IW 50: Cisco Aims to Build 'Next-Generation Internet'

Company's new CRS-3 router promises to deliver data at incredible speeds.

In March, Cisco Systems Inc. unveiled the CRS-3 Carrier Routing System, which the San Jose, Calif.-based networking equipment manufacturer says is "designed to serve as the foundation of the next-generation Internet." Befitting a product with such an ambitious mission, the CRS-3 comes with some bold claims.

According to Cisco, the CRS-3 can deliver up to 322 terabits per second of capacity, more than tripling the capacity of its predecessor (the CRS-1), and boasting more than 12 times the capacity of any other core router in the industry.

To put it into perspective that the layperson would understand, Cisco claims that the CRS-3 has the capacity to enable the entire printed collection of the Library of Congress to be downloaded in just over one second. The CRS-3 also would enable every man, woman and child in China to make a video call -- simultaneously, according to the company.

In terms of the company's overall business strategy, the CRS-3 is Cisco's latest effort to capitalize on a "market transition" -- in this case, the surging popularity of video, mobile devices, collaboration and online services such as virtualization, explains Kelly Ahuja, Cisco's senior vice president/GM of the SP Routing Technology Group.

"This is kind of a critical time for where the network is and where the network is headed," Ahuja tells IndustryWeek. "Our goal is to use the network as a platform for creating those experiences."

Among the reasons that the CRS-3 is "an industry breakthrough," asserts Ahuja, is that it offers expanded capacity while consuming up to 60% less electricity than other platforms. Ahuja also points to the system's ability to support data center/cloud computing services such as infrastructure as a service (IaaS), which enables pay-as-you-go for compute, storage and network resources.

Rob Enderle, principal analyst for the Enderle Group, a San Jose, Calif.-based technology advisory firm, says the hype for the CRS-3 is justified. Enderle calls the CRS-3 a "game changer."

"This is the kind of product that the industry was arguably looking for but probably didn't have the money to buy, at least not yet," Enderle says. "It kind of falls into that category of 'Scary Tech,' when you come up with something that is so much faster than the technology that's out there. [That kind of technology] can be very disruptive, and this falls into that class."

The CRS-3 aside, Enderle describes Cisco as "a changing company" that is branching out from its core networking offerings in an effort "to go aggressively into the home as well." In May 2009, Cisco acquired San Francisco-based Pure Digital Technologies Inc., maker of the Flip Video family of camcorders. The company said the acquisition would be "key to Cisco's strategy to expand its momentum in the media-enabled home and capture the consumer market transition to visual networking."

At the 2009 International Consumer Electronics Show in Las Vegas, Cisco unveiled its new Eos hosted software platform, which "allows media and entertainment companies to create, manage and grow online communities around their content," according to the company. Eos users include the Travel Channel, All Access Today and Warner Music Group.

The recession hurt demand for networking gear, and Cisco saw its net sales (based on GAAP results) drop 8.7% to $36.1 billion in its fiscal year 2009. Business has been picking up, though. In the second quarter of fiscal 2010, Cisco posted net sales of $9.8 billion, an 8% increase from second-quarter 2009. As the economy improves, Enderle believes "Cisco will come back strongly with the market."

Still, Enderle says Cisco has a lot riding on the CRS-3. Between the CRS-1 (which was introduced in May 2004) and the CRS-3, Cisco says it has poured $1.6 billion into R&D for the CRS product family.

"This is one of the foundation products for Cisco," he says. "So if it goes, it's huge for Cisco. If it doesn't go, it would be catastrophic."

If the success of the CRS-1 is any indication, Cisco will be fine.

"Many people thought maybe less than a handful of customers would ever use [the CRS-1], that 50 units might be a stretch goal. Today we're approaching 5,000 units and hundreds of customers," Cisco Chairman and CEO John Chambers said. " To me this is an instant replay of 2004. It's Cisco taking the leadership for the future and where the market's going to go."

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