Last summer, when 10-gigabit Ethernet was first approved, it was an untried and expensive networking technology. While regular one-gigabit Ethernet switches cost about $1,000 each, 10-gigabit Ethernet came in at between $30,000 and $50,000 a port. And the first applications were almost exclusively in research centers, which needed the higher speed and bandwidth.

Today, the price has dropped to half of what it was then, and it's expected to fall even further within the next six months-soon reaching the magic number of $10,000, which would make it competitive with one-gigabit Ethernet.
But many Wall Street firms are still not biting.

One of the problems is that the vendors that offer 10 gigabit today-such as Force10 Networks, Foundry Networks and Extreme Networks-are relative newcomers.

"You think about mainstream networking as being fairly risk averse, especially in today's market," said David Cohen, a VP in Merrill Lynch's technology architecture group.

Merrill Lynch, for example, has no plans to roll out 10-gigabit Ethernet, Cohen said.

Cohen said he's waiting for 10-gigabit Ethernet to develop more of a track record.

In addition to a lack of a history, there are no pressing business drivers yet for 10-gigabit Ethernet, said Financial Insights analyst Damon Kovelsky.

One potential spur for 10-gigabit Ethernet was the proliferation of one-gigabit Ethernet ports on desktops and laptops.

In order to serve all those one-gigabit ports on the desktops, companies would need 10-gigabit backbones. Or, at least, that was the thinking.

But the multimedia applications such as video conferencing that were expected to create a big need for higher bandwidth and actually use all that gigabit capacity never materialized, said Kovelsky.

"Most professionals on Wall Street are not doing that," he said. "No matter how vendors push and push, they don't need to be speaking to someone via their terminal. You've got the phone, you can pick up. If they're on the other side of the trading floor, you can stand up and scream, and text-based instant messaging does not take up a lot of bandwidth either."

Other high-bandwidth applications, such as offsite storage and grid computing, also haven't created a big rush for 10-gigabit Ethernet.

"If you think about the capital expenditures required to lay that stuff down, there are current technologies that are more cost-effective," said Merrill's Cohen.

The recent blackout, added Kovelsky, demonstrated quite effectively that existing backup systems are effective and, for now, sufficient to the task at hand.

Other securities industry players confirm that assessment.

"The Ethernet we're running now is quite ample for our current business requirements," said Dale Carlson, VP of corporate affairs at the San Francisco-based Pacific Exchange. He added that, as a new technology, 10-gigabit is not something a company would deploy in a mission-critical environment.

"It's there now, and will mature and will be more and more of a portfolio candidate over the next two years," said Merrill's Cohen.

When that does happen, Force10 Networks, based in Milpitas, Calif., hopes to be the dominant supplier of 10-gig Ethernet. Today, though, neither Force10 nor any of the other 10-gigabit vendors can point to any referenceable Wall Street customers. Though Force10 does count some securities firms among customers who are testing the system.
"We've got Wall Street customers doing trials right now," said Marshall Eisenberg, Force10's director of technical marketing. "We do not have any customers as yet we can talk about, but a number of organizations are looking at it and kicking the tires around."

Force10's 10-gigabit Ethernet currently costs around $15,000 for a port, down from $30,000 a year ago. Eisenberg said he expects that price to drop below $10,000 within six months. At that point, 10-gigabit Ethernet will become very cost-effective for a number of applications.

"The new grid computing experiments are running at 10-gigabit," said Nick Lippis, president of Hingham, Mass.-based Lippis Enterprises, a networking consulting, media and events company. "That is, by default, the speed that you need. On back-end storage and storage area networks, 10-gigabit is competing with Fiber Channel. And for business-continuity applications, especially on Wall Street, 10-gigabit Ethernet links are not becoming not the norm, but more and more prevalent and more and more important."

Another application for 10-gigabit Ethernet once prices drop, is in disaster recovery.

First, 10-gigabit Ethernet makes it possible to back up data faster and recover it in case of an emergency. Second, it may enable firms to do away with some of the other alternatives-which can be costly, inflexible or create management problems.

Today, Fiber Channel, another communication standard, is popular for moving large volumes of data over long distances. That means that Ethernet data has to be converted to Fiber Channel and then converted back again on the receiving end, adding delays.

End-to-end Ethernet would potentially be cheaper, easier to install, and easier to upgrade.

According to Lippis, Wall Street's top firms have either deployed 10-gigabit Ethernet in trial mode, in operational mode or are looking at doing so, though he could not name any specific companies, he said, because of nondisclosure agreements.

Lippis added that if the costs drop down enough, companies would buy 10-gigabit Ethernet even if they don't currently need it, as an insurance policy. "We'll over-design the network so that the network can handle anything that users can throw at us," he said.

According to Force10's Eisenberg, there's also another way in which Wall Street firms are looking at using 10-gigabit Ethernet-to light up cheap dark fiber for metropolitan-area networks.

During the telecom boom, a number of companies laid fiber-optic cable that was never used.

"A number of financial firms are going out to the marketplace and buying up the assets of metro-area networking companies that have gone bankrupt," Eisenberg said. "Since there's so much dark fiber available in the Manhattan area, it's doable."

Meanwhile, academic and research customers like the University of Texas, Lawrence Berkeley Labs and others have come out in public with testimonials in support of Force10's 10-gigabit Ethernet offering, mostly in creating grid computing clusters.

"Performance and scalability are the most important requirements for our clusters," said Linda Winkler, TeraGrid network architect at the Argonne National Laboratory. "The Force10 E-Series has the density and nonblocking performance needed to interconnect the Linux servers in our cluster today, as well as the scalability to support thousands of servers in the future."

In New York, the Jacobi Medical Center is implementing a 10-gigabit network from Extreme Networks, said Duncan Potter, vice president of corporate marketing at the Santa Clara, Calif.-based company.

"Those are the kinds of cases that Wall Street firms are really looking at," Potter said. "They've been keeping a close eye on whether 10-gigabit really is prime time."