The networking category has recently become a far more competitive one. In line with the effects of the recession, research firm Gartner shows that worldwide spending on enterprise network equipment fell by 16.4% in 2009. The researcher is optimistic however, predicting that the market is expected to recover starting this year, with a compound annual growth rate of 5.5% forecast from 2009 through 2014.
This prognosis is far better than for many other areas of the IT industry. The accompanying tables give an idea of the temperature of the networking industry by country and segment. Enterprise Ethernet switches are by far the most popular segment; however they only display a 0.9% compound annual growth rate (2009-2014) compared to enterprise wireless LAN equipment, which shows the strongest predicted growth (15.9% CAGR 2009-2014), followed by application acceleration equipment, showing where the market opportunities lie.
Of course, the recession has had other effects besides the fact that sales have been depressed across the board. Budgets have been screwed down and projects have been scrutinised much more closely than ever before. A report entitled Market Trends: Reshaping Enterprise Communications Markets, Worldwide, 2009 and 2010, by Gartner, shows that cost savings are still very much in technology-buyers’ minds. It states: "Enterprises will continue to save money by renegotiating contracts, delaying capital spending, and spreading costs with hosted and leased service models. Vendors will focus on delivering a complete customer experience in order to compete. High-quality billing, uptime and customer service will improve customer retention."
Competition and consolidation
This drive in cost saving has witnessed a shift in the vendor landscape. Bjarne Munch, a Principal Research Analyst for Gartner, says he has seen "enterprises going to market much more competitively than they used to". Until now, he says, there were a lot of enterprises that had "quite well-defined preferred vendors". But now companies are opening their eyes and looking around for other vendors. He noted anecdotally that Juniper in particular is taking market share from Cisco (although he stresses that it still has a long way to go). This increased competitiveness has led to new types of network designs popping up which make the solution more cost-effective.
He says: "A year ago we wouldn’t have a lot of discussion with enterprises about Juniper, but they turn up there frequently, and HP pops up quite a lot – certainly after the 3Cm acquisition – because they are more cost-effective and they have solutions that are good enough for the enterprise to use. Resellers and integrators should be aware that there’s a lot more competition; maybe open up your eyes. Should you have other options? As a reseller, be aware the client is scrutinising proposals a lot more."
With this increased scrutiny on cost-effectiveness, he says that network designs need to be focused a lot more on being appropriate and targeted to current needs. One of those needs is consolidation, an ongoing trend, both in and out of the data centre. Networking is a large part of the total IT expenditure of any enterprise – typically, more than 15% (Gartner) – so for most network managers, the key to further reducing cost structure is not finding new, unexplored opportunities, but fully implementing (rather than partially completing) available options. This often comes in the form of network consolidation and design optimisation.
Gartner suggests you focus your clients’ network consolidation efforts on voice and data convergence, data centre terabit switching, and email and messaging integration. You should also fully use your customers’ networking to consolidate data centres, and to move servers out of branches and into data centres. Fellow research firm IDC’s Jamie Jin, Market Analyst, Network Technologies, sees a similar trend with the switching and routing market being driven by the next-generation data centre initiatives and new enterprise collaboration experience."New technologies such as unified
fabric and virtualisation are driving further consolidation of server, network and storage in the data centre environment. The new enterprise collaboration experience such as videoconferencing and inter-company collaboration will drive enterprise network architecture refreshment, with higher-speed connections and stricter network security control."
As the workplace expands, with work being conducted from the branch office, the home office and the hotel, WAN optimisation will be in even greater demand, as will the application acceleration necessary when data centres retrench to two or three centres.
Defining the network
So far we have mainly discussed the switching and routing landscape, but networking is much more than that these days. As Gartner’s Munch says, there are so many things happening in networking now; it’s not just traditional networking anymore but encompasses so many other technologies.
He explains, saying that networking is much more about understanding how the users are using applications and how the business is using the network. It’s about end-user expectations. This is a big change for a networking department, and resellers and integrators, but Munch suggests that we move away from established design networks, and start looking at the network as the overarching end-to-end solution and how that end-to-end solution can make
life more productive.
That end-to-end solution is not just how the computer links up to the server and the printer any longer. Now it incorporates a range of other technologies such as VoIP, videoconferencing and unified communications. Gartner’s report,
Market Trends: Reshaping Enterprise Communications Markets, Worldwide, 2009 and 2010, mentioned previously, suggests: "Technologies that promise cost-savings will sell well if vendors can prove a business case. Videoconferencing, unified communications (UC) and WAN optimisation will be prominent."
Munch agrees, saying: "Silos don’t really exist anymore. A few years ago there were the first signs of handing over of issues when enterprises started deploying IP telephony... When we say network now, we’re often talking about unified communications." With IP networking becoming more ubiquitous, we are beginning to see a lot more than just phone calls flowing over the network. IP surveillance is one such trend, and videoconferencing at the desktop, laptop or video phone is also becoming more and more common. We can even have connectivity out into the streets; to traffic lights, for example. IP telephony and videoconferencing are a lot more cost-effective than traditional methods and therefore getting more popular.
That obviously places a lot of pressure on the network because you need to have more bandwidth into those sites, and you’ve got to have better quality so that you can deploy these solutions, not only in the LAN but also over the wide area network. This has a lot of implications, such as capacity planning and managing performance. With so much more traffic running over the network, you need to map out the technical issues before you begin – how you’re going to do it, should you do it, and why you are going to do it. If you don’t, all of a sudden the technologies all converge into one solution, but you won’t have provided a pathway for your client to take responsibility for the converged solution, which is different to having responsibility for the disparate solutions.
If the network wasn’t getting complicated enough, enter cloud computing: "a disruptive change within the software, computing and networking markets" (Gartner). Most companies will likely adopt a hybrid cloud model, with a private cloud and some on-demand services on top as IT investments shift more toward operational expenses like services, rather than to capital expenses.
Gartner predicts that networking projects will continue to incorporate cost control and optimisation, but network service demand will grow with virtualisation, convergence, cloud computing and video. It is also common to see bandwidth needs expand at a rate of over 30% per year, putting enormous pressure on budgets. Traffic patterns become more chaotic, and traditional WAN designs using hub-and-spoke topologies are giving way to interconnected meshes with distributed internet connectivity wherever applicable, it says.
New voice and unified communications systems are also changing toward a mixed-use model with on-premises and external service-based approaches. This means that networks must be designed not only for convergence, but also with highly distributed cloud-based communications in mind.
"Cloud computing will introduce changes to the data centre, including a requirement for scalability, tighter coupling between server and switch to manage virtualised resources, and the convergence of standards. This represents both an opportunity and a threat to incumbent technology providers," says Gartner.
With all this change afoot, IDC’s Jin says that one of the most exciting things happening in networking at present is the general holistic recovery of the market since the global financial crisis, and estimates that New Zealand’s switch and router market will grow 11% in 2010.
Jin adds: "Network consolidation, convergence and data centre transformation are definitely driving new business in the reseller and system integrator markets. System integrators in particular are reaping the benefits, with new project-based system deployment coupled with mid-to-long term managed services contracts."