Router revenue growth continued to be slow in the third quarter of 2014 due to what Infonetics Research calls "SDN hesitation," with service providers taking more time to research new investments in network infrastructure.
"The 'SDN hesitation' we first identified four quarters ago remains in effect, slowing router spending in the third quarter of 2014 as carriers remain cautious about investing in equipment and software that might need to be replaced in the future," said Michael Howard, Infonetics analyst and co-founder.
Service provider router and switch revenues, including IP edge and core routers and carrier Ethernet switches, were $3.7 billion worldwide in the third quarter of 2014, down 3 percent sequentially from the second quarter of 2014. From a regional perspective, every region except CALA (Caribbean and Latin America) declined sequentially in the third quarter of 2014.
Despite the near-term losses, the market rose 3 percent from the same period a year ago, reflecting what Infonetics said was the long-term slow growth trend it has been tracking.
Alternatively, the Carrier Ethernet Switches (CES) market saw global revenues rise 32 percent sequentially and up 14 percent year-over-year due to gains ZTE saw in China and Cisco made in North America.
The research firm has forecast that the global carrier router and switch market will grow slowly to $17 billion by 2018 at a five-year compound annual growth rate of a little over 3 percent.
Howard noted that while the routing and switching industry overall will be migrating to software-driven elements, routers will need to be built to keep up with new traffic demands and finding ways to interoperate with optical networking systems.
"Fundamental changes are on the horizon as the market transitions from hardware-driven to software-driven, but no doubt routers must be fitted with higher-capacity blades to accommodate growing traffic, and there is intensifying focus on content delivery networks (CDNs) and smart traffic management across routes to make routers and optical gear cooperate more closely," Howard said.
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