Interview: Redback CEO: Opportunity in industry downturn

The impact of the telecom downturn on the larger players is well- chronicled. But even though affected similarly, some smaller players are viewing the slump as an opportunity to strut their stuff. Redback Networks President and CEO Kevin DeNuccio recently shared his perspective with Jim Duffy.

Q: What are your chief differentiators from Cisco and Juniper?If you look at [subscriber management systems (SMS)] and what Redback built, it built an operating system for the first time with user-to-network in mind, not network-to-network. If you look at [Cisco's] IOS and the way it was architected, it was designed for the enterprise, a multiprotocol router. It was the only IP operating system, so it moved in and became the Internet as well. Juniper [entered the market] by building a core operating system. They [entered the market] at the high end when Cisco couldn't scale up.

SMS beats Cisco everywhere around the world. How does little Redback beat Cisco in the routing space unless it truly had a technology advantage? I ran sales at Cisco for seven years. We couldn't beat Redback in aggregation. Here I am. I think the DSL model is how you're going to manage data networks.

The foundation architecture that sits there [in SMS] is so dramatically different from what anybody else has, it can't be replicated for years. IOS and JUNOS think about IP connectivity; they don't think about services and users.

Q: What about (Unisphere's) Unison?The underlying Unisphere operating system is modified from industry-standard code that's off-the-shelf. They basically took off-the-shelf software and laid SMS on top of it. They can get 8,000 users on a box, which is better than Cisco, and rivals our low-end system. They built a pretty good platform and, in my opinion, became our only viable competitor. Cisco, because of their size and presence, is in the bids all the time. But they are not a viable competitor.

I'm glad about the Juniper acquisition of Unisphere because I'd rather have two competitors than three of us or four, because it does confuse the issue. I think the challenge for Juniper is they view their strength as the percentage they were able to gain in the core, and they wanted to take JUNOS and move it to edge. They've been fairly unsuccessful at that, selling baby core routers at the edge. It's unclear to me how they are going to sort through their operating system and SMS stuff. But they're going to be deficient to what I think our capabilities are. We have something. The customers realize it and that's why we're able to win. As a small company against these guys, people want an alternative to the [Cisco 7500 router] and they want an alternative to Cisco. I think we have it.

Q: You have fewer competitors but they're big and varied.At some level, technology becomes a driver. When you talk about orders of magnitude difference, when you talk about a box that can do 2,000 VPNs vs. 200. . . . Our strategy is first to be viewed as one of three choices the customer has in the IP world. The next step under that is to convince the world that we're the alternative on the edge, just the way Juniper became the alternative in the core. There's that much differentiation in it that Cisco just can't bowl over us and just sink us on a given deal like I used to do day in and day out.

The other aspect that we have that's to our advantage is we have the top 300 companies around the world. We have 17 of the top 20 DSL networks, we have every [regional Bell operating company], we have every [interexchange carrier]. We're not a foreign entity to these guys. Verizon has 900 routers of ours in their network today. That's twice what they have of Cisco. Despite Juniper's size, we have a better customer base than they do. They're not in the [post, telegraph and telephone administrations] and RBOCs. They're in the ISPs and the IXCs. Those are not the customers that are surviving this wave of destabilization.

Q: Are you targeting multicable service operators aggressively given the impending collision between RBOCs and MSOs?We are just beginning to [target MSOs]. In countries where cable companies run like the RBOCs do - they offer broadband as a wholesale service to ISPs or to content providers - there's an SMS model usually in place. We play in that kind of space around the world. In the U.S., they have not been doing that today. But they're just coming around. We have some significant opportunities that we're working.

Q: Is Redback looking to get into the cable modem termination systems business?I've been paring down what we do given that we need to get more focused. We're focused now and have significant differentiation. You mentioned optical transport. We've really backed down on our investment there, significantly. We haven't discontinued the product line but we got a very small R&D team so we really downsized the R&D team. Strategically, we're taking care of our customers and we're doing the features that our customers are demanding us to do. We will migrate a lot of those networks to routing.

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