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"There's One IT Market: The Planet"

Juniper Networks (JNPR) is one of the key manufacturers of high-capacity routers, which direct traffic at the core of a network. It rocketed to success during the '90s, building a reputation as one of the few companies to ever successfully compete with equipment giant Cisco Systems (CSCO).

Chief Executive Scott Kriens met with BusinessWeek editors on June 9 to discuss the tech sector and the global market. Here are edited highlights of the conversation, as compiled by BusinessWeek Telecom Editor Steve Rosenbush:

On the Internet:

The Internet protocol is the first global language. That's great, but it has run out of gas. All it does is connect us without telling us who's being connected or what their individual needs are. [To fix that problem], the market will separate into four layers: devices, applications, network services, and infrastructure.

The application layer will look a lot like the consumer-electronics business model: high-volume, lower-margin, and standards-based. The network-procurement layer will connect devices to the physical plant and identify users and their unique requirements, such as whether they need lots of bandwidth for video. The plant owners are like real estate companies. Their business is very capital-intensive: They're concerned about having the highest occupancy rate, and there's very little emphasis on brand. The services side is less capital-intensive, higher-margin, and more people-oriented.

On Cisco:

In the future, Cisco will be more consumer-oriented, and we'll be complementary. They have the brand, scale, and distribution. The big software challenge is managing the networks of the future -- high-speed smart networks. Juniper is better positioned to do this intelligent processing. Cisco has just come out with a new modular operating system. We have had that since 1999. Cisco's devices have to play catch-up with ours (see BW Online, 6/14/04, "This Deal Might Reveal Cisco's Weakness").

On China's Huawei:

While Huawei has had their home markets, they're showing up more in developing markets as well. They offer routers as well as switches and optical products, but since there's no publicly available information, it's not clear what their success is [in each of those areas].

There's also speculation, impossible to substantiate, that they're subsidized by government sponsorship and/or excused from making any profit. But who knows? I'm sure they're improving their engineering skills. They haven't been as much a factor in the more mission-critical and visible networks where we have been focused, but we take them seriously.

On outsourcing:

In India, we'll have several hundred people in Bangalore by the end of the year. Some of them are in sales, but a lot of them are in development. There's a tremendous supply of talent. China is a different story. There's good labor for cheap, but also a huge economy. It's a very big, important market for us. In Russia, engineers cost half of what they cost in India and China. But there aren't a lot of English-speaking [engineers].

There's one IT [information technology] market: the planet. It's not a sustainable model to be a regional player.

On broadband:

A lot of the innovation is still occurring in the U.S., but the technology is being deployed elsewhere. The U.S. ranks 12th in the world when it comes to broadband on a per-capita basis. Spain, Norway, Korea are ahead. It's getting to be embarrassing.

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