ACG Research Blog: Telecom Performance in 2014 Indicates Growth

The Worldwide Router and Switch markets are expected to grow moderately and steadily from 2014–2018 with growth being driven by the increase in fixed broadband traffic and mobile broadband traffic on 3G and LTE networks.

The total Worldwide Service Provider Carrier Router-Switch market is projected to increase from $11.4 B to $13.8. B by 2018 (CAGR 5.1 percent). From a regional perspective, APAC will lead the growth as carriers respond to increases in data traffic, big data, virtualization, software-defined networking and machine to machine as well as the unrelenting demand for innovative and intelligent applications and services. The projected five-year growth will be strongest in APAC (CAGR +6.3 percent), North America (CAGR +5.1 percent), and EMEA (CAGR +4.5 percent).

Wall Street firms report that the 2013 year-to-date telecom performance was 6.2 percent; IT was 10 percent. These numbers are indicators of future economic growth within these sectors. Worldwide, there is a correlation between different types of technology and the impact on GDP or economic growth. For example, for every 5 percent broadband penetration related to consumer business or mobility there is a 1.6 percent increase in GDP. In the communications, technology or IT in the enterprise spaces, we see a similar type of correlation; for every 5 percent increase in the use of IT within the enterprise space there is approximately 0.5 percent increase in productivity. This insight is important for companies as they need to change their mindset on how they create solutions for a customer.

Trends

The outlook for routers: the edge segment, which is projected to reach $12.2 B in 2018, is 3X the size of the core router market, which will increase $3.3 B in 2018.

Live SDN deployments in WAN IP and transport solutions will gain significant traction, and the edge, metro and core domains will each become larger as a percentage of total SP SDN sales than the data centers are by 2018 (including both hardware and software SDN products). This is driven by the diversity of platforms participating in SDN solutions in those domains (IP/MPLS, Ethernet/MPLS, Optical and Packet Optical Transport Systems, for example), the broad extent of their deployment in SP infrastructures globally, and the range of optimizations in each domain being ushered in as part of the SDN transformation.

Total potential for SDN enabled equipment in the core will reach $7.5 billion in 2018, but not all of those platforms will be used for live SDN deployments.

The demand for new applications, increases in Internet data and video traffic will continue to drive markets during the forecast years. These drivers will require flexible and scalable networks. This year, the network that connects the data centers will be the industry’s focus. Inter-data center networks need to change to support new services and network requirements for bandwidth scalability, low latency, security, virtualization and automation.

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