The rapidly changing demands that enterprise and cloud applications are putting on enterprise and hyperscale networks for more speed and better performance helped drive record sales for Ethernet switches last year, according to industry analysts.
Infonetics Research analysts said in a research report this week that sales in 2014 hit $21.7 billion, a 5 percent increase from the year before. The numbers echoed what IDC analysts found earlier last month, when they announced that in the fourth quarter of 2014, Ethernet switch revenues reached a record $6.2 billion—a 3.8 percent increase from the same period in 2013—and that for the entire year, revenues grew 3.9 percent.
Both research firms noted that 10 Gigabit Ethernet switch revenue is slowing as prices fall, though port shipments grew strongly, between 24.4 percent (according to IDC) and 27 percent (Infonetics). They also both noted that what will be key to accelerating growth going forward will be 40GbE.
"Despite precipitous price erosion, 10Gb Ethernet is the primary growth driver of the Ethernet switching market, with 40Gb Ethernet growing in stature quickly, as data centers seek greater capacity to deliver a feverishly proliferating ecosystem of enterprise and cloud applications," Rohit Mehra, vice president of network infrastructure at IDC, said in a statement. "The 1Gb Ethernet market remains important to the enterprise campus network, although price declines will potentially challenge market growth."
Matthais Machowinski, directing analyst for enterprise networks and video at Infonetics, said organizations that run large data centers are continuing to migrate to 40GbE, while mainstream enterprises are still waiting to make a broad move from 1GbE to 10GbE.
"As a result, 40GE is the key growth segment right now, but we expect this to last only another one to two years, after which 25GE and 100GE technology takes over," Machowinski said in a statement.
With the rise of such trends as mobile computing, big data, social networking and the cloud, networks are under increasing demand for more speed and greater capacity. Those demands, as well as new models like software-defined networking (SDN) and network-functions virtualization (NFV), are revamping what the networking industry looks like, according to analysts with Dell'Oro Group.
In a report released April 1, Dell'Oro analysts said there is continued fragmentation within the Ethernet switch market as the campus, data center, small and midsize business (SMB) and carrier Ethernet segments continue to evolve and contract.
"The Ethernet switch market continued to evolve rapidly in 2014, with vendors performing very differently in each segment of the market," Alan Weckel, vice president of Ethernet switch research at Dell'Oro, said in a statement. "In looking to our forecast, we believe the demands of the cloud and higher speeds of Ethernet, such as 25G bps, 50G bps and 100G bps, will cause the vendor landscape in the data center market to change significantly."
The campus networking market is moving toward a cycle that will see speeds upgraded to 2.5G bps and 5G bps as it looks to support faster WLAN access points, Weckel said.
Petr Jirovsky, research manager in IDC's Networking Trackers Group, also noted the disparate needs of varying groups.
"The Ethernet switch market continues to be a story of the ascendance of greater speeds and feeds, namely 10Gb and 40Gb Ethernet," Jirovsky said in a statement. "However, differences in deployment needs across different segments and geographies keep all speeds relevant to the overall market."
According to Infonetics, 10GbE port shipment growth was fueled by data center upgrades, server virtualization and the build-out of core networks. At the same time, 40GbE last year saw port shipments triple and revenue double, while 100GbE port shipments jumped more than sixfold. The momentum for 100GbE will continue into 2015 and later as it grows in use on fixed switches and as low-cost optics expands, the analysts said.
The research firms found that established networking vendors, including Cisco Systems and Hewlett-Packard, saw Ethernet switch revenues grow. Cisco continues to be the dominant player, though its market share slipped to 61.1 percent in last year's fourth quarter from 62.9 percent in the third quarter, according to IDC analysts.
The analysts also noted the rise of other vendors as well as white-box makers—original design manufacturers (ODMs) that sell their low-cost hardware directly to businesses rather than going through a brand partner. Infonetics said white boxes are getting a lot of attention from large Web services businesses and content providers likes Google and Amazon, while Dell'Oro analysts noted that Arista Networks and the white-box and bare-metal switch segments each saw their revenues jump more than 40 percent in 2014.