The Australian router market has declined by 6.1 per cent, to tumble from $US281 million in 2013 to $US265 million in 2014, according to independent research firm, IDC. It said the market for routers was growing well till the end of 2013 but things changed suddenly.
IDC analyst, Ahmar Karimullah, addressed the possibility of the demand for routers plateauing following sustained growth over the prior three years. But are equipment suppliers in for a sustained drought in router revenue?
Karimullah said Initial indications pointed to open standards and the introduction of virtualised routers as it’s been in the news for the last few years and SDN solutions had arrived in volume. But further investigation revealed another culprit – over provisioned capacity.
“Virtualised routers are making a dent on the market but they still require software licensing and hardware to support their deployment, and they have yet to make a dent on the high end routers used by telecom service providers.
“This part of the market still relies on equipment with specialised hardware designed for reliable, high bandwidth, low latency operations. Service providers have been buying capacity over the last few years and 2014 revealed some over provisioning,” he said.
According to Karimullah, providers have simply reduced their purchasing as they wait for this capacity to be filled as there’s an expectation for revenues in this market to recover as data requirements grow to exceed installed capacity.
“Once that happens, they will start spending again,” he added.
As for enterprise router deployments, they continue their decline, accounting for only $US55 million in 2014, down from $US65.5 million in 2013.
IDC attributes this decline to the introduction of datacentre services by the likes of HP, Amazon, Telstra, etc. that have started outsourcing their infrastructure requirements to these off-premise datacentres in order to consolidate their IT resources and reduce expenditures.
IDC also found that while the service provider market declined from 2013 and most vendors dropped revenues, only Cisco enjoyed a 32 per cent gain. IDC said this could be because of the new ACI products that it introduced in the second half of 2014.
“For other players, this growth experienced by Cisco shows there is a demand in for products which provide a unified view and control of network. Vendors who cannot provide products with such capabilities may not be able to survive,” Karimullah noted.
However, he said the market will pick up over time even though he is uncertain when that will happen.
“IDC expects that virtualised equipment such as routers will be installed in lower demand locations like the edge of the network. Announcements from suppliers such as Cisco, Huawei and Juniper all point to more adoption even though they are some years off,” he concluded.