Unstoppable Force

Network Equipment Forecast: Vendors Must Sell More For Less, Or Else!

Unstoppable ForceSince Moore’s Law first started making the rounds of the computer industry in 1970, it has been credited (blamed?) for the perception — largely realized — that technology would get smaller, faster, and cheaper on a roughly 18-24-month cycle. However, at the same time that technology has seen relentless improvements in cost/performance, demand has also continued to explode, and it looks as though the network is going to suffer the consequences of an even more powerful paradox: “What happens when an unstoppable force meets an immovable object?”

A new survey from Infonetics Research indicates that a 2X cost/performance improvement every 18-24 months will no longer suffice. “Our latest enterprise survey uncovered a solid outlook for network equipment spending, driven by the ever-growing demands placed on network infrastructure,” said Matthias Machowinski, directing analyst for enterprise networks and video at Infonetics. “But not all is well: there is a disconnect between the growth in network usage and enterprise budgets, and cost containment is one of the top priorities over the next year.  are best positioned to take share in this $27-billion-a-year market.”

Network demands are growing in double and triple digits, and the budgets can’t keep pace. Cloud-based network traffic is expected to grow 600% by 2016, and data center traffic will increase at an only marginally slower 400% rate during this period. Just over half of IT departments (52%) said that their need for network I/O increases by 60% or more annually, and almost half (45%) of all networks are expected to be obsolete by 2017.

The smart-device explosion has led to significant and increased demand for bandwidth across 84% of organizations surveyed globally, and 56% of IT managers have also noticed a resulting performance decline in some applications. Gartner predicts that by 2015, at least 60% of information workers will interact with content applications via a mobile device.

However, that’s just the people portion. Throw in the Internet of Things, AKA Machine-To-Machine, and the situation just gets worse. IoT and M2M communication is projected to be the fastest growing technology segments of the IT sector in the next 3 to 5 years, surging from $44 billion in 2011 to $290 billion by 2017, a CAGR of 30.1%.

If cost containment is one of the top networking-related initiatives over the next 12 months, another key focus will be the virtualization of the IT infrastructure, stated Infonetics. Clearly status quo is not an option, according to Gartner, which predicted that through 2015, only 10% of infrastructure and operations (I&O) organizations will be able to deliver the speed of change required by the business processes they enable.

Virtualization only made it to 8th place on Gartner’s top 10 CIO technology priorities for 2013, but when coupled with the top business priorities, including reducing enterprise costs (3rd), improving IT applications and infrastructure (5th), improving efficiency (7th) and improving business processes (10th), its significance is apparent.

According to IDC, more than 60% of all workloads running on global servers are virtualized. From a networking perspective, revenue from virtual WAN optimization more than doubled in 2012, although it represented just over 6% of the overall WANop market. “The virtual segment continues to grow robustly too, accounting for more than 8% of market revenue in Q4 20121,” said IDC’s Brad Casemore, research director of datacenter networks.

This strong growth is expected to continue in 2013, according to Dell’Oro Group. The market for virtual WAN optimization will grow by 100%, while the overall market is only expected to grow by 6%.

So what happens when an unstoppable force, network demand, meets an immovable object, IT budgets? Looks like doing more with less will move from a preference to a priority.

About the author
Steve Wexler
Steve is a proficient IT journalist, editor, publisher, and marketing communications professional. For the past two-plus decades, he has worked for the world’s leading high-technology publishers. Currently a contributor to Network Computing, Steve has served as editor and reporter for the Canadian affiliates of IDG and CMP, as well as Ziff Davis and UBM in the U.S. His strong knowledge of computers and networking technology complement his understanding of what’s important to the builders, sellers and buyers of IT products and services.