Cisco foes turn up heat

R.R. Donnelley & Sons Co., a print services firm headquartered in Chicago, is an established company operating in a mature industry. But when it comes to network equipment, it seems this century-old business is willing to break with tradition.

In the past, R.R. Donnelley has bought network gear from Cisco Systems Inc. However, according to John Schaefer, vice-president of infrastructure, the firm is eyeing equipment from a relative newcomer, Force10 Networks Inc., based in Milpidas, Calif.

Force10 in January dropped the price of its 10-Gigabit Ethernet line cards by 40 per cent, bringing the cost down to approximately US$17,000 per port.

“It puts 10-Gig at a different price point,” Schaefer said, adding that 10-Gig connectivity would help R.R. Donnelley consolidate servers across its 200 locations.

Normally, Cisco would count as the number one go-to network supplier for companies like R.R. Donnelley. The San Jose, Calif.-based vendor practically owns the enterprise network equipment space – and with good reason, said Dan McLean, director of outsourcing and IT utility research with IDC Canada Ltd. in Toronto.

“It has so much to do with the fact that Cisco is perceived as a safe buy for customers,” he said. “Cisco is a company that’s going to be around. It won’t go down the tubes like some other networking companies that we’ve seen.”

But that leadership position does not deter competitors like Force10 and upstarts like it from trying to take a run at Cisco.

According to Steve Mullaney, Force10’s vice-president of marketing, the firm’s claim to fame isn’t just price, but also performance that belies cut-rate costs. He said Force10’s line cards are purposely built for 10-Gig connectivity, which helps set the company apart. Other competitors have “bolted on 10-Gig to their existing architecture. They don’t get the density; they don’t get the performance. None of them is running 10-Gigabit Ethernet at 10-Gigabit Ethernet [speeds]. Everybody else is at 5-Gig or 8-Gigabit performance.”

The 40 per cent price-drop doesn’t hurt, Mullaney said, adding that the line cards are not loss leaders. Force10 leveraged market forces to tame prices.

“As you start getting more volume, you start negotiating with your suppliers – your costs continue to come down,” he said.

Force10 isn’t the only Cisco challenger using price to get a foot in the enterprise’s door. Dell Computer Corp. peddles its PowerConnect switches as cost-effective alternatives to Cisco equipment.

Robert Mah, product manager for the enterprise with Dell Canada in Toronto, said PowerConnect Gigabit Ethernet switches cost approximately $10 per port. “If you take a look at similar offerings…Dell is on a price basis of about 50 per cent less.”

Mah attributed the PowerConnect’s low price in part to patience – the company waited for component costs to come down and for the market to settle before jumping in.

“We’re never out first with the latest and fastest products,” Mah said. “We take a look at what is developing from a technology perspective and monitor very closely. When the market is mature and there is a sweet spot there, we enter the market.”

Todd McNeilly, manager of computer services with The College of the Rockies in Cranbrook, B.C. and a PowerConnect user, said price matters.

“The areas I’ve worked in have not had unlimited IT budgets to simply go purely by feature. It’s a balancing act. If I see something where there are definite dollar advantages and I can get the benefit of X-amount of features, that’s what I tend to look for.”

Juniper Networks Inc., a Sunnyvale, Calif.-based Cisco competitor for the router space, also tries to achieve balance. According to Christine Heckart, Juniper’s vice-president of marketing, the company has discovered a sweet spot with security.

“We had some real success stories from the worm that was released last weekend,” Heckart said, referring to “Slammer,” a digital parasite that hampered numerous corporate networks the weekend of Jan. 24. “Juniper networks in many cases proactively caught it. All you had to do was turn a particular filter on and your network was fine.”

McLean from IDC Canada said Enterasys Networks Inc. also plans to take the security path to success in an industry dominated by Cisco.

“Enterasys is trying to say to customers, ‘Our big focus is certainly on feature richness and performance, but we also are looking to build security into our products…. That’s something Cisco doesn’t have and we think it’s something customers are interested in.'”

How does Cisco plan to defend its turf? The answer comes in three parts, said Andrew Sage, Cisco Canada’s Toronto-based director of marketing.

Part one: innovation. Cisco puts more than US$3 billion into research and development each year, Sage said. “It takes a lot of engineering and expertise to maintain products over a period of a number of years.…We’re going to continue to focus on that.”

Part two: the systems approach. Cisco focuses on the whole network, rather than simply the switch or router. “The network works together as a system, rather than, ‘This is a router. Go and make it work with that switch,'” Sage said.

Part three: people. Sage said Cisco has 10,000 employees in the field whose job is to make sure customers have positive experiences. “It has always been part of our customer strategy to use those people to stay close to our customers and drive customer satisfaction,” he said. “A great number of our competitors don’t take the same approach, particularly Dell, who look at a very hands-off approach. Order from the Web and the stuff arrives tomorrow. It’s very efficient from a delivery standpoint, but it doesn’t come with a lot of support.”

McLean said Cisco’s massive market share is well deserved. He added that when it comes to new competitors, “I can tell you how Cisco will react. They will look at a company like Force10 and take them very seriously. They will watch that company, and they will monitor their success. They will have a very deep understanding of how well that company is doing against Cisco in that product space. They’re not complacent at all.”

Even though he’s considering Force10’s 10-Gigabit Ethernet platform for R.R. Donnelley, Schaefer certainly wouldn’t say Cisco’s in trouble. When it comes time for the enterprise to decide which vendor gets the contract, the bottom line is…well, the bottom line.

“I don’t think anyone’s going to rip out their entire Cisco backbone,” Schaefer said. “I mean, you’ve got a whole support organization underneath the technology. But when you’re looking at data centre consolidation, consolidating a number a servers, the higher-end switching technology is attractive.”