By Cliff Grossner, Ph.D., senior research director and advisor, cloud and data center research practice, IHS Markit

Highlights:

• Growth continues for the data center network equipment market, which grew both sequentially and for the full-year 2016
• By 2021, the cloud service provider (CSP) and telco market segments will squeeze the enterprise in data center switching revenue and transmission capacity
• Software-defined enterprise wide area network (SD-WAN) revenue is anticipated to reach $2.9 billion by 2021

IHS Markit Analysis:

Worldwide data center network equipment revenue—including data center Ethernet switches, application delivery controllers (ADCs), SD-WAN and WAN optimization appliances (WOA)—totaled $3.5 billion in Q4 2016, gaining 4 percent from Q3 2016. For the full-year 2016, revenue grew 10 percent to $12.9 billion. Revenue was up in all regions except the Caribbean and Latin America (CALA).

Some results by segment:

• Data center Ethernet switch revenue rose 8 percent in Q4 2016 from the year-ago quarter
• SD-WAN revenue was $31 million in Q4 2016 and hit $87 million for the full-year 2016
• Bare metal switch revenue was up 27 percent year over year in Q4 2016
• ADC revenue was down 3 percent sequentially in 4Q 2016 and down 8 percent year over year
• WAN optimization appliance revenue declined 9 percent in Q4 2016 and fell 20 percent from a year ago

We look for long-term growth in the data center network equipment market to slow to 2018 and then increase out to 2021 as SD-WAN reaches $2.9 billion.

Ethernet switch analysis by market segment:

For this latest edition of our data center network report, we added Ethernet switch analysis by market segment: CSP, telco and enterprise—by revenue and port speed (1GE, 10GE, 25GE, 40GE and 100GE).

The CSP and telco segments are expected to squeeze out the enterprise in data center switching by 2021 as Ethernet capacity measured in 1GE port equivalents shipped to CSPs reaches 44 percent of total capacity (up from 25 percent in 2016), to telcos reaches 22 percent (up from 19 percent) and to the enterprise drops to 34 percent.

Barefoot Networks’ Tofino is now available in switches from Taiwan-based Edgecore Networks and WNC. Cavium’s Xpliant-based Wedge 100C switch design contributed to the Open Computer Project (OCP) targeting CSP and telco network virtual function (NVF) markets. Cumulus Networks announced the availability of its operating system for Backpack, Facebook’s white box bare metal chassis, and is partnering with Celestica to make Backpack available for preorder with Cumulus Linux. And Huawei is challenging Arista for the number-two spot in data center Ethernet switching.

Data Center Report Synopsis

The quarterly IHS Markit data center network report provides market size, vendor market share, forecasts through 2021, analysis and trends for data center Ethernet switches, bare metal Ethernet switches, Ethernet switches sold in bundles, application delivery controllers, software-defined enterprise WAN and WAN optimization appliances.

For information about purchasing this report, contact the sales department at IHS Markit in the Americas at (844) 301-7334 or[email protected]; in Europe, Middle East and Africa (EMEA) at +44 1344 328 300 or[email protected]; or Asia-Pacific (APAC) at +604 291 3600 or [email protected]