Analyst: 'SDN hesitation' slows carrier router and switch spending

May 29, 2014
The enormity of coming software-defined networking (SDN) and network functions virtualization (NFV) transformation is making carriers more cautious with their spending, reports Infonetics Research.

Infonetics Research has released notes from its 1st quarter 2014 (1Q14) Service Provider Routers and Switches report. The analyst determines 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.

“Last quarter, we identified the ‘SDN hesitation,’ where 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," explains 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.”

Related: Data center and enterprise SDN market forecast to exceed $3B by 2017

According to the report, revenue for all product segments -- IP edge and core routers and CES -- declined by double digits sequentially in 1Q14. Likewise, all major geographical regions (NA, EMEA, APAC, CALA) were also down from the prior quarter, though all but North America are up from the same period a year ago, found the analyst.

Howard adds, “We believe 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 -- and many of the largest operators in the world are involved, including AT&T, BT, Deutsche Telekom, Telefónica, NTT, China Telecom, and China Mobile.”

Infonetics is projecting 5-year (2013–2018) CAGRs of 4.3% for edge routers, 2.9% for core routers, and 0.7% for CES. The analyst also found that the market's top 4 router and CES vendors stayed in dominant positions in 1Q14, but "positions 2 through 4 played musical chairs: Cisco maintained its lead, Juniper rose to 2nd, Alcatel-Lucent rose to 3rd, and Huawei dropped to 4th."

See also: Infonetics raises forecast on Carrier Ethernet

“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,” notes Howard. Learn more about the report.

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