From the Enterprise VoIP Experts

November 27, 2012

Router Market Growth Flat, Future Uncertain Amid Troubled Economy, Growing Competition

By Contributing SIP Trunking Report Writer

The world economy has seen better days. With a shaky Eurozone tottering along uncertainly and the United States facing a "fiscal cliff," it's not surprising to see growth in electronics markets match up. ACG Research recently unveiled the results of their recent studies and found there was plenty to be concerned about, with just a few potential bright spots in the mix.

The ACG Research studies, focused on the Worldwide Carrier Routing & Switching markets, offered little growth in the third quarter of 2012, staying comparatively flat. While the total market offered revenue of $2.75 billion, it represented a drop of 1.7 percent over the previous quarter, and a drop of 2.5 percent over the year.

Core routing revenue fared worse, yielding a drop of 1.9 percent from the previous quarter and 9.6 percent over the year. Edge routing and switching, meanwhile, also saw declines, though much less pronounced; while they lost 1.7 percent over the previous quarter, they're down only 0.4 percent from this time last year.

The root causes of the drop, according to managing partner Ray Mota, appear to be a combination of overall economic uncertainty at the global level as well as increasingly aggressive competition for a declining overall market.

Mota elaborated, "Enterprise CEOs will most likely remain conservative and more focused in their IT spending and hiring for the remainder of the year. These factors will continue to force vendors to innovate and develop technology that can deliver significant operational savings as well as address market demands for new and cutting-edge services that are application focused."

But it wasn't all bad news, as Mota also described AT&T's plans to increase its capital expenditures by $2.5 billion per year. Additionally, it's becoming clear that expansions are going to be necessary regardless of the overall economic conditions simply due to consumers' increasing bandwidth demands.

The report detailed that core network traffic is growing at a rate of over 50 percent per year, and the increase in cloud-based services, mobile services and digital media offerings are increasing demands on the network still further.

Moreover, 78 percent of respondents in a recent ACG survey said they had SDN plans either under discussion or planned for deployment, a response to both the unfavorable economic conditions currently in play and the need to offer new services to keep customers currently in place.

The lack of growth in the router market is likely a temporary problem. The demand for access isn't going away – if anything it's getting significantly larger as more consumers discover benefits – and that's going to drive growth among all those who are still subscribing. People want access; the growth in streaming video services and online gaming isn't restricting demand any, and that means more networks will either have to bulk up or lose customers to those who will.

While the larger economic picture is still marked by uncertainty and major problems afoot, there's also room for opportunity, if one chooses to pursue it. The key focus for router providers, however, will be above all else to provide value.

Want to learn more about SIP Trunking and how to integrate it into your current UC strategy? Don’t miss the SIP Trunking- UC Seminars in South San Francisco on November 27, 2012.

Edited by Braden Becker