations. Juniper has tended more to address the Internet service provider (ISP) and telecommunications service provider markets.

Cisco's position in the low end of the router market is reversed by its ownership of Linksys, which has a 45 percent market share and 8 percent revenue share in the router market, according to the Infonetics report.