Next-Gen Networking Drives IT Budgets
March 20, 2012
Vice President Joe Biden once said, "Don't tell me your values, show me your budget and I'll tell you your values." If the vice president saw the enterprise IT spending budgets, he would rightly conclude that they place an increasingly higher value on their networks as the critical circulation system for all of their IT assets. As demands are placed on networks to handle more video traffic, migrate to 10GbE connectivity, connect mobile and wireless devices, and handle the increase in data traffic brought about by virtualization, companies are investing significantly in their networks in 2012.
A March 2012 report from Enterprise Strategies Group (ESG) shows that 58% of IT professionals surveyed said they plan to increase spending on networking this year, up from 47% last year and 37% in 2009, during the worst of the recession. Conversely the percentage of respondents decreasing network spending has been cut in half to 13% from 26% in 2009 (and 16% in 2011).
Enterprises are the most generous with their networking IT spending. According to the ESG report, “2012 Networking Spending Trends,” 64% of enterprises with 1,000 employees or more will increase network spending this year, compared to 50% of midmarket employees with between 100 and 999 employees.
A month earlier ESG released another report declaring that enterprises have entered into a state of 'data center networking discontinuity', characterized by data centers being built at massive scales to achieve consolidation and prepare for cloud computing, but legacy data center networking equipment, operations processes, and management tools can no longer meet business and IT requirements.
"Data center networking discontinuity is a gap that's evolved between where data center technology is going and what the network is capable of," explains Jon Oltsik, senior principal analyst, ESG. "We believe ultimately there's a whole new architecture involved that's not just an incremental fix what's broken approach. It's a rearchitect approach that will win out."
Another research firm, Dell’Oro Group, forecasts IT spending on networking to grow to $27.5 billion by 2016, from $19.7 billion, in 2011.
Industry analyst Cindy Borovick likens the job of a network administrator to that of a juggler. All day, they have to keep balls marked '10GbE', 'video', 'mobile', 'virtualization' and 'IPv6' in the air and if they drop one, the show’s over.
“I think the message is that the network is this important foundational element [of IT],” says Borovick, VP of enterprise communications and data center networks research at IDC.
While spending on networks is up, it’s not clear if the network’s slice of the IT pie is significantly bigger or that spending on compute, storage, software or other parts of IT are being reduced, she says. Spending also varies by network type with data center network spending up, but only slightly, driven by server consolidation due to virtualization. As virtualization increases server utilization, the pipes connected to them need to grow. Also, spending on wireless networks has “exploded,” she adds, though she doesn’t have a precise figure.