Brace for rocky router market: analyst

In the future, corporate Canada might be buying network equipment from firms not on the list of usual vendors, judging by one industry analyst’s assessment of the enterprise router market.

Neil Osipuk is calling for a shake-up in the router space. Whereas Cisco Systems Inc. dominates this area today, Osipuk, an industry analyst at Infonetics Research Inc. in San Jose, figures other router makers are making strides.

“Certainly the next 12 months are an important time in terms of any shifting activity in the router market,” Osipuk said, pointing out that enterprises are evaluating alternative vendors these days.

“Economics play a large part. The climate that we’re in, companies are looking for low cost, feature-rich providers.”

Osipuk said vendors such as Allied Telesyn Inc., Adtran Inc. and Sunnyvale, Calif.-based Quick Eagle Networks Inc. are making strides in the low-level router market, while Enterasys Networks Inc. has added security features to make its routers more attractive to midsized customers. 3Com Corp.’s joint venture with China’s major telecom equipment provider Huawei Technologies speaks to larger clients.

“It’ll remain to be seen how successful this joint venture will be, but it’s something that Cisco’s mentioned is certainly on their radar screen,” Osipuk said. He added, Huawei’s claim to fame is positive price-performance figures.

For the moment, however, Cisco’s crown is secure. The firm has 88 per cent revenue market share for high-end routers, according to Infonetics, and 84 per cent revenue market share for midrange routers. And although it trails Vanguard Managed Solutions LLC in the low-end or small-office, home-office (SOHO) router segment in terms of revenue, Cisco remains the king so far as units-shipped is concerned.

Infonetics says worldwide shipments of low-end/SOHO routers increased 18 per cent between Q1 and Q2 2003. However, the firm pointed out that revenues slipped 21 per cent over that period. Osipuk noted that this is the result of pricing pressure.

In the midrange router sector, Infonetics says revenue is expected to grow 17 per cent between 2003 and 2006.

“We see a continuing trend of connecting branch offices with the corporate WAN,” Osipuk said, adding that companies also seek to increase data security at the branch office, and that requires advanced routers.

Infonetics says it expects high-end router revenue to increase modestly. “It’s part of a continuing rebound in spending on the high-end,” Osipuk explained. “We’re not looking at particularly high numbers in growth. We’re looking at low single-digit numbers 2004 through 2006.”

Osipuk said customers consider product reliability, how committed a vendor is to industry standards, post-sale support offerings and the vendor’s financial stability when making a buying decision. To entice the enterprise, “certainly vendors will need to have good stories around those issues,” he said.

For more information about Infonetics, visit the firm at