12/28/2004 -- Earlier this month, Cisco Systems, Inc. notched a strategic alliance with network and computing giant Fujitsu to develop routers and switches to help service providers and enterprises build advanced IP networks.

The two companies pledged to undertake joint development of high-end routers, cooperate in routing and switching, and collaborate on continuous quality improvement, enhanced support and service. Just as important, the new alliance marks the first time Cisco has collaborated with another vendor on the development of its coveted IOS-XR software.

The upshot, writes Glen Hunt, a senior analyst with consultancy Current Analysis, is a significant market opportunity for Cisco in Japan, where Fujitsu enjoys enormous prominence as a provider of optical networking solutions, especially. “The combined efforts of Fujitsu’s expertise in optics and high-reliability technologies plus Cisco’s depth in IP routing applied together can address the needs of Japan’s exploding IP networks,” he says.

What’s more, the alliance could translate into beaucoup revenue for Cisco in a ripe Japanese market, Hunt speculates: “[W]ith Fujitsu’s expertise and Japanese presence, this gives Cisco a continued position in the unique Japanese market which represents one of the world’s highest growth markets.

Even more important, the Japanese market could prove highly receptive to Cisco’s next-generation CRS-1 router. Even though most analysts agree that the CRS-1 stands head-and-shoulders above the competition, many customers are still evaluating Cisco’s 21st century router, given its high price tag, huge form-factor, and somewhat steeper learning curve.

“[T]his has the potential to provide Cisco with a stronger field for the deployment of the CRS-1, especially when tailored to fit the needs of the local Japanese market,” he writes. “The Japanese market is pushing the capabilities of current IP core routers in terms of capacity and high-reliability features, Cisco will be able to leverage the CRS-1 to capture more of the overall Asian market place which mirrors Japan’s rapid growth and capacity trends.”

The alliance isn’t completely without risk, of course. “Cisco and Fujitsu will both need to make significant investments in the partnership in order for it to yield positive results, as with any partnership,” Hunt says. Nevertheless, the alliance is significant for at least two reasons: For starters, it’s the first time Cisco is cooperating with another vendor to flesh out its high-end IOS-XR operating system; secondly, it makes Fujitsu’s best-of-breed optical networking expertise available to Cisco engineers for incorporation into the IOS-XR.

“Cisco will be co-developing features for the new IOS-XR operating system, the first time that the company has opened its coveted family jewels to a third-party in quite some time,” Hunt writes. -Stephen Swoyer