Data center network equipment revenue totaled $13.7 billion in 2017, a 13 percent increase over the previous year, according to IHS Markit’s latest numbers. The analyst firm forecasts the market will grow to $19.6 billion by 2022, with bare metal and software-defined wide area networking (SD-WAN) revenue seeing the most growth.
The overall data center network equipment market includes Ethernet switches, bare metal, application delivery controllers (ADCs), and SD-WAN revenue.
While investment in physical infrastructure continues to drive network equipment growth in the short term, IHS Markit expects this to slow down this year and next as companies move from on-premises data centers to the cloud. This will mean fewer — but higher capacity — servers, reducing the need for data center Ethernet switch ports along with the move to virtual ADCs.
“The adoption of lower-priced bare metal switches will cause revenue growth to slow,” said IHS Markit analyst Clifford Grossner in a statement. “The ongoing shift to the cloud not only moves network equipment out of the enterprise data center, but also requires less equipment, as the cloud represents data center consolidation on a wide scale.”
This echoes earlier IHS Markit reports that found while enterprises continue to be the biggest buyers of data center servers, cloud service providers are forecast to overtake enterprises beginning in 2019.
The new data center network equipment report also projects SD-WAN revenue, which hit $444 million for the full-year 2017, will reach $3.6 billion by 2022. The next wave for SD-WAN includes increased analytics, with artificial intelligence (AI) and machine learning (ML) providing multi-cloud connectivity, Grossner said in an email.
“Once SD-WAN is in place for controlling traffic, a natural next step is using the telemetry for analysis and improvement in user experience and anything else we can dream up around improving business processes,” he explained.
Data center Ethernet switch revenue rose 13 percent over the previous year, reaching $11.4 billion in 2017. This includes general purpose ($1.4 billion), purpose build ($8.2 billion), bare metal ($917 million), and blade ($863 million).
Bare metal switch revenue was up 60 percent year-over-year in the fourth quarter of 2017. And it’s projected to reach $3.6 billion in 2022, with cloud deployments as the primary driver.
At $1.3 billion, ADC revenue was down 5 percent year over year in 2017.
Data center network equipment revenue was on the rise, year over year, in all regions: North America and Europe, Middle-East and Africa (EMEA) each increased 10 percent in 2017; Asia Pacific (APAC) was up 23 percent; and Caribbean and Latin America (CALA) rose 2 percent.
At last week’s Open Compute Project Summit in San Jose, California, IHS Markit separated OCP gear from the overall data center networking equipment market.
OCP engaged the analyst firm to gauge adoption of OCP equipment in the data center industry and determine revenue generated from non-board member companies. OCP board member companies are Facebook, Goldman Sachs, Intel, Microsoft, and Rackspace.
In 2017, OCP equipment revenue reached $1.2 billion from non-board member companies, or about 1 percent of the total $13.7 billion market.