Cisco lays foundation for next generation Web

Published: March 10th, 2010

Cisco Systems (Nasdaq: CSCO) will attempt to deliver up to 322 terabytes per second of capacity to service providers through its new Carrier Routing System-3 core routing product (CRS-3) for future video networking, mobility, and cloud services.

The CRS-3 product is what company CEO John Chambers believes will be the heart and brains of the next generation Internet. “This is not an announcement about CRS-3 product but the foundation of the next generation Internet,” Chambers said.

The CRS-3 can handle three times more traffic capacity than that of its predecessor the CRS-1, which was released six years ago. Company officials were quick to say that CRS-1 will still be available even after CRS-3’s release, which is expected sometime in the third quarter. Key for channel partners will be the investment protection Cisco is offering for the more than 5,000 CRS-1 customers. Chambers said this will cost the company roughly $1.6 billion. The new units will be priced at US$90,000.

Pankaj Patel, senior vice-president and general manager of Cisco’s service provider organization, said the new CRS-3 could download the entire printed collection of the U.S. Library of Congress in just over one second; and every movie ever created to be streamed in less than four minutes. “You will need a pretty big hard drive for that last one,” Patel said.

But video is the main driver for CRS-3. In fact, Chambers said “video is the next killer app.”Chambers believes that video networks will foster new productivity models because it enables collaboration. He said that video will bring in a new generation of collaboration through video via satellite. The challenge and the opportunity for solution providers will be to create new services in the cloud that can connect the office and the home. “This will drive productivity. Each time I talk to government leaders about the future of the Internet and the future of countries, new jobs, better healthcare service, digital classrooms we focus on everything going over the Internet with voice and video,” Chambers said during the Webcast announcement.

Jon Arnold, principal analyst at J. Arnold & Associates in Toronto, said this is a very important announcement for Cisco in the carrier space since they are a company that is on the outside looking in. “Cisco is still not the vendor of choice for operators. They are still on the outside as Alcatel-Lucent and Siemens control that market. Now this may make them more important because the carriers need a life line with growth being at 5,000 per cent in bandwidth traffic. The carriers are struggling right now with this,” he said.

The CRS-3 is also a transition for Cisco in a way. Chambers said that the company is moving from being a plumber into a business architect. “We’ve always been happy with the role of the networking plumber but as we transition we’ll be moving from being a plumber into delivering a whole new generation of services and business models,” Chambers added.

Arnold added, he has seen the transition taking place over the last three Cisco events he has participated in. “They have to find new areas of growth and move up the chain to be that vendor who delivers the platform and the solutions through the channel that does collaboration. They want to see themselves as the vendor that puts all the pieces together,” he said.

However, to get beyond being a plumber Arnold thinks Cisco would have to be a disruptive vendor with their alliance partners.

“They have already divorced from HP and this will play into Microsoft and IBM’s backyard,” Arnold said.

Chambers added that it will all be about the media experience from a healthcare perspective, education, and business and even in sporting events which will lead to channel opportunity. “There will be new business models for these areas and I believe we’ll see a growth for companies at five to 10 times the productivity rate over the next few years,” he said.

Arnold agrees saying that video will be the real driver for growth, which will be good for channel partners as they will sell more routers and build more networks for applications such as digital classrooms and e-health.

“It was interesting to hear Chambers say that it brings the Internet to life. That’s a simple statement but it’s true. Cisco has tried to achieve that in a way with Telepresence, but they did not mention how HD will be a factor.

This maybe coincidental but Google is launching search for TV,” Arnold said.