Software-defined networking (SDN) promises significant benefits for carrier networks. But it’s not doing much for router/switch sales at the moment, says Infonetics Research.
The market research firm reports that the global carrier router and switch market, including IP edge and core routers and Carrier Ethernet switches (CES), totaled $3.2 billion in 1Q14, down 13% from 4Q13 and up just 2% from the year-ago quarter. Infonetics blames “SDN hesitation” for the fact that revenue for all product segments declined by double digits sequentially in 1Q14, while revenues in all major geographical regions are dropped compared to the prior quarter.
"We believe the enormity of the coming software-defined networking and network functions virtualization (NFV) transformation is making carriers be more cautious with their spending," said Michael Howard, principal analyst for carrier networks and co-founder of Infonetics Research. "This hesitation reared its head in the first quarter of 2014, where global service provider router and switch revenue increased only 2% from the year-ago quarter."
Howard believes the current generation of high-capacity edge and core routers can be nursed along for a while as the detailed steps of the SDN-NFV transformation are defined by each service provider. Many of the largest operators in the world are involved in this process, including AT&T, BT, Deutsche Telekom, Telefónica, NTT, China Telecom, and China Mobile.
He added, "There is intensifying focus on multiple CDNs [content delivery networks] and smart traffic management across various routes and alternative routes to make routers and optical gear cooperate more closely."
As operators work out these issues, growth will resume. Infonetics is projecting five-year (2013-2018) compound annual growth rates of 4.3% for edge routers, 2.9% for core routers, and 0.7% for CES.
Infonetics' quarterly service provider router and switch report provides worldwide, regional, China, and Japan market share; market size; forecasts through 2018; analysis; and trends for IP edge and core routers and CES.
In 1Q14 the top four router and switch vendors stayed in dominant positions, but positions two through to four played musical chairs: Cisco Systems Inc. (NASDAQ: CSCO) maintained its lead, Juniper Networks, Inc. rose to second, Alcatel-Lucent (Euronext Paris and NYSE: ALU) rose to third, and Huawei Technologies Co Ltd. dropped to fourth.
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