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Enterprise Router Market Sluggish

April 06, 2015

There is no denying that as we move to an all IP world, the centrality of routing remains intact for enterprises and service providers alike.  Indeed, as transformations of networking architectures continue, all aspects of the networking piece of the puzzle are being critically examined. With this in mind, getting a fix on the routing sector is instructive, and Infonetics Research, now part of IHS, Inc., is out with their assessment of where we are with routing and where we could be heading.

The headline Infonetics used in promoting its fourth quarter 2014 (4Q14) and year-end Enterprise Routers report is food for thought.  It reads, “Enterprise Router Market’s Strong Q4 in China Not Enough to Offset Global Declines.”  This is not necessarily meant to be alarmist but, rather, illuminating. The reason for the headline is that revenues for the sector are down 3 percent for the full-year 2014, following a 6 percent increase the year prior.

What’s behind the numbers?

The report, which tracks high end, mid-range, branch office and low-end/SOHO router revenue and ports, paints a mixed picture. 

Source: Infonetics Research

“After a strong 2013, enterprise router sales fell negative in 2014, dragged by a challenging capex environment at service providers in North America and Europe,” said Matthias Machowinski, directing analyst for enterprise networks and video at Infonetics Research.  He added, “High-end routers continue to do well, driven by new data center deployments and large enterprise headquarters upgrades, but the mid-range and branch office segments both declined due to a focus on cost reduction and shifting preferences to low-end routers.”

Highlights from the report include:

  • Globally, enterprise router revenue totaled $974 million in 4Q14, a 4 percent increase sequentially, but a 3 percent decline from the year-ago 4th quarter
    • In 4Q14, revenue growth was undermined by average selling price (ASP) declines in the branch and mid-range categories
  • Asia Pacific was once again the top-performing region for enterprise routers, with China in typical fashion ending the year with a bang and Japan returning to growth
  • The top enterprise router vendors in 2014, based on total global revenue, are Cisco in first place, HP in second and Brocade in third
  • ZTE’s enterprise router sales more than tripled in 2014 as preferences in China shifted to local vendors; Huawei also ended the year on a high note thanks to end-of-year buying in China
  • Long term, enterprise routers could face downward pressure from their software-only cousins, virtual routers, which will be attractive to service providers as a means to reduce CPE costs and deploy new services quickly

The last point is one that is worth iteration.  Router virtualization, particularly with the spate of announcements from various solutions providers of virtualized offices aimed at small and branch offices will put pressure on hardware vendors.  This obviously does not mean the need for next generation routing is going away.  That is far from the case.  What it does mean is that SDN and NFV are going to be disruptive, particularly in specific market sectors, and those who do not have virtualized offerings are going to feel pressure to provide their customers with options.

In short, the actual health of the router market going forward will be a case of “it depends!”  It depends on which sector as well as the type of solution being opted for. 

Edited by Dominick Sorrentino

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