With networking vendors becoming more of partners than suppliers, and an increase in endpoints of the network, the future outlook for the enterprise network market is certainly positive.
Enterprises are overhauling their networks with a focus on improving efficiency and responsiveness of business, enabling mobile productivity, and leveraging big data. To keep pace with evolving customer needs, companies are adopting cloud, big data analytics, Internet of Things (IoT), and mobility to drive business efficiency and performance.
Enterprise networking will continue to be transformed by the 3rd Platform (cloud, mobility, big data, and social business) as well as its emerging accelerators, including IoT and robotics. Virtualization also continues to have a sizable impact on the enterprise network. These drivers will have a profound effect on business and technology requirements across the entire enterprise network.
Increasing shift toward wireless adoption, expanding the mobile workforce, rising bandwidth requirements, and growing base of mobile Internet devices are the key factors that are expected to drive demand. Growing adoption of virtualization technology and high demand for Internet-enabled devices is expected to also contribute efficiently to industry growth.
The enterprise networking market is migrating from a single-vendor environment to the one in which discrete decisions for different network building blocks are rapidly becoming the norm. For network architects, this is a new approach, which is expected to lead to network solutions, meeting business requirements, and saving money, without adding operational complexity.
Increasing need for enterprises to become digital to remain competitive is expected to increase the impetus for agile networking and increase the value and importance of virtual and software-defined networking. Companies are focusing on upgrading their networks to increase wireless capacity. Moreover, they are spending money to modernize their systems, which is expected to fuel enterprise network demand going forward.
To build a future-oriented enterprise network, companies need to address several critical challenges. They need to integrate and manage disparate technologies and resources into comprehensive and efficient heterogeneous networks, which provide high performance to meet expanding user data demands. In addition to delivering high performance and minimizing cost, next-generation enterprise networks need to be flexible, scalable, simple-to-manage, and secure-to-support businesses in the future.
Indian Market Dynamics
Digitization has moved to center stage in India and I&O leaders must act quickly to create an enterprise I&O strategy that is ultra-agile, scalable, and responsive to business change.
The Indian IT infrastructure market in 2015 stood at Rs.13,635 crore, segmented as enterprise network equipment, servers, and storage equipment. Within the enterprise network equipment, Ethernet switches dominate with a 50 percent share.
Significant growth was seen in L4-7 switches and routers category, contributed largely by telecom investments and 4G rollouts. Telecom, banking, professional services, education, and government procurement were the key contributors with a combined market share of 80 percent.
Wireless LAN (WLAN) market is expected to further grow on the back of increasing devices, need to stay connected, and government's initiatives to facilitate Wi-Fi on a large scale along with fresh projects.
"Networking market is in the middle of a huge value shift from hardware to software-based solutions, which is expected to further change their business models and product portfolios in the near future. The focus on networking would only increase, considering that it is the major bottleneck that stands before the vision of a truly connected world," opines Gaurav Sharma, research manager-enterprise & IPDS, IDC.
The skyrocketing population of smartphones, tablets, and IoT devices, combined with high bandwidth workloads moving across wireless networks, requires that the campus network infrastructure evolve to meet these demands. This transformation means enterprises need to upgrade their WLAN infrastructure to support increased traffic, performance, and security requirements. Bring-your-own-device (BYOD) adoption, the rollout of IoT solutions, and the adoption of cloud storage and backup solutions are pushing the WLAN infrastructure to the limit. This is reflected in the emergence and rapid adoption of 802.11ac Wave 2 standard.
When enterprises replace older 802.11a/g or 802.11n access points (APs) with 802.11ac Wave 2 APs, they will see an immediate increase in WLAN capacity
The 802.11ac standard continues on its brisk adoption path and now accounts for 59.6 percent of dependent AP unit shipments and 75.6 percent of dependent AP revenues, representing a noticeably faster adoption rate from 802.11n than that of the 802.11a/b/g to 802.11n transition several years ago.
LAN market is expected to grow in single digit in terms of CAGR from 2016 to 2020. Telecom and banking would remain the key contributors but incremental growth is expected from education, government, e-commerce, healthcare, and hospitality verticals in the near future. SDN is slowly expected to further gain traction in the next few quarters, though large implementations will still take some time to come.
Going forward in 2016-17, 4G rollouts and government projects comprising various e-governance, surveillance, and digital initiatives are expected to further contribute to the market growth.
The global enterprise network infrastructure market is expected to reach USD 41.1 billion in 2016 with data center network spend to exceed USD 10.8 billion.
The year 2016 shall see enterprise network revenue grow 3.5 percent to reach USD 41.1 billion, according to IDC. Similar to 2016, the 3rd Platform (big data/analytics, cloud computing, mobility, and social business) will drive growth, assisted by 3rd Platform accelerators such as IoT, robotics, and cognitive computing.
Revenue accruing to Ethernet switching will increase by 3.6 percent in 2016 and continue to account for 49.2 percent of total enterprise networking spend. IP telephony constitutes the second-largest segment of the market, coming in at 14.2 percent for 2015, a drop of over 1 percentage point. WLAN claimed a 12.6 percent share. Routers followed with a market spend of 8.7 percent, while enterprise video and telepresence came in at 5.4 percent. Fiber channel switches accounted for 4.2 percent of enterprise networking expenditures, with application delivery controllers (ADCs) (L4-7 switching) claiming 3.6 percent. About 1.9 percent of spending was attributable to WAN optimization, and just 0.3 percent went toward InfiniBand switching.
Geographically, the Americas will account for expenditures of network infrastructure of about USD 19.3 billion in 2016, up from USD 18.7 billion in 2015. IDC projects that enterprise network infrastructure spend in the Americas will reach USD 22.4 billion in 2020. In EMEA, spending on enterprise network infrastructure will come in at USD 12.0 billion in 2016, up incrementally from USD 11.6 billion in 2015.
In 2020, enterprise network infrastructure spending is expected to reach USD 13.8 billion in EMEA. Asia-Pacific including Japan (APJ) will account for USD 9.7 billion in enterprise network infrastructure spending in 2016, up from USD 9.4 billion in 2015. Enterprise networking spending is expected to reach USD 11.4 billion in APJ in 2020.
In revenue terms, Ethernet switches (L2-3) will account for USD 20.2 billion of total expenditures of enterprise network infrastructure in 2016, up from USD 19.5 billion in 2015. At the end of the 2016-2020 forecast period, Ethernet switching will account for USD 23.7 billion of total network infrastructure spending. WLAN spending will come in at USD 5.7 billion in 2016, up from USD 5.0 billion in 2015. WLAN continues to grow at a pace that suggests that it will move from the third-largest category of enterprise network spending to the second-largest by the end of 2016 and will grow to USD 7.5 billion in 2020. Currently, the second-largest category of enterprise network infrastructure spending is IP telephony, which is expected to record USD 5.56 billion in revenue in 2016, down slightly from USD 5.64 billion in 2015. IP telephony is expected to resume modest growth after 2016, reaching USD 6.0 billion in 2020. Most other categories of enterprise network infrastructure are expected to grow incrementally from 2016 through 2020 with the notable exceptions of fiber channel switching and InfiniBand switching, which will decline to USD 1.6 billion and USD 108.1 million, respectively, in 2016 and continue to contract through 2020.
Public cloud will have a major and growing impact on data center networking in 2016. The growth of major public cloud players, led by the hyperscale giants, will increasingly command the attention of the data center networking industry's supply chain in 2016, extending all the way from vendors of Ethernet merchant silicon to major OEM and ODM switch vendors. Data center switching expenditures by public cloud buyers will grow from about USD 2.2 billion in 2015 to nearly USD 2.75 billion in 2016, increasing to USD 4.9 billion in 2020.
Successful vendors will proactively innovate around customer needs whereas customers will seek customizable solutions that optimize network availability, performance, reliability, scalability, and security through automation and programmability.
The network is becoming a more strategic element of many business strategies and, in many cases, is the backbone of the businesses moving forward. In 2016-17, the industry shall see it manifest, as enterprise IT decision makers seek new technologies that can create new efficiencies by shifting the physical to the virtual, leveraging APIs, and building better pathways to customer engagement while maximizing the value of pre-existing networking deployments.
With increasing convergence of enterprise networks, mobile Internet, and IoT networks, companies need to enhance intelligence at the network's edge to optimize data traffic flow and policy enforcement without compromising security or quality of service and driving up cost.
Future-ready enterprise networks need to be able to expand to enable rapid deployment of IT services and applications to support business needs. At the same time, users want to connect to network resources from both wired and wireless devices. To address these needs, the enterprise network must be able to scale efficiently to accommodate capacity needs within data centers, wide-area networks, campus networks, mobile Internet, IoT, and other networks.