Carrier Interest in SDN, NFV Slows Switch, Router Spending

By Jeffrey Burt  |  Posted 2014-05-31
networking Ethernet

Carrier Interest in SDN, NFV Slows Switch, Router Spending

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.

Carrier Interest in SDN, NFV Slows Switch, Router Spending

A specifications group within the European Telecommunications Standards Institute (ETSI) since 2012 has released a number of papers about NFV, including definitions and use cases. Kelly Herrell, vice president of software at Brocade and former CEO of Vyatta—and SDN and NFV vendor Brocade bought in 2012—said in a recent interview with eWEEK that service providers and carriers are actively investigating and testing NFV concepts, though they are still waiting for SDN to become better defined.

"[NFV] is far more mature" than SDN, Herrell said. "It's modular and much more easy to consume."

Analysts are expecting big things out of SDN. Transparency Market Research has said the SDN market could hit $3.52 billion by 2018. Infonetics researchers late last year said it expects the SDN market to hit $3.1 billion by 2017, and that by that year, 10 percent of all Ethernet switches will be used in SDN environments.

According to Infonetics' numbers released May 28, the worldwide carrier switch and router market—which includes IP edge and core routers and carrier Ethernet switches—grew 2 percent in the first quarter over the same period last year, to $3.2 billion. Cisco Systems remained the top vendor, followed by Juniper Networks, Alcatel-Lucent and Huawei Technologies. The analysts said they expect the edge router market to grow 4.3 percent over the next five years, while the core router business will increase 2.9 percent and carrier Ethernet switches 0.7 percent.

While analysts are expecting SDN to become a formidable market, researchers also are noting that SDN is still in its early stages. In a survey released late last year, QuinStreet Enterprise—publisher of eWEEK—found that while SDN is still getting a lot of attention from vendors and the media, it remains an emerging technology that will take some time before gaining widespread adoption in data centers. The survey, "2014 Data Center Outlook: Data Center Transformation—Where Is Your Enterprise?" found that while SDN is a point of conversation in many organizations, they're holding off on adopting it right now.


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