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Rise of SDN drives switching and routing decline: IDC

Rise of SDN drives switching and routing decline: IDC

Cisco leads cut-throat Australian market which saw 'significant slowdown'

Cut-throat pricing in the Australian switching sector has led to a softer market with fewer deals and lower revenue, according to IDC analysts.

Overall, switching and router markets were down year-on-year representing a significant slowdown in the market, surpassing the expected seasonal decline of the third quarter of 2013.

Vendors also saw port count increasing, but with limited or no revenue increase indicating aggressive pricing in the market.

Cisco continued to hold the largest portion of the switching market with 62 per cent of revenue.

HP, Alcatel Lucent, Citrix and F5 were the closest challengers. Based on the growth numbers for the quarter, IDC analysts said that the Australian market was beginning to open up to challenger networking brands.

This was indicated by the decrease, year-on-year, of major brands while a good number of the smaller vendors have achieved some growth.

Government spend momentum carried over from last year’s second quarter into the third.

This momentum was a result of an uptick in projects resulting from a prior period of cautious investment activity between late 2012 to early 2013.

Traction in the third quarter was especially pronounced because this was the quarter in which a majority of policies for the next four years crystallised within government departments, leading to increased willingness to spend.

The education space sustained growth also, as video streaming and online based learning increasingly become central and crucial to most school curricula.

Companies with fewer than 500 employees continued to show an appetite for network infrastructure projects.

Revenue attributable to this sector continued to grow quarter-on-quarter.

Converged or unified access offerings, bringing together wired and wireless network capabilities under one management platform, saw increased interest in the third quarter.

While uptake is still limited, IDC analysts say this trend becoming the norm in the near term.

IDC analyst Tafadzwa Marash said vendors with both wired and wireless products had already started offering products here, while pure play vendors were starting to form go-to-market alliances.

“An example of the latter scenario is the agreement between Aruba and Brocade, which took effect in Q3 2013.”

From a yearly viewpoint, the overall routing market grew, thanks to increased core and customer edge router deployments.

This growth was a result of revived spend on network upgrades by service providers, after two relatively soft quarters.

Specific upgrade projects in Q3 included 4G rollouts and 3G acceleration initiatives. While the SP segment grew, enterprise and consumer router segments declined.

This is likely a reflection of a slowdown in Cloud building rollouts, according to IDC's analysts.

The NBN strategy remained in doubt, as talks were still in progress to determine the future of this national broadband infrastructure.

The market remains hopeful as the new government has opted to look at alternative technologies for the network other than the originally proposed Fibre-to-the-Home model.

Top routing vendors for the third quarter were Cisco, Juniper, Alcatel Lucent, Tellabs, Huawei and Brocade.

Cisco also dominated that segment with a 51 per cent share.

According to IDC, over the past year software-defined-networking (SDN) has taken hold, with most telecom equipment vendors announcing and starting to deliver first generation SDN product enhancements.

However, in these early stages, IDC found the various vendor approaches to SDN fragmented, with different vendors still leveraging proprietary architectures for their products.

Marasha said Q3 saw the overall switching and routing markets declining 17 per cent and 15 per cent respectively, year-on-year.

“Taken together with an overall qualitative market view, IDC concludes that part of this decline can be accounted for by cautious spending from organizations that are conscious of SDN and are waiting for a clear standard to emerge before proceeding with investments,” he said.

“Over the coming year however, IDC expects multi-vendor offerings to start to emerge.” says Tafadzwa Marasha.

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