Service providers' interest in software-defined networking and network-functions virtualization may be impacting sales of traditional networking gear, including switches and routers, according to Infonetics Research analysts.
In a recent report, the analysts pointed to this "SDN hesitation" as a key reason behind the slow growth of network router and switch sales to service providers in the first three months of the year.
"Last quarter, we identified the 'SDN hesitation,' where we believe the enormity of the coming software-defined networking and network functions virtualization (NFV) transformation is making carriers be more cautious with their spending," Michael Howard, principal analyst for carrier networks and co-founder of Infonetics, said in a statement. "This hesitation reared its head in the first quarter of 2014, where global service provider router and switch revenue increased only 2 percent from the year-ago quarter."
Service provider interest in SDN and NFV continues to be high. An earlier report by Infonetics found that 97 percent of carriers surveyed by the analyst firm plan to deploy SDN in their networks at some point, and 93 plan to implement NFV. However, according to the latest survey released May 28, service providers are holding back some of the money they spend on routers and switches as they prepare to invest in SDN and NFV.
"We believe the current generation of high-capacity edge and core routers can be nursed along for a while as the detailed steps of the SDN-NFV transformation are defined by each service provider—and many of the largest operators in the world are involved, including AT&T, BT, Deutsche Telekom, Telefónica, NTT, China Telecom, and China Mobile," Howard said. "And there is intensifying focus on multiple CDNs (content delivery networks) and smart traffic management across various routes and alternative routes to make routers and optical gear cooperate more closely."
SDN has been a growing focus in the networking world for the past several years, as organizations dealing with rapidly changing business demands—due to such trends as cloud computing, mobility, bring-your-own-device (BYOD) and big data—are looking for ways to make their networks more flexible, dynamic and automated. SDN calls for the decoupling of the network intelligence from the underlying hardware and putting it into software.
Meanwhile, service providers have been the driving force behind NFV, in which networking tasks like load balancing, firewalls and intrusion detection also are taken out of the switches and routers and made into software-based services.
Service providers and network operators are seeing rising competition from such over-the-top (OTT) threats as Google and Skype, and are looking for ways to not only reduce capital and operating expenses, but also to spin out services for customers more quickly. Over the years, they have built up legacy infrastructures that are unwieldy, based on expensive proprietary hardware and time-consuming to program, leading to long service development cycles. Web companies like Google, unhampered by such legacy infrastructures, have created networks that can respond rapidly to the changing demands from increasing mobile users, putting pressure on the traditional telecoms.
Editors note: This story has been changed to better reflect Infonetics' viewpoint that service providers are interested in SDN and NFV, and that that interest could be causing sales of traditional switches and routers to slow.