Demand for high-performance and innovative networks continues to be strong. Mobility, Big Data, and SDN will instigate significant shifts in networking in 2014.

GILBERT , ARIZONA, USA, February 17, 2014 /EINPresswire.com/ -- The Worldwide Carrier Routing & Switching markets decreased revenue 0.5% in Q4 but increased slightly 0.7% for the entire year. In spite of positive growth and doubling of profitability reported by Tier 1 providers, ACG Research anticipates a challenging market and aggressive competition will continue to put pressure on vendors’ pricing and margins in 2014. “The long-term outlook for routers is evolving into an area that will be driven by network virtualization,” states Ray Mota, managing partner. “Virtualized routers currently have limited functions and are just not sufficient for today’s bandwidth demands. Service providers are judiciously spending, investing, upgrading and launching new projects but only on those that drive efficiency and vendors need to be mindful of this as they address SDN, virtualization and cloud.”

Growth in mobility and Big Data, capacity constraints, and interest in software-defined networking and virtualization has instigated a significant shift in networking. Momentum for software-defined networking has increased because SPs are searching for a new way to deliver services and realize OpEx savings. Providers need new solutions specifically designed to address these issues. Next-generation infrastructure platforms will need to meet massive capacity and scaling requirements. Providers are demanding converged solutions that include optical and LSR functionality, especially in metro regional networks in order to lower the cost per bit of transport and routing. Adding application awareness to a converged solution will also enable service providers to meet their performance and scale demands while increasing control and enabling service innovation, all with significantly improved economic efficiencies.

Q4 Total Worldwide Carrier Routing & Switching market posted revenue of $2.9 B. Core Routing revenues were down 0.8% q/q but up 16.3% y/y. Edge Routing and Switching revenues were down 0.4% q/q and down 2.8% y/y.
Although Alcatel-Lucent is benefiting from the growth in IP core, which continues to see increases in 100GE adoption, providers refreshing core routers, increases in IP-Optical convergence and investigation of SDN, the company decreased 1.6% q/q and 5.7% y/y. The company benefited from CapEx spending in the first three quarters of 2013 but which dried up in Q4. Cisco, as the company projected, posted a total worldwide decline of 7.4% q/q and a decrease of 2.4% y/y. In spite of the decreases Cisco is currently undergoing product transition and shifting to a virtualized product portfolio. The company was impacted by slowdown in emerging countries. Juniper posted increases of 3.2%, q/q and 15.3% y/y. Juniper reported that its MX line of edge routers drove growth (22%) in routing revenues.

QUARTERLY TRENDS and DRIVERS

Live SDN deployments in WAN IP and transport solutions will gain significant traction, and the edge, metro and core domains will each become larger as a percentage of total SP SDN sales than the data centers are by 2018 (including both hardware and software SDN products). This is driven by the diversity of platforms participating in SDN solutions in those domains, the broad extent of their deployment in SP infrastructures globally, and the range of optimizations in each domain being ushered in as part of the SDN transformation.

Total potential for SDN enabled equipment in the core will reach $7.5 billion in 2018, but not all of those platforms will be used for live SDN deployments.

The outlook for routers: the edge segment, which is projected to reach $12.2 B in 2018, is 3X the size of the core router market, which will increase $3.3 B in 2018.

Karen Grenier
ACG Research
408.200.0967
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