Ethernet Switch Market Will Rebound in 2010: Dell'Oro

Driven by the demand for 10GbE and the moves by such vendors as Cisco, HP and IBM to a more converged data center, Dell'Oro Group analysts expect that the market for Ethernet switches will begin to grow again next year. However, the sharp decline in the market in the first quarter of 2009 will make for a difficult year, with revenues dropping by 20 percent.

The push by such vendors as Cisco Systems and Hewlett-Packard to offer more converged data center solutions will help drive the expected rebound in the Ethernet switch market in 2010, according to a report by Dell'Oro Group.

Another key driver will be the growing demand for 10 Gigabit Ethernet, the analyst firm stated Aug. 4.

However, the rebound in the market won't occur until after the industry sees the sharpest decline in almost a decade, according to Dell'Oro analyst Alan Weckel. Due in large part to the severe decline in the market in the first quarter of 2009, the overall Ethernet switch market for the entire year will see a 20 percent drop in revenue.

"It will be difficult for the market to rebound quickly to the revenue and port levels we saw in 2008," Weckel said in a statement. "We believe that the data center will be one of the largest drivers for growth beyond 2009, as the market is expected to begin expanding again in 2010. However, it will be difficult for the market to return to the robust growth rates it enjoyed over the past five years."

Vendors like Cisco, HP and IBM are looking at more holistic approaches to the data center, which puts a premium on connectivity. Cisco in March went deeper into the data center with its entrance into the server market with the introduction of its UCS (Unified Computing System), which brings together server, storage, networking and management software into a single offering.

HP countered with its BladeSystem Matrix. In addition, HP is building up its ProCurve networking business to rival Cisco, and is more closely tying those technologies with its ProLiant servers.

IBM also is pushing tighter integration of server, storage and networking technologies, but is going a different route than the all-in-one offerings from Cisco and HP. IBM in July announced new reseller and OEM deals with Cisco, Brocade Communications Systems and Juniper Networks. Those technologies will work with IBM's servers, storage and management software. IBM officials said they wanted to give customers greater options than what they said Cisco and HP offer.

In addition, trends such as increased video traffic and Web 2.0 workloads, as well as virtualization in the data center, are driving demand for 10GbE. Analysts with the Dell'Oro Group and other firms, such as Infonetics, have said the demand for 10GbE will continue to grow.

In addition, vendors are already looking past 10GbE to 40GbE and, in some cases, 100GbE. Both Juniper and Alcatel-Lucent in the past couple of months have introduced 100GbE interface cards.