Cisco directs its gaze toward the optical market

Excuse Carl Russo, the vice-president of Cisco Systems optical networking business, if he appears glassy eyed these days. It’s a good bet that Carl has spent more than a few sleepless nights fretting over how to grow an area of business in which Cisco is currently only a minor player.

Russo leads the most strategic product area in networking, but one where Cisco is a novice, trying to establish a foothold against a dominant archenemy. Optical networking will undoubtedly be a fast-growing and incredibly lucrative area for both Cisco and the industry in general. From his perspective, Russo probably sees a gold mine in glass, but it will be tough digging. In the optical networking market, Cisco has a long row to hoe, to say the least, and it’s all tough slogging against Nortel, a company that currently has a much stronger technology portfolio and believes in the importance of optical networking at least as much as Cisco.

It’s unfamiliar territory for Cisco to be so far back of a leader in a market that it considers vital. Such a foray goes totally against the business gospel according to Cisco, which preaches that the company won’t enter a market that it cannot lead or occupy a strong second-place market share position.

But fibre optics is different. The technology represents the present and future underpinning of communications flow and the potential opportunity and importance of fibre optics is too great to resist. It would also be foolhardy for any network equipment maker that wants to remain an industry leader to not make a serious play in this market. Cisco recognizes this and despite its current lowly market position, is pulling out all stops to at least try to establish a significant presence.

The importance of the fibre optics business and Cisco’s place in it was revealed during a December industry analysts’ conference in San Jose, Calif., where Russo outlined the company’s intentions. He revealed that by his estimates Cisco currently has a 6 per cent market share in fibre optic network equipment provisioning, which Russo also admitted is dwarfed by Nortel’s 44 per cent slice of the optical pie.

Getting to prominence will simply demand that Cisco become the fastest-growing optical technology company on the planet. The how-to, according to Russo, is a need for Cisco to identify the fastest-growth spaces of optical technology, continue to focus on execution, and “run like hell.” That likely translates into meaning Cisco will focus on the edge and try to push into the core.

Optical technology will be pushed farther and farther out to the edge, according to Russo, but he added the evolution won’t necessary mean fewer routers – Cisco’s bread-and-butter business – deployed at these strategic points. In fact, Russo believes routers will continue to be deployed in services points of presence (POPs), which will continue to be moved closer to end users. It’s certainly what you’d expect Cisco, the king of routing, to say. Communication services, Russo said, will be deployed with routers and content switches, adding that the core of communication service provider networks will be more expansive and POPs will be more widely distributed.

Of course, Nortel has quite the opposite view of routing, suggesting these devices represent “Old World technology” and users should instead consider content switching, which the company claims is much more cost-effective, versatile and eliminates router bottlenecks.

How does Ethernet move into the core of networks? Ethernet is pervasive, said Russo, adding, “You will never see Ethernet become the transport technology on the other side (in the core).” Instead, according to Russo, Ethernet will stay in the enterprise and up to the point where it connects to a POP. Ethernet is not robust and simply does not do well in what Russo described as the “hostile” high-traffic environment of core carrier networks.

Optical represents a best bet as an investment and Russo said he believes there will be significantly more venture capital investment in optical networking. “I think you’ll see a continued evolution in the optical systems space,” he said.

Russo’s other predictions on the optical front: the notion of managing photons is years, not months, away: about 10 years off. “In two to three years you should be able to view a complete photonic path,” Russo said.

Other thoughts? Russo said he believes the core of carrier optical networks will move from current SONET rings to meshed topologies.

Russo wants to change the mindset of the carrier industry, in terms of how it purchases products. Carriers typically look to purchase enormous volumes of equipment prior to when they actually use it, in order to have the assurance that when new services are rolled out, they actually have the necessary equipment to provision it. Russo and Cisco would like to change that mindset and convince carrier customers to eliminate their warehouses. That way, Cisco can be more predictive of the market and actually predict when real demand is being driven – and, of course, not have to stockpile their own warehouses with unsold equipment, waiting to be unpredictably purchased.

Finally, as you might expect from a senior executive of Cisco, Russo envisions a world of unlimited bandwidth, where real-time, high-quality Internet video resides. It’s a “fibre everywhere” world that Russo believes will bring enormous increases in capacity and dramatically reduced transmission costs. He also predicted that the day that enterprise networks are wired with optical cabling will mark the era when networks become utilities, where, “you plug in and all of the content is readily available.”