Study: US companies invest in switched Ethernet services to connect to cloud

May 5, 2021
According to Frost & Sullivan, enterprises are evaluating the benefits of fixed versus usage-based network services to align with pay-as-you-go cloud-based services.

Recent analysis from Frost & Sullivan finds that continued demand for bandwidth and cloud connectivity needs are sustaining Ethernet demand in the United States business markets.

However, the researcher notes that market maturity, downward pricing pressure, and lack of sustained demand for point-to-point Ethernet services with SD-WAN [software-defined wide area network] capability will result in the market dropping from $6.35 billion in 2021 to $5.94 billion by 2024.

Frost & Sullivan observes that COVID-19 has forced many enterprises to alter their strategies -- while some have decided to hold off on making network purchase decisions, others invested in site upgrades because there was a demand for increased bandwidth.

"Although the market is declining, there is still demand from enterprises that consume Ethernet services for their flexibility, scalability, and reliability," comments Gina Sanchez, Industry Principal, Frost & Sullivan.

Sanchez adds, "There will be a sustained call for switched services -- Ethernet virtual private line (EVPL) services, in particular -- since companies benefit from purchasing a single user network interface (UNI) port and creating multiple Ethernet virtual circuit (EVC) to share the bandwidth among different applications."

The new study from Frost & Sullivan presents key trends, market revenue and ports forecasts, a market share analysis, and growth opportunities. The report is segmented by transport distance (metro versus long haul) and service type (dedicated or port-based services versus switched or VLAN-aware services).

As summarized by Frost & Sullivan, going forward, market participants should closely look at the following growth opportunities:

  • Support for Continued Demand for Bandwidth:  "As enterprises seek higher-capacity ports to support the growth in bandwidth-hungry applications, network service providers (NSPs) must offer speed configurations, ensuring the service's reliability through strong service-level agreements (SLAs) and performance management solutions that build customer trust."
  • Cloud Connectivity and Cloud Services:  "As companies focus on network performance and reliability, NSPs must provide flexible and scalable approaches to Ethernet services. Expanding footprint and network is also important."
  • Focus on Customer Experience:  "MEF-defined products are a basic feature, and network service providers should focus on the customer's digital experience to differentiate their offerings (portals, systems, and processes)."
  • Leverage Dynamic Ethernet Services:  "Service providers should give customers greater control over their network and bandwidth efficiency. Dynamic Ethernet, or bandwidth on demand, is important."

Frost & Sullivan's Sanchez concludes, "The adoption of Ethernet by enterprises to connect to cloud-based applications is driving the demand for dynamic bandwidth capacity on Ethernet networks. Enterprise users are evaluating the benefits of fixed versus usage-based network services to align with pay-as-you-go cloud-based services. Therefore NSPs are increasingly shifting from selling fixed bandwidth services to dynamic bandwidth options using SDN technologies."

The Business Carrier Ethernet Services Market Update, United States, 2020 report is the latest addition to Frost & Sullivan's Information and Communication Technology research and analyses, available through the Frost & Sullivan Leadership Council, which helps organizations identify a continuous flow of growth opportunities to succeed in an unpredictable future.

Learn more about the report.

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