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Enterprise switches lie at the heart of networks. They enable the many connections, protocols, handshakes, and data transfers that underlie the web. They are also a primary element in telecom networks.
As Private Branch Exchange (PBX) technology evolved as a way to switch phone calls to and from the Public Switched Telephone Network (PSTN), the features of these switches have changed markedly. Without them, people wouldn’t be able to make and receive phone calls. And with the convergence of telecom, IP, and most recently, mobile and W-Fi networks, switches have forever changed.
Here are five of the top trends in the enterprise switch market:
1. Network gear rebound
Enterprise network equipment showed a strong rebound in 2021, following some stagnation in the prior year, likely related to the pandemic, according to Dell’Oro Group. Overall, sales jumped 12% year over year, propelling the market to a record level in 2021.
This is good news for all kinds of switches, including campus switches, enterprise data center switches, and IP telephony switches as well as SD-WAN and enterprise routers, network security tools, and wireless LANs.
The analyst firm said that all of these subcategories are enjoying strong growth, with some of them in the double digits. Campus and enterprise data center switches were up by mid-to-high single digits and hit recent revenue levels in 2021, according to Sameh Boujelbene, senior research director, Dell’Oro Group.
2. Digital transformation
What is behind the surge in switch sales for both the fourth quarter and the full year 2021? Digital transformation initiatives combined with government stimulus are the main drivers of growth, according to Boujelbene with Dell’Oro Group.
Vendors such as Arista, Extreme, H3C, HPE Aruba, and Juniper are all doing well on switch and other sales as a result.
Digital transformation is going full throttle across both the enterprise and telecom sectors. Organizations are keen to digitize all systems and unify them into one overarching infrastructure that can be monitored centrally. Further, they see the benefits of eliminating data silos and enabling the analysis of all data stores throughout the enterprise.
The government stimulus bill too is fueling investment in internet backbones, 5G networks, optical fiber lines, and more areas of technology. As they are added, new and better switches are needed.
“What was remarkable is that the 2021 revenue growth was broad based across all regions, all customer sizes, and all vertical segments, including those that have been hit hard by the pandemic,” Boujelbene said.
3. Supply chain woes
One factor that could derail the switch surge is the supply chain. Many aspects of the global and national supply chains are stuttering.
For example, shipping containers are backing up at ports all over the world. Truck driver shortages are slowing down freight timelines and sending freight charges soaring. Shortages are already manifesting in areas such as cabling, laptops, chips, and other equipment.
“Despite the robust sales performance in 2021, demand continues to outpace supply,” said Boujelbene with Dell’Oro Group.
“Supply challenges continue to limit vendors’ ability to fulfill orders, resulting in wide quarter-to-quarter variations in vendors’ performance. These variations are causing share shifts in the market, which are not necessarily reflective of competitive displacements, but rather the timing of order fulfillment.”
4. Problems in Chinese supply?
Huawei has elicited controversy for some time. The U.S. government and parts of Europe flagged the company’s software and equipment as potential security threats, due to the company being based in China and claims it is linked to the Chinese government. U.S. security agencies issued orders to not use Huawei gear in high-profile government systems. That pushed sales downward a couple of years ago.
Despite that, Huawei has gradually managed to come back. The company is steadily regaining its previous market position. In fact, in 2021, it made its way back to number two in overall networking and switch sales, behind Cisco, which is by far the dominant force in the market.
However, things can change fast in the current political climate. If Huawei gear has difficulty reaching markets, shortages could manifest and prices could spike.
5. Cisco supremacy
The good news is that any switch supply chain and market disruption may be short lived. Cisco remains the market leader by a large margin.
Cisco controls almost 40% of the networking and switch market. If supply chain shortages manifest elsewhere, it has the capabilities of ramping up production at facilities around the world, including many in the Americas to address the shortfall.
The predicted trend, therefore, is that 2022 may be a year with some shortages and price hikes. However, the market should normalize to some degree the following year.
