Software-defined networking (SDN) and network functions virtualization (NFV) represent two of the more dramatic technology shifts in networking. Both will significantly alter network designs, deployments, operations and future networking and computing systems. Some of the key drivers include improved network service levels and lower operating and capital costs.

One question that it brings to mind is what effect this will have on the router and switch market. The latest quarterly report from Infonetics (News - Alert) titled “Service Provider Routers and Switches (2015 Edition)” shows that on a worldwide basis the service provider router and switch revenue, which totaled $14.6 billion in 2014, remained unimpressively flat year-over-year.

As you can see from the following chart China and Europe, the Middle East and Africa (EMEA) did witness some growth, but Japan, along with the rest of Asia Pacific regions and North America all saw a decline, the largest being 21 percent.

More Carrier Router and Switch Market Highlights:

• Worldwide service provider router and switch revenue was $3.8 billion in 4Q14, up two percent on a quarter-over-quarter and year-over-year basis
• Sales in the core router segment dipped five percent in 2014 from the previous year as expected due to the volume of capacity already “in the ground”
• Carriers in North America exercised caution in their router/switch spending in 2014, sending revenue down seven percent from 2013
• However, the other major geographical regions, EMEA, Asia Pacific and Latin America, were in positive territory in 2014.
• China came to the rescue of a flat 2014 Asian telecom economy with a double digit increase over the previous year
• On the whole in 2014 and 4Q14, the top four router and CES manufacturers, Alcatel-Lucent (News - Alert), Cisco, Huawei and Juniper, stayed in dominant positions, together taking 85 percent of revenue

According to the report’s author and principle analyst for carrier networks at Infonetics, Michael Howard (News - Alert), “We’ve been talking about this for the past year and it’s still true: the enormity of the coming SDN-NFV transformation is making carriers more cautious with their spending. But this does not mean that router and switch spending will take a sizeable downturn. Rather, we look for the market to slowly climb to $17 billion in 2019, a five-year compound annual growth rate (CAGR) of just over three percent—unchanged from our previous forecasts.”

For most telecom carriers, managing SDN and NFV is difficult in light of the considerable investments they have made in Operations Support Systems (OSS)/Business Support Systems (BSS) and their infrastructure. As the migration continues, toward SDN and NFV, with the belief that it will breathe new life into traditional network configurations offering greater agility and flexibility, we will have to see how it continues to effect the router and switch market.