Nortel Networks is licensing its routing code in an attempt to bring Internet access to the masses at an affordable price and to try to upset Cisco's momentum as the leading supplier of Internet routers.
In November Nortel announced the so-called Open IP Environment, routing code that is separated from router hardware and offered to hardware manufacturers for a licence fee. Nortel also says it is lowering the price of its Bay AN and ARN access routers by as much as 50 per cent.
Nortel says it expects the Open IP Environment software to drive the shift away from `expensive and complex 'Old World' router hardware' to low-cost `New World' routing that is widely available to the industry and can be embedded directly into servers, processors and devices. Nortel's reference to `Old World' routers is a thinly veiled swipe at Cisco's tradition of selling routing software only with its expensive routers.
In November, Nortel said it sold 200 licences of the Open IP Environment to 75 companies. Two of those companies are Intel and Microsoft, which plan to incorporate the code into program-mable silicon and operating system software respectively.
The practice of licensing routing code is not new, however. Small companies like Phase2 Networks and Wind River Systems have been licensing routing software for years, analysts say. And Cisco licensed its IOS routing technology to hub and switch manufacturers years ago but, in keeping with its hardware requirement, only offered it bundled with a router module.
In fact, Open IP Environment is Nortel's second attempt at licensing routing code.
Bay Networks acquired Phase2 19 months ago and shortly thereafter announced a licensing program for its BayRS code.
Nortel announced plans to acquire Bay a week before Bay announced its BayRS licensing program.
Nortel officials acknowledge that the Open IP Environment program is essentially a recast of the BayRS licensing plan.
`It's the next generation of that capability,' says Bill Conner, Nortel executive vice president and president of the company's Enterprise Solutions business unit. `What we've done is taken that preliminary routing code and modularised it, streamlined it, tuned it up and turbocharged it so it's higher-performance, and changed the economics and quality equation of that.'
Some analysts are less than impressed with the Open IP Environment program however. `I think it's mostly marketing,' says Craig Johnson, principal at analyst The PITA Group in Oregon.
`They're reannouncing something they announced almost two years ago, and they made no real inroads during that time. What they're trying to do is pull a card out of Cisco's deck where Cisco right now is trying to use this 'open' pitch against the likes of the 'Old World'' telecomm companies like Nortel.
Johnson says there are more fundamental issues with routing in end-user devices, such as appliances and set-top boxes: manageability and scalability. As more intelligence spreads farther out to the network edge, managing that intelligence and scaling performance become more critical than lowering the price of routing, he says.
For its part, Cisco is unfazed by Nortel's Open IP Environment pitch.
`Price is not the number one or number two criteria' for selecting a router or router vendor, Cisco CEO John Chambers said. `We've seen [Nortel] aggressively price in many of our accounts and that, in most situations, has not changed the [user's purchase] decision process. I do not think that will make a major difference in the market.'
`I characterise it as sleeves from a vest. It really isn't something that the market has demanded or wanted. I view this as [Nortel] exiting the access router market, which is fine with me,' added Cisco executive vice president Don Listwin.
