Network spending at $186b – service providers beat enterprise customers

The network hardware market was worth $186 billion in the year to the end of June – growing by 5%. It is split by customer and product type, with service provider networks growing by 5% and enterprise ones by 4% to $131b and 55b respectively. In the quarter growth was 1% (to $49b) in total; service provider networks grew by 2% to $35b, while enterprise spending remained level at $14b.As we’ve mentioned many times before the network market is mainly a two horse race, with Huawei the leading supplier to service providers and in second position in the enterprise. While it competes worldwide (despite being victim of US trade wars), it is enjoying the much faster growth of networking in Asia Pacific than other regions. Cisco is the dominant supplier in the enterprise network market – its share has increased over the last few years, standing at 55.7% in the year. See my Figure above for market shares of the total and two subsidiary markets for the year to the end of June 2019.

The push towards 5G is helping the service provider market and will continue to 2020 and beyond. It is making up for a dramatic decline over a number of years following the Credit Crunch in 2008 – a time when many new IT suppliers took away much of the ‘over the top’ services for mobile phones. In comparison the enterprise network market has been seen less dramatic changes – the total annual spending has remained similar for a decade. See my Figure above for the relative annual growth of both markets with a forecast to 2020.

Breaking the spending on enterprise networks by product type (see my Figure above) we see than LAN switches have been the most successful, followed by routers. An increasing focus on security has led to a slow rise in firewall spending, although it remains the smallest of the sub-categories. SAN networking was falling, but has now levelled off – I expect to see more spending as NVMe over fibre solutions reinvigorate this area.

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