Cisco and the CRS-3 Hype

If you follow the technology business, you would have noticed it when Cisco announced that they would be making saying something titanic the next day that would change the internet forever. When I saw that, my initial reaction was to re-read it a bit more slowly and then I thought: huh?

Don't get me wrong. I have immense respect for Cisco. There was even a period of some years where if someone (like an investor) understood that your company was planning to compete against Cisco, he would immediately bolt. They were scary good, and the respect and fear they instilled in others was well-earned.

Cisco is still a great company, but over the years since the dot-com boom and bust they have become quite a bit more uninteresting. They still produce great technology and do very well at pleasing their customer, but they are no longer quite so scary. Competing against Cisco is now perfectly acceptable and can be lucrative if you have the drive and business scale to take a serious run at them in any of the market segments in which they operate. Of course they continue to dominate in the core router business, and as the internet and all things IP has grown so have they. In short, their success has been earned.

The problem is that they have always found it challenging to break into new markets that are higher in the value chain, up beyond the basic routing of bits. They bought their way into many markets and muscled into others with brute force. Doing this has, for example, put them inside consumers' homes and made them a strong player in the enterprise and carrier VoIP market. All this highlights just how different the IP infrastructure market differs from the service and application markets. It's hard to be great at everything.

Maybe that explains why they took the hype route in announcing the CRS-3. It looks like a great product with excellent engineering, but revolutionary it is not. It is important to carriers since it allows them to evolve their existing base of Cisco routers without the higher costs (capital, operating, and manpower) of running more CRS-1 systems or switching to another vendor. I think Lightreading nailed it pretty well:

"...the CRS-3 is a CRS-1 outfitted for 100-Gbit/s interfaces...The 40-Gbit/s limit was a function of the switching fabric available on the CRS-1..."

It's an incremental improvement that I'm sure their customer have been demanding for some time. It is not a product that impacts carrier customer -- like you and me -- in the slightest. It isn't even that the capacity of the internet would choke with all those video streams to mobile smart phones, since there are alternatives that are perhaps more expensive or less convenient for the carriers. It am also quite certain that its announcement was not a surprise to any of the targetted carriers since you can be sure they've been promoting it as vapourware for a long time, if only to dissuade the carriers from switching to Juniper routers.

So it's great that they can now say "me too" when it comes to 100G Ethernet, and it's even better that they can do it by popping in faster switch cards and interfaces in the shelves of existing frames. They can even reduce the power budget, which is an increasingly burdensome expense in data centres.

Their claim that the CRS-3 cost them $1.5B in R & D is almost certainly bunk. They probably threw everything except the kitchen sink under that umbrella to add to the hype. Cisco does spend that and much more on R & D, but it is an investment that applies to many more products, both current and future.

Cisco remains a great company, especially a router company, and this is unlikely to change. They are very good at building the plumbing of the internet but, unfortunately for them, most people only notice the fixtures in their homes, not the plumbing that makes them work. Cisco's name isn't found on many fixtures.