Enterprise Routers and Switches

Enterprise Routers and Switches Market Analysis and Global Outlook

MARKET OVERVIEW 

GLOBAL MARKET SIZE (Q4 2022) – 

• Switch: $10.3 billion

• Router: $4.6 billion

• HIGH MARKET MATURITY REGIONS – NORTH AMERICA, EUROPE

• MEDIUM MARKET MATURITY REGIONS – LATIN AMERICA, APAC

• LOW MARKET MATURITY REGIONS – AFRICA

Key Insight

• The transition towards remote working culture has resulted in network equipment demand reduction from the enterprise segment. Despite this, enterprise demand continues to be high and supply chain issues being exacerbated by the semiconductor shortage issue. In order to circumvent the effects of logistics cost increase, enterprises can evaluate options to extend lifecycle of existing equipment through third-party repair and refurbishment service

Key Network Hardware Components

Switch

• In an Ethernet LAN, a switch determines the destination, where a message has to be sent based on the MAC address in the message

• Switches initially performed only the data link layer function (layer 2), whereas the newer version of switches perform routing functions (layer 3) and are also called IP switches

• Switches are classified based on their speed, form factor and operating layer

Router

• A router controls the flow of information within a network

• A router also acts as a hardware firewall for systems connected to high-speed internet connections such as cable, satellite or DSL

• A router operates in layer three of the open systems interconnection model

SDN – Cost Breakup

• SDN can offer immediate costs savings of about 50 percent for large data centers when compared to the existing hardware

• The savings potential over the years may decrease with the size of the network, however, savings in the range of 30 to 50 percent can be achieved over a course of 5 years

Cost Breakup: Typical Hardware vs. SDN Hardware

• SDN facilities implementation of multi-brand equipment in the same architecture, which leads to reduction of acquisition cost

• The efficiency of the network is increased through automation, leading to reduction in maintenance and administrative costs

Drivers and Constraints : Enterprise Routers and Switches

• ​​​​​Increase in growth of internet-enabled devices and growing demand for hyperscale datacenters are the key factors steering the growth for network hardware industry

• Major factors hindering growth for network hardware industry include the risk of information theft and increasing adoption of low-cost alternatives such as Skype and Google Hangouts

Drivers

Growth in the Usage of Internet-Enabled Devices:

• To support the rapid increase in an adoption of internet-enabled devices and trends such as BYOD, new network infrastructure is required, which in turn is fueling the growth of the network hardware market.

Growing demand for hyperscale datacenters

• Enterprises and service providers are opting for hyperscale datacenters (because of the growing IP traffic) that are built with multistage circuit switching networks. Such datacenters require deployment of several routers and switches, and the required amount of server capacity for bandwidth and pipes to cross-connect would be more than 100,000.

Constraints

Safety of Cloud Usage and Security of Information:

• Though network security features have advanced in recent years, there still exist concerns regarding the security of information in the cloud by some verticals, such as pharmaceutical and BFSI.

Semi-conductor Shortage:

• The global semiconductor shortage has caused delays in supplies of key components by as much as 100 percent forcing big names, like Cisco, to evaluate other sourcing locations and also looking at acquisitions backwards in supply chain.

Procurement Practices: Sourcing Models for Network Hardware

• Enterprises generally prefer a multi-vendor model when procuring network hardware

• The multi-vendor sourcing model offers better cost- saving opportunities

• Most Fortune-500 firms prefer the bi-vendor regional sourcing model to reduce risks and to encourage competition.

• The typical contract duration ranges from a period of three to five years depending on the maintenance contract, depreciation of the equipment and technological advancements.

• When procuring multiple network hardware products from a single supplier, buyers prefer having individual contracts for various services (bundled under the same deal), rather than bundle all service offerings under a single contract. This enables flexibility, as termination of one contract will not impact the other.