Data Center Networking Market To Reach $21.85 Billion By 2018: Report

Fueled by growing demand for more powerful Ethernet switches, SAN components, and network security as data center virtualization increases, the global market for data center networking equipment will soar as high as $21.85 billion in 2018, according to a new report from research firm MarketsandMarkets.

According to the report, the data center networking market currently stands at $12.49 billion and will grow at a compound annual rate of 11.8% during the next five years, with the APAC region the driving force behind the spending increase.

Among the product segments that make up the market -- which includes Ethernet switches, storage area network (SAN), application delivery network (ADC), network security equipment and WAN optimization appliances -- Ethernet switches will see the largest growth due primarily to the increased adoption of next-generation 40 Gigabit Ethernet and 100GbE data center switching platforms, MarketsandMarkets analyst Neha Sinha said in an email interview.

"The 40GbE/100 GbE is rapidly gaining traction as a key foundation for building the next-generation of data center network infrastructure," she said. "After data center switches, the highest growth potential is expected for SAN components and network security equipment product segments."

The SAN market will witness higher growth potential in the coming years to the tune of a compound annual growth rate of 12.2%, due largely to increased adoption of Fiber Channel over Ethernet (FCoE), she explained. Meanwhile, the market for network security tools is set for a jump because of the growing need to protect virtual environments.

"Virtualization being a disruptive technology is one of the major driving factors in [the] data center networking market," Sinha said.

"The adoption of high-performance virtual switches is critical to support increasing number of virtual machines used in multi-tenant data centers," she said. "The virtual switches include programmatically managed and extensible capabilities to connect the virtual machines to both physical and virtual networks. Similarly, virtualization also enables companies to deploy software-based virtual application delivery controllers (ADCs), which support multiple virtual ADC instances on a single shared ADC hardware device."

[A survey of data center operators showed they're overwhelmed by outages. Read the details in "Data Center Outages Haunt IT Pros."]

While the firm predicts the data center networking equipment industry will see healthy growth, it doesn't mean the market does not face any challenges, Sinha noted. While the majority of customers appear to be looking at software-defined networking (SDN) technologies to solve some of their critical networking challenges, they are also being bombarded with ever-evolving technologies that are slowing down their evaluation cycles and purchase decisions.

In addition, the market may be affected by a lack of IT professionals trained to assist in data center virtualization, she said.

"One of the primary challenges is the need for skilled and trained professionals to support server virtualization," Sinha said. "Virtualization is still a new technology and organizations are facing difficulties in training and educating workers to ensure that IT department is able to deliver on its goals. There is a risk associated with roles and responsibilities involved in managing a virtualized infrastructure. The enterprises that embrace virtualization in their data centers need to mature their support models to leverage the benefits of virtualization."