Big cloud computing datacenters are driving growth in Ethernet switching and white-box servers, according to a quarterly update from Dell'Oro Group.
The market for Ethernet switches in datacenters reached $2.1 billion in the third quarter of 2013, setting a revenue record and accounting for nearly 40% of the overall Ethernet switch market. Revenue performance in the overall Ethernet switch market is expected to be modest over the next five years, with robust revenue growth in the datacenter offsetting flat performance in the rest of the market. The datacenter growth is expected to be driven largely by cloud applications.
In 2014, the absence of 10 GBase-T LAN on motherboard in most high-volume server platforms could delay the enterprise market's near-term migration to 10 GE for server access. Though strong growth in cloud deployments are expected to continue, the lack of significant transition to 10 GE among businesses will put downward pressure on overall switch market growth projections for next year.
In the third quarter, white box (unbranded) server vendors continued to take share. If this trend continues, their marketshare is on track to reach 10% in the next couple of quarters.
Cloud datacenters now buy nearly 40% of Ethernet switches.
White box vendor shipments, or shipments from server contract manufacturers (original design manufacturers) directly to customers, have gained popularity in recent quarters due to a variety of factors. White box servers are attractive to cloud providers due to their focus on higher volumes and lower prices. Furthermore, cloud datacenter operators prefer the customizability that white box vendors offer to meet their unique needs. Traditional OEM vendors generally have not offered custom options for cloud customers, leaving white box vendors as the alternative. Many of the OEM vendors have since shifted their strategies in response to customer demand and now offer an option for customization.
White box vendors now sell nearly 10% of all servers.
In the third quarter of 2013, the enterprise firewall market grew just 2% from a year earlier. Application-aware firewalls, a.k.a. next-generation firewalls, drove much of this growth. Before these firewalls, such devices were typically deployed at the perimeter of the network, where they monitored ingress and egress traffic to look for threats. With application-aware firewalls, a device can be placed virtually anywhere within a network.
The new systems can monitor all traffic, not just ingress and egress, so companies can make security decisions based on parameters such as applications, users, and content, in addition to traffic type. One of the pioneers in next-generation firewalls, Palo Alto Networks, has gained share over the past several quarters in part due to next-gen firewall demand.
In addition to application-aware firewalls, many network security appliance vendors are introducing unified threat management platforms. These upgraded platforms allow single network elements to perform more security functions than merely firewall threat detection.
Enterprise firewalls grew just 2% in the third quarter.
There are numerous advantages to this approach, because the network complexity is reduced. However, there is still pushback from some enterprises. Network administrators may prefer distinct elements for legacy and debugging purposes.
Dell'Oro Group is a Redwood City, Calif., market research group specializing in telecom and networking.