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Bay freeware takes on Cisco

The company buys Phase2 Networks for an undisclosed sum and pledges to open its own software innovations to third parties.

Bay Networks is changing the course of the rapidly evolving market for routing technology by purchasing Phase2 Networks for an undisclosed sum.

In addition, the networker has pledged to open its own software innovations to third parties.

Bay hopes the move will position its technology as a more appealing alternative to software provided by Cisco Systems, by far the dominant provider of routing hardware and accompanying software in the industry.

The networking sector has seen a dramatic shift from interest in and use of expensive routing devices to cheaper switching hardware that incorporates routing functions in hardware, not software, bringing down prices to a fraction of the cost and blowing away previous assumptions about routing speeds. Routers generally are used as a back-end device to interconnect networked sites and provide connections to the public Internet or private corporate networks.

Bay continues to push various strategies despite last week's announcement of merger plans with Canadian telecommunications firm Northern Telecom. Bay will remain an independent subsidiary of Nortel once the merger is finalized, according to executives.

Much like a PC, a routing device gains its functions once operating system software is installed. Routing software essentially provides the intelligence so that the hardware can process and route the data traffic that runs through it across a network.

Executives said Phase2, which has offered routing code to the market for nine years, gives Bay the chance to open up its own BayRS routing software to a huge number of firms. Phase2 makes software that runs on third-party networking equipment.

The firm allows these companies to remain anonymous while encouraging these third parties to share various new features and protocol extensions developed for the Phase2 software. It has deals with about 50 companies to provide hardware-independent code, a figure that represents a significant portion of the companies involved in the routing industry.

Now Bay will contribute technology from its own routing experience, which dates back to the days of Wellfleet Communications, one portion of the duo that merged to form Bay.

"This is the Internet way," claimed Ilan Carmi, vice president and general manager for Bay's routing products division. "We want to play in this market and accelerate it."

This runs counter to Cisco Systems' strategy for its dominant Internetworking Operating System (IOS) software, essentially a "protocol salad" of interfaces, specifications, and services that the company uses throughout its wide array of networking products. Cisco has released few elements of its software to third parties and ties much of its code directly to its own hardware.

It is in this strategy that Bay sees an opening. "We're hoping this is going to shake some trees," noted Paul Callahan, vice president of business development for Bay. "We want to build hotter products faster.

"We can leap ahead while Cisco tries to unsnarl the IOS monolith," he said, adding that Bay can now drive standards through 50 companies.

Despite Bay's lofty goals, Cisco's hegemony in the routing market could make it extremely difficult for anyone--including Bay--to break ahead. Cisco maintains a 70 percent share of revenue in the worldwide routing market, according to 1998 first-quarter numbers from market researcher Dataquest, compared with Bay's 8.5 percent share.

Jeff Pickering, president of Phase2, will remain at Bay and become general manager of a newly formed open routing division. Phase2 will retain its headquarters in Durham, North Carolina.