IDC believes there are several structural reasons why the networking market will continue to grow faster than the rest of the IT market for at least the next five years. The five core trends IDC sees that are combining to drive this growth include migration of voice and video traffic to IP, expansion of network-based businesses, intelligent networks winning out over dumb pipes, endpoint growth and virtualisation.
In 2007, for example, the worldwide LAN switch market grew 13% to reach 19.6 billion, while spending on enterprise LAN switch, router, WLAN, IP telephony equipment and security appliances grew 12% to reach $41.7 billion In contrast, other IT markets such as the worldwide server market (4%) and the storage market (7%) have exhibited slower growth.
As a result, here are the top five trends driving networking on a growth path:
1. The first trend is migration of voice and video traffic to IP. IP voice presents a fundamentally new challenge for network architects, as the tolerance for latency ratchets downward and the expectation of network availability takes yet another step up. Architecting and supporting networks capable of supporting business-class voice and virtually no downtime requires a major shift in the way many enterprise networks are built and managed.
IDC believes every rand spent on IP voice results in an associated R15 to R30 in spending on network infrastructure to support it. With the global installed base of commercial desktop phones at roughly 500 million, there is significant growth opportunity as enterprises migrate from TDM voice to IP networks. Further, IDC believes video traffic will migrate to IP networks faster than voice since the installed base of private video networks is fairly small relative to that of voice.
2. The second trend is expansion of network-based businesses. Networked applications are becoming key competitive differentiators for businesses of all shapes and sizes. While the network-based businesses of the dot-com era such as Amazon, Google, and Yahoo! are well known, less visible but increasingly important is the role new information services are playing across every industry.
In addition to external facing business applications, the challenges of conducting business across long distances is driving collaboration and business processes to the network in the form of voice, email, wikis, blogs, videoconferencing, telepresence and other communications tools. IDC surveys reflect this trend.
Over the past three years, when line-of-business managers were asked what they want from IT, the response has shifted from cost savings, to business enablement functions such as enabling collaboration within their ecosystem and streamlining and providing transparency into a wide range of business processes. As the scale and importance of network-based businesses continue to grow, the demand for network infrastructure will remain strong.
3. The third trend is intelligent networks winning out over dumb pipes. Enterprises require far more from their network equipment than basic packet forwarding and routing. While traditional considerations such as throughput, bandwidth and performance certainly remain important to the network equipment decision, other challenges such as supporting a growing mix of applications, enhancing security, deploying WLAN, enabling mobility and migrating to IP voice all represent additional functionality demands that networking vendors have yet to fully satiate or simplify.
Enterprises are introducing mission-critical low-latency traffic that reaches far beyond the datacenter. Network managers increasingly need to view and control these traffic flows to troubleshoot or solve application delivery problems. They need to ensure application delivery is aligned with business needs so that a movie download does not hinder voice or business application traffic, and they must mitigate security threats compounded by the continued growth in users and business-critical applications.
Feature additions that improve reliability over the life span of a network device are serving to keep pricing stable. In fact, this dynamic has given some vendors in this market the ability to not only keep prices steady but even raise prices on some product-line refreshes — a rarity in the server, PC and storage markets.
4. The fourth trend is endpoint growth. Mobile wireless networks, metro mesh networks and WLANs are connecting new groups of users and increasing the frequency of traffic from existing users. New devices such as smart phones, IP phones, IP cameras, RFID readers, point-of-sale devices and other noncomputing devices are migrating connections and traffic to the network. Additionally, continued growth in total user populations from global emerging markets will keep demand for network connectivity strong across all market segments.
5. The final trend is resource virtualisation and cloud computing. The network plays a critical role in enabling virtualisation of all types, including server virtualisation, storage virtualisation, the federation of software applications, and outsourcing storage and compute capacity. By enabling server consolidation in the datacenter, virtualisation is exerting downward pressure on LAN switch port growth.
The number of ports needed is decreasing, while the importance of the remaining switch ports is increasing. IDC believes that while there may be slight revenue loss in the near term from this port loss, it will be made up over the longer term as compute platforms begin to scale up again and require greater resiliency, mobility and capacity.
In summary, even though networks still represent only 5% to 7% of IT spending, network infrastructure’s share of the IT wallet is growing. As long as the pace of new applications traversing the network remains strong, the opportunity to innovate and improve network service will produce opportunities for networking vendors to provide value.
Packet forwarding and routing performance, along with connection density and increasingly power consumption, give vendors credibility with customers. In the future, the road to reliability and consistency in networking will increasingly be found through the integration of connectivity and functions that provide visibility, control, security and resiliency.
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