Routers Face Open-Source Threat

The open-source operating system Linux is at the heart of the unlikely recent partnership between Microsoft (Nasdaq: MSFT) and Sun Microsystems (Nasdaq: SUNW), who have lost significant market share for their server OS products to Linux.

Now the open-source meme is set to threaten the likes of Cisco Systems (Nasdaq: CSCO) and Juniper Networks (Nasdaq: JNPR) as well. The International Computer Science Institute (ICSI), which is affiliated with the University of California at Berkeley, is developing software for Internet Protocol (IP) routers. The software is called Extensible Open Router Platform (XORP) and will be available for free in June.

The ICSI wants XORP to be the Linux of routing, which is possible, if not likely. Because it's a modularized software, it's relatively easy to modify existing modules or create new ones. So, it can be adapted quickly to specific functions and needs. Furthermore, XORP is a threat to the leading routing companies from both the software and hardware standpoints. With XORP, a network router can be assembled using standard PC components for about $1,500, which is less than a tenth of the cost of a Cisco setup.

XORP isn't likely to threaten Cisco's or Juniper's hold on large corporate networks in the near future, but it could have a significant impact on the market share for midsize to small firms in the next year or two. Since the software is free, companies can adapt it for use in low-cost routing systems targeted at this category.

To Cisco's credit, it was wise to snatch up Linksys, which would likely be one of the first companies to offer such a product. But at the Linksys end of the scale, the competition could be steep, limiting market share and leaving the current mid-tier companies, such as Avici Systems (Nasdaq: AVCI) and Redback Networks (Nasdaq: RBAK), in the dark.

I don't expect XORP to remotely resemble Linux's following or contributions, but there are other examples of open-source software that are taking significant market share within niche markets, such as MySQL in the database realm. XORP has the potential to have a similar impact.

Will XORP really threaten Cisco? Give your opinion on our Cisco discussion board.

Fool contributor Mark Mahorney doesn't own shares of any companies mentioned.