Enterprise network revenue reached $30.9 billion in 2H15, according to the latest figures from Technology Business Research's Enterprise Network Vendor Benchmark.
The analyst firm says the growth is due to enterprise customers increasingly modernising their networks to reduce infrastructure costs and complexity and boost business agility. These needs are also leading to increased adoption of white-box hardware and demand for network security, TBR says.
“As customers digitise their business models, they seek to reduce bottlenecks and security gaps relating to the network,” explains Krista Macomber, TBR data center senior analyst. “As a result, vendors have broad sales opportunities ranging from infrastructure upgrades to professional and managed services engagements.
All five segments covered in the benchmark — network infrastructure, wireless networks, unified communications and collaboration (UC-C), network security, and services — experienced year-to-year revenue growth in 2H15, demonstrating customer demand for modernisation across all aspects of their network architectures, Macomber says.
However, TBR estimates total network infrastructure revenue for benchmarked vendors increased just 0.2% year-to-year, as customers are increasingly finding value in software and services, such as managed and professional services, at the expense of hardware.
According to the benchmark, Cisco remains the revenue leader in the network infrastructure space; however, Macomber says customer demand for increased network flexibility is encouraging adoption of white-box hardware, threatening hardware vendors' sales and profitability.
Huawei, the revenue growth leader in the network infrastructure space, is investing in decoupling software from hardware, allowing for separate sales of software and hardware, and addressing customer demand for openness, without sacrificing revenue streams, which TBR believes positions Huawei strongly in the infrastructure segment.
TBR's research also reveals average network security revenue growth for benchmarked vendors was notable in 2H15, increasing from a 5.3% year-to-year decline in 2H14 to growth of 6.6% year-to-year in 2H15.
"As customers continue transitioning workloads to hybrid cloud solutions, they evaluate new solutions that extend network security controls to cloud environments, creating add-on revenue opportunities for network vendors in 1H16,” Macomber says.
TBR estimates indicate that while all regions for the benchmarked enterprise network vendors saw revenue growth in 2H15, APAC was the only region to record accelerated growth.
Economic uncertainty caused slowing growth in CALA and EMEA. North America, the majority contributor to benchmarked enterprise network revenue, is experiencing slowed growth due to its expanded revenue base.
Additionally, many vendors are spending on long-term education and infrastructure investments in CALA, enabling vendors to leverage local talents in the future to achieve sustainable growth.
“North America is driving IT transformation toward converged networks and cloud-enabled solutions, providing half of the total enterprise network revenue for benchmarked vendors in 2H15,” explains Stephanie Long, TBR data center research analyst.
“Although North America is the clear front-runner, for long-term investments we see vendors looking toward emerging markets, such as CALA, where foundations being established now will drive steady growth in the coming years,” she says.