CNET también está disponible en español.

Ir a español

Don't show this again

Tech Industry

How network firms can all claim victory

Behind the chest-pounding that dominates the competitive climate in today's network equipment market lies a simple fact: Everybody wins.

    Behind the chest-pounding that dominates the competitive climate in today's network equipment market lies a simple fact: Everybody wins.

    Despite strategic blunders and product misfires, the largest network equipment firms--Cisco Systems, Nortel Networks, and Lucent Technologies--can always count on playing some type of role in network construction from the likes of Qwest Communications International, Level 3 Communications, or US West, to name a few.

    Network contracts are viewed as the epitome of success in the market. The more contracts a company can grab, the stronger that company's strategy will appear to customers and to Wall Street. Yet it's not a situation where one winner will take all.

    For example, Qwest signs a deal with Cisco for network gear. The next week Nortel signs a deal with the same firm. Confused? "They're probably all in different portions of the network," said Rolf De Vegt, principal analyst with industry consultants Renaissance Worldwide. "They can all be true."

    As a result, networking firms find themselves in the midst of a high-pitched struggle for business in a world in which every network operator knows that every company has its own particular technological strengths.

    "None of the major market players are winning everything," said Chris Nicoll, director of infrastructure analysis for market watcher Current Analysis.

    In the United States alone, communications companies will spend $32.5 billion on equipment for their networks this year, Renaissance predicts, with the market expected to grow by 11 percent each year. These numbers don't even take into account the corporate networking market, according to the research firm.

    X marks the spot
    Case in point: Nortel this week unveiled its latest high-speed networking equipment gear. As part of the announcement, the company was quick to highlight both Cable & Wireless and IXC Communications as adopters of its new technology.

    Curiously, IXC has already been certified as a "Cisco-powered network," a designation that means at least 80 percent of its network equipment comes from the data networking giant. So what gives?

    It's a typical scenario. IXC uses Cisco equipment to power the Internet Protocol (IP)-based portion of its network for Net services. Separately, the firm uses networking gear from Newbridge Networks and Ciena for connections based on sophisticated frame relay and asynchronous transfer mode (ATM) technology. Finally, IXC taps Nortel's fiber-optic expertise for long-haul transport of voice and data traffic.

    In doing so, IXC doesn't want to become too dependent on one provider. Picking and choosing networking firms allows companies to potentially use other companies as leverage during contract negotiations, according to analysts.

    "These relationships--to work--are long-term relationships. They start with a product, but they have to do a lot more than that," said Mike Guess, vice president of engineering for IXC.

    "I think service providers are hedging their bets," Current Analysis' Nicoll said. "I think they recognize each company's particular strengths. It gives the service provider a hammer to hold over its vendors."

    Losses and gains
    Earlier this month, Swedish communications carrier Telia was in the middle of a fight between Cisco and Nortel over conflicting reports concerning equipment the service provider was adopting in its network.

    Telia, regarded as a cutting-edge communications company, signed a deal with Cisco in February to expand its network. Earlier this month, Nortel--which has a 10-year relationship with Telia--detailed a similar expansion agreement with the company, calling it a significant Internet win.

    But Cisco remains the supplier for Telia's IP-based networking needs, according to the company. At issue is Cisco's attempt to extend use of its equipment to a portion of the network based on frame relay and ATM. "They were looking at one of our ATM products," said Larry Lang, vice president of service provider marketing at Cisco.

    "One of the things that may lead to confusion is there's a lot of technology that goes into these networks," Lang said. "In the real world, these networks are complicated beasts."

    But Nortel executives said the deal was a "displacement of another manufacturer's equipment," according to Paul Brandwood, a marketing director for Nortel's carrier data solutions group. "It's a significant win," he said.

    Telia eventually clarified its position after different executives gave diverging accounts of the company's equipment plans. "We will continue to work with Cisco as network operations are more and more driven toward data," Jan Morten Ruud, head of datacom and Internet operations for Telia, recently told Bloomberg.

    "The vendors want to position themselves as the leader in the market. In fact, they're all leaders," noted Current Analysis' Nicoll. "No one's going to dominate all the markets together."