North American Network Operators Group

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RE: CIDR Report

  • From: Roeland Meyer (E-mail)
  • Date: Wed May 17 12:50:17 2000

> [email protected]: Wednesday, May 17, 2000 7:17 AM
> On Wed, 17 May 2000 02:04:55 PDT, "Roeland Meyer (E-mail)" said:
> > >> > [email protected] wrote:
> > >> > Sure, *any* good router vendor can build a router that can
> > >> > handle 100 million routing table entries.
> > I tend to agree, the numbers I threw around earleir were strictly
> > first-order approximations for raw sizes. Second-order would include
> > performance issues and algorithm requirements. I see that Vadim ihas
> > already arrived there.
> OK.. I meant the ability to *store* 100M table entries.  Flapping is
> another story, which just aggrivates the cost problem ;)

Dealing with flapping is part of exception analysis, which is part of
third-order approximation.<g> At second-order, all you have to do is
identify it and determine a rough estimate development cost <g>, as
input to the third-order analysis.

> > Why $2M? From price ranges in the current market, I would think that
> > they'd have to hit under $200K. Actually, I would have a
> > difficult time
> > convincing clients of anything over an additional $60K.
> Exactly.  We can all *SAY* we want features X, Y, and Z, but who will
> actually *buy* them if they cost more?

This is a pure marketing issue. Those that absolutely need it, will buy
immediately, Those that may need it in the near future, may buy some
now, for evaluation, otherwise they will wait for the first price drop.
Those that hope to need one, will wait for the price drop before even
looking at one, and so on ... this is independent of cost.

> > This gets back
> > to my earlier question, how many backbone routers are there (nearest
> > order of magnitude should suffice here)?

So far, I've heard 100's and 1,000's, do I hear 10,000's?

> > Typical rough market guidelines are that development cost
> > must be less
> > than 1% of total market size or the project is a non-starter,
> > business-wise. Typical costs for this sort of project are
> $1M to $3M,
> > over 8 months, with COGm at about $50 (relative to a
> minimum Number of
> > Goods sold [NOGs] and assuming that it is technically feasible).
> Hmm. 1%?  Based on what I've seen for cost estimates for
> other high-ticket low-volume stuff (mostly mainframe-class computers,
etc) I
> would have guessed 10%.

So would I, in the old days <sigh>. Hardware margins are much thinner
now and competitive risk is higher. Regardless of design and function,
using known technology, any circut board can be built for about $20US
COGm, add another $10 COGm for the case, and $30 for shipping. What's
expensive is the amortized development cost, which is fixed, so the
development cost burden is distributed over the sold volume. The problem
is that it is too easy for garage-shops (HP) to come up with a
competitive product, once you've proven the market, if all that you are
using is known current tech. What I'm saying is that the market
commoditizes too quickly these days, for the old 10% valuation to hold
good. This is why hi-tech companies resist commoditization (and why IBM
generally leaves a market once it gets there).

> In any case, I think the point is made that we can talk
> all we want about how we want <insert router vendor
> name here> to provide a truly high-end
> router that solves everything, but the reality of the cost
> pressure does need to be considered....

That is one major point, maybe the entire point.