Sun and Microsoft executives laid out divergent visions for home networking last week at the Consumer Electronics Show in Las Vegas, but figures at both 3Com and Cisco say they are trying to stay above the fray.
"It's not a war we want to get into," said Brent Lang, 3Com's marketing director for home networking. "What we're interested in is compatibility."
At stake is who controls the various standards needed for home networks, and in turn, a large portion of the potential revenue from products. The fledging market could mean big profits generated by everything from new handheld devices and their operating systems to the expensive, back-end equipment required to deliver new services, such as video-on-demand.
Analysts expect the home networking market to boom--Cahners In-Stat Group predicts it will grow from sales of $281 million this year to $1.4 billion by 2003--but its growth could be stunted if consumers are confused by products that are incompatible. "The greatest fear in the industry now is that we start producing products that don't work together," said analyst Kurt Scherf of Parks Associates, a consultancy.
"At this point, no one can afford to go their separate paths," Scherf said. "The model today is everyone is scrambling to get into as many efforts as they can. They don't know how it will shake out, but they basically have to have a hand in every pot."
For example, in the market for "residential gateways," devices that will be able to control all kinds of home appliances, from refrigerators to PCs, Cisco and 3Com will have to choose between Sun and Microsoft, unless they decide to support both.
Cisco and Sun recently signed a pact to develop a residential gateway the two companies intend to serve as a control center which links home appliances, PCs and phone service to high-speed Internet connections. Meanwhile, 3Com has a one-year-old partnership with Microsoft to build networking kits that allow people to connect their home PCs together, so they can share a single Internet connection, printers and files.
3Com and Cisco's dilemma is a microcosm of what each technology or consumer electronics company in the home networking market faces. Consumer giant Sony, for example, is also supporting both Jini and UPNP.
In fact, a mixture of technology and consumer electronics companies--including Sun, IBM, Oracle, Sony, Philips, Cisco and Motorola--have created a consortium to build a software model based on Sun's Java programming language that will run on the residential gateways. The model, which will support both Jini and Microsoft's UPNP as well as other technology, will help cable companies and telecommunications carriers provide new services through home networks, such as security and entertainment.
Microsoft, which is in the midst of a lawsuit with Sun over Java, does not support the group's efforts. Executives say PCs running the Windows operating system already serve as residential gateways for homes today.
The company has been silent about its future strategy, however. Executives declined to comment this week.
3Com, which plans to release its first residential gateway later this year, said the company could support the software model touted by the consortium, called the Open Services Gateway Initiative (OSGI). But it could also expand its existing home networking relationship with Microsoft, said 3Com's Lang.
"We're not at liberty to talk about that yet, but we need standards for residential gateways and OSGI does make a lot of sense," said Lang. He added that it wouldn't affect his company's existing relationship with Microsoft in the home networking market if the company chose OSGI.
Both networking firms have much at stake when it comes to their relationships with Microsoft. For 3Com, the giant is a natural ally given Microsoft's consumer bent and desire to become more network-friendly. For Cisco, Microsoft looms large as it tackles more and more corporate and Web-related computing tasks, as evidenced by Cisco's decision to partner with the Redmond, Wash.-based software company to produce directory software-based products for service providers.
But Cisco has also been burned. Its directory-based product initiative was predicated on a timely delivery of the Windows 2000 operating system upgrade, which will soon be available but is woefully behind schedule.
"Cisco and Microsoft have been on again-off again competitors and cooperators through the years," Pita Group analyst Craig Johnson said. "But they all need each other in the end."
So as the notion of home networks proliferates, Cisco may want a hand in both the Microsoft and Sun camps so it can retain some market leverage.
Cisco executives say they want to remain neutral. The company will support whatever standards its customers demand, said Jared Headley, Cisco's consumer marketing manager.
"For home networking, we're the enabler for whatever applications and services that run, so if it's a Microsoft service or Sun service, we'll enable it," Headley said.
Yankee Group analyst Karuna Uppal said 3Com and Cisco's strategy to support both makes sense. Without a competing software model from Microsoft, OSGI currently looks like the best bet, especially since it's signed on service providers like GTE, Sprint and France Telecom.
"After 3Com's alliance with Microsoft, it's not surprising that Sun went hard after Cisco," said Uppal. "But the deals aren't exclusive. 3Com will probably join OSGI unless they get something compelling from Microsoft. They don't want to get burned because they want to be Microsoft loyalists.
"It's everyone for themselves out there," Uppal said.