The Australian data and IP market revenue is forecast to decline at a compound annual growth rate (CAGR) of 1.3 per cent over the period between 2017 and 2022.
The downturn is due to the adoption of technologies such as software-defined networking (SDN), intense competition and price erosion, according to data and analytics firm GlobalData.
As a result, GlobalData advised telecommunications providers to align with managed SD networking wide-area-networks (SD-WAN), as no extra budgets are being allocated to support the demand for more connections and bandwidth.
The shift in buying patterns is because of the increasing adoption of services such as cloud, big data and video conferencing.
However, GlobalData research reveals that among the various enterprise network and communications, budget allocation upside is mainly in SD-WAN and network services.
"In terms of competition, besides tier-2 players such as Vocus and TPG, there are players such as Megaport and SuperLoop which are entering the market and leveraging SDN-based technologies for market disruption," GlobalData Asia technology market analyst Siow Meng Soh said.
"While we do not suggest that vast swaths of enterprise customers are already moving network estate away from multi-protocol label switching (MPLS) and Ethernet, the demand is undeniable and SD-WAN is happening now."
Soh said that SD-WAN not only brings cost-savings but offers enterprises a greater level of control over networks and therefore, most of the early adopters are self-managing the solution.
"At the moment, the SD-WAN vendors account for a large percentage of the initial uptake. Vendors such as VeloCloud (now owned by VMware), Aryaka and Silver Peak have made a big entrance into the market,” Soh added.
However, enterprises with existing MPLS/Ethernet networks are increasingly looking to develop a hybrid network leveraging SD-WAN, according to GlobalData.
This trend is expected to accelerate as telecom providers and managed service providers are now actively partnering with SD-WAN vendors to tackle this segment.
“While SD-WAN adoption will limit the growth of traditional data and IP services in Australia, we do expect growing opportunities in the managed network services space to offset the decline in carriage revenues," Soh added. "Telecom providers that do not have SD-WAN in their portfolio need to act fast."
Telcos such as Telstra (ASX:TLS) and Macquarie Telecom (ASX:MAQ) have announced several deals in the past 12 months involving its SD-WAN technologies.
At the time, there were 70 centres using Macquarie’s SD-WAN with plans to having the solution deployed to all 516 centres, it what the company called its largest SD-WAN deal to date.
In May, Telstra announced a deal with Rabobank Australia and New Zealand that will see the telco's SD-WAN solution deployed across the Tasman.
Headquartered in the Netherlands, Rabobank is a financial services company focused on food and agriculture financing banking.
The financial institution has more than 90 branches in the A/NZ region and, according to Telstra, is one of the first banks in Australia to implement SD-WAN to its branches.