Fir an update to this data click here. Today I want to look at developments in the network market. This is the largest sector of the IT world, but has been performing sluggishly. It is split roughly 66:33 between service provider and enterprise offerings. In the quarter the enterprise network market grew 3.6% to $13.4B and in the year was static at $52.2B. The service provider network market declined by 11.7% to $26.5B and in the year by 3.7% to $111B. The combined total of the network market was $40.0B in the quarter and $164B in the year. You’ll want to lean more about the market developments and shares in the year to the end of September.
The Figure shows market shares for service provider and enterprise networks. In the service provider area the acquisition of Alcatel Lucent by Nokia will push it into second place behind Huawei. In the enterprise network market Nokia’s dominance is undaunted: its products account for more than half of the total market. Despite purchasing Aruba HP is still a long way behind, with Huawei (as always) biting at its heels.
Table – Enterprise network market shares ($US billion) – years to end September 2014 and 2015
| <Q3 2014 | Share % | <Q3 2016 | Share % | Growth % | |
| Cisco | $28,410 | 54.4% | $29,423 | 56.3% | 3.6% |
| HP* | $3,242 | 6.2% | $3,173 | 6.1% | -2.1% |
| Huawei | $2,633 | 5.0% | $2,833 | 5.4% | 7.6% |
| Alcatel Lucent | $2,459 | 4.7% | $2,260 | 4.3% | -8.1% |
| Brocade | $1,837 | 3.5% | $1,890 | 3.6% | 2.9% |
| Netgear | $1,327 | 2.5% | $1,228 | 2.4% | -7.4% |
| Juniper | $1,208 | 2.3% | $1,122 | 2.1% | -7.1% |
| Other | $11,110 | 21.3% | $10,286 | 19.7% | -7.4% |
| Total | $52,226 | 100.0% | $52,215 | 100.0% | 0.0% |
Table – Service provider network market shares ($US billion) – years to end September 2014 and 2015
| <Q3 2014 | Share % | <Q3 2016 | Share % | Growth % | |
| Huawei | $23,694 | 20.5% | $25,494 | 22.9% | 7.6% |
| Ericsson | $17,205 | 14.9% | $14,831 | 13.3% | -13.8% |
| Nokia | $15,086 | 13.0% | $14,043 | 12.6% | -6.9% |
| Alcatel Lucent | $9,836 | 8.5% | $9,039 | 8.1% | -8.1% |
| ZTE | $7,519 | 6.5% | $8,987 | 8.1% | 19.5% |
| NEC | $6,369 | 5.5% | $5,552 | 5.0% | -12.8% |
| Cisco | $3,874 | 3.3% | $4,018 | 3.6% | 3.7% |
| Other | $32,230 | 27.8% | $29,523 | 26.5% | -8.4% |
| Total | $115,814 | 100.0% | $111,488 | 100.0% | -3.7% |
Regionally the Americas remain the largest market for enterprise networks (see Figure, where I show total revenues each quarter from 2005). EMEA is larger than Asia Pacific – the downward trend in both these markets is a function of falling exchange rates against the $US. They have both been growing when looked at in local currency rates. The lacklustre performance of enterprise networking is partially due to the movement towards ‘software defined’ architectures which substitute applications running on servers for dedicated network hardware. However the largest vendor Cisco always includes its Nexus hardware in its ‘software defined’ ACI products. When and if it introduces software-only offerings you should expect to see a fall in this hardware line. To a certain extent the regional markets are driving local vendors – Cisco in the Americas, Huawei in Asia Pacific and Nokia/Alcatel Lucent in EMEA. Acquisitions will most probably accelerate this trend in the future. HP’s position is interesting – its new HPE organisation should be able to drive its service provider business, building on its substantial software business there and its strong enterprise hardware products.
The Figure shows a comparison of the quarterly size of service provider and enterprise network revenues: the former is more seasonal and, although faring worse, remains a long way ahead of the enterprise sector. Service providers are looking for efficiency and lower prices – driving the adoption of NFV, which is likely to favour the established enterprise players, The recently announced partnership between Ericsson and Cisco is an illustration of how vendors can work together to address this new product area.
As always the data shown in this post is just a fraction of that I hold on the network market. Please contact me if you need more details for your business plans.