Layer 2-3 Ethernet switch market to reach $3B by 2016

As more enterprises turn to cloud services, it will drive more 40G and 100G revenues for Layer 2-3 Ethernet switch vendors, says a new Dell'Oro report.

Fueled by Ethernet switches optimized for larger data center deployments, the research firm said that the Layer 2-3 Ethernet Switch market is forecast to grow to $25 billion in 2016.

While 10 Gigabit Ethernet (GigE) will be the dominant revenue driver during this period, Dell'Oro said that it also expects that the combined 40 GigE and 100 GigE segments will approach $3 billion by 2016.

"The Cloud is changing how networks are built and in who owns data center equipment," said Alan Weckel, senior director of Dell'Oro Group. "We believe all data centers in the future will be similar to 'Clouds,' in which any server can connect to any resource within a data center."

However, Weckel added that "It is unclear whether enterprises will tend to own and run their own Clouds, or whether they will outsource their Clouds" to a third-party data center provider like Equinix (Nasdaq: EQIX) or a traditional Tier 1 provider such as CenturyLink (NYSE: CTL) or Verizon (NYSE: VZ), or a Tier 2 service provider like Windstream (Nasdaq: WIN), TDS (NYSE: TDS) and Cincinnati Bell (NYSE: CBB) via its CyrusOne subsidiary.

Fran Shammo, CFO of Verizon, said during the 15th Annual Oppenheimer Technology, Internet and Communications Conference in Boston, that he's seeing more customers embrace the idea of using their data centers and cloud services as a way to reduce costs.

Seeing a potential growth opportunity, all of these service providers have been expanding their data center footprints and cloud offerings to meet potential enterprise and medium customer demands for cloud and data center services.

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