Service Provider Router and Switching Market Shows Positive Spark in Q2 2017
Despite transformation disruption in the routing market, most vendors showed substantial sequential growth in this quarter and year over year
Service providers continue to feel the effects of a rapidly changing market as they address the disruption that has been upending their businesses. “To be successful they must realize that transformation is more than just a technological upgrade; it is a fundamental change to how they operate their businesses and organizations,” says Ray Mota, CEO, ACG Research. “Operators recognize that to succeed they must modernize their networks to gain agility to effectively compete and remain relevant in a highly dynamic market. Routers aren’t going away, they are still playing an important role in this transformation.”
To address these disruption challenges, SPs are upgrading to key technologies, building comprehensive plans for transformation and working with the right partner throughout the process to achieve their agility as well as their financial goals. We continue to see service providers focus their capex on revenue-generating services and economic cost, while running their networks hotter with higher traffic loads. They will not expend as much capex on dealing with capacity and traffic but will continue to invest on key strategic projects that will help deliver services with new revenue for them, for example, SD-WAN and/or IoT solutions, which bring in new revenue and new subscribers.
TREND and DRIVER HIGHLIGHTS
Service providers are increasingly challenged by nimble competitors. To succeed they will need to have a 1) smaller footprint with higher capacity than the legacy equipment; 2) lower opex costs; 3) lifecycle support for existing and future services that leverage a common IP infrastructure; 4) plan that is flexible and includes training; and 5) right support from a trusted partner.
Operators' capex spending is growing 2% to 3% a year. As a result, some vendors are turning to web-scalers whose spending on new network gear is growing by double digits.
As their traditional business matures, service providers are increasingly moving to offer services in adjacent industries, leveraging their ability to deliver connectivity solutions and tapping into value-creation opportunities at the application level.
The distinction between wireline and wireless networks will disappear; in 10 years, we will not talk about wireless and cable networks. There simply will be the network. Cost, agility, simplification, cloud and slow migration away from MPLS is driving the adoption of SD-WAN.
For more information about ACG’s routing and switching services contact sales@acgcc.com.
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