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February 05, 2013
Service Provider Router Market Forecasted to Decline Over Next Five Years

By David Gitonga, TMCnet Contributing Writer

As Internet adoption continues to grow, the market for networking products and services has been growing at par. This, however, will not be the case for Service Provider Router market.

According to a report published by Dell’Oro Group, the industry will experience a slower growth rate from 2012-2017 compared to past periods of expansion.

Service Provider Routers, the systems used to manage Internet traffic, have been experiencing sales declines for all leading manufacturers since the middle of 2011.

Slower growth has been seen as a move by network operators to capitalize on network investments they’ve undertaken in the past. In the recent past, the Service Provider Router market had been growing by 20 percent annually as network operators looked to support Internet traffic growth, which required allocating more capital expenditures on network architectures.

According to the VP at Dell’ (News - Alert)Oro Group, Shin Umeda, “Service providers will need to take advantage of new products and network architectures, and improve operating processes to make their networks more efficient and obtain the most return on their investment.”

As a result, the company forecasts annual market growth to remain below 10 percent for the next five years. The company had similarly forecasted a flat year for the market following the Q2 2012 report on the state of the industry.

According to IDC’s statistics, in the second quarter of 2012, demand for routers and switches around the world grew by 8.5 percent with the big driver being enterprise 10 GbE ports. Cisco (News - Alert) continues to dominate the enterprise switch market with over 60 percent market share. Following the second quarter switch piece, IDC released a statement saying the “Ethernet switch market shows that the network continues to play a pivotal role in IT infrastructure rollouts.”

The growth of networking demand was also attributed to growth in applications, virtualization and mobility – all powered by the underlying networking infrastructure.

Edited by Braden Becker

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