After five consecutive quarters of contraction, the enterprise access router market recorded year-over-year growth, largely due to the availability of routers that support SD-WAN. This is according to a recent report from the Dell’Oro group that found the market grew 5 percent in the third quarter of 2018.
Dell’Oro’s Router & Carrier Ethernet Switch Quarterly Report showed that in the third quarter of 2018, access router unit shipments approached record levels. Cisco, Huawei, and Chinese telecoms equipment provider H3C were the top vendors in the global marketplace.
According to Shin Umeda, vice president at Dell’Oro, the growth is not necessarily the start of long-term growth, but instead as an “indicator of a trend toward SD-WAN market consolidation.” Over the past five quarters the enterprise access router market has weakened due to the consolidation of the SD-WAN market, particularly in the U.S., he said.
Specifically, Umeda is referring to Cisco’s acquisition of Viptela and VMware’s acquisition of VeloCloud, which he says led to market uncertainty. “Because SD-WAN solutions are tied to branch office connectivity, many businesses paused purchases of access (branch) routers to see how and when Cisco would integrate Viptela technologies into its market-leading ISR Series.”
Cisco began the integration process in December 2017, just a few months after the purchase. At that time, it rolled Viptela technology with its existing IWAN software, which it used to deliver SD-WAN. In August of this year, Cisco made its Viptela-based SD-WAN offering available to run on all its ISR and ASR routers, as well as its ENCS 5000 routers that are 4 years old or younger.
Umeda noted that these acquisitions by prominent companies are “instrumental” in driving SD-WAN consolidation, and help evolve the perception of SD-WAN as a mainstream service with “backing for long-term investment and development.” Subsequently, companies’ successful integrations open up room for growth in the router market.
According to Dell’Oro, Cisco holds 80 percent market share in the global access router market and over 90 percent of North American market share. “Perturbations in [Cisco’s] business generally affect the overall market,” said Umeda.
He also noted that he was surprised by the strength of Cisco’s results in the third quarter, but that it was likely a result of new products being introduced and older products being discontinued.