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Dell’Oro published an update to the Data Center Capex 5-Year Forecast report in July 2021. Server spending is forecast to grow at a compound annual growth rate of 11 percent over five-year, comprising nearly half the data center capex by 2025.

The pandemic resulted in strong demand for computing and digital technologies due to a shift in enterprise and consumer behaviors. Current semiconductor foundry capacity is not adequate to meet the recent surge in global demand. The cost of servers and other data center equipment is projected to rise sharply in the near term partly due to the global semiconductor shortages. An increase of server average selling prices (ASPs) could approach the double-digit level that was observed in 2018, which was another period of tight supply and high demand. However, in the longer term, we anticipate that supply and demand dynamics could reach equilibrium and that technology transitions could drive market growth. We identify the following technology trends that shape our five-year forecast:

  • CPU Refresh Cycles: Intel and AMD both have an aggressive roadmap to introduce new platform refreshes as the processor race heats up. Both the Intel Sapphire Rapids and AMD EPYC Genoa, expected in 2022, will pack more processor cores and memory channels, and support the latest interfaces such as CXL, DDR5, and PCIe Gen 5 that could enable denser server form-factors and new architectures.
  • Accelerated Computing: A new class of accelerated servers densely packed with co-processors that are optimized for application-specific workloads, such as artificial intelligence and machine learning, is emerging. Some Cloud service providers such as Amazon and Google, have deployed accelerated servers using internally developed AI chips, while other Cloud service providers and enterprises have commonly deployed solutions based on GPUs and FPGAs. We estimate that attach rate of servers with accelerators to grow to 13 percent by 2025
  • Edge Computing: Certain applications—such as cloud gaming, autonomous driving, and industrial automation—are latency-sensitive, requiring Multi-Access Edge Compute, or MEC, nodes to be situated at the network edge, where sensors are located. Unlike cloud computing, which has been replacing enterprise data centers, edge computing creates new market opportunities for novel use cases.

With the evolution of CPU platforms along with and proliferation of accelerated computing, we anticipate data centers will be better optimized to process application-specific workloads with fewer, but more powerful and denser servers, increasing the total available market through higher server ASPs. Edge computing, on the other hand, will increase the available market with greenfield deployment of servers distributed edge locations. To access the full Data Center Capex report, please contact us at dgsales@delloro.com.

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About the Report

Dell’Oro Group’s Data Center Capex 5-Year Forecast Report details the data center infrastructure capital expenditures of each of the ten largest Cloud service providers, as well as the Rest-of-Cloud, Telco, and Enterprise customer segments. Allocation of the data center infrastructure capex for servers, storage systems, and other auxiliary data center equipment is provided. The report also discusses the market and technology trends that can shape the forecast.
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Dell’Oro Group published an update to the Broadband Access and Home Networking 5-Year Forecast report in July 2021

Continued Subscriber Growth and Bandwidth Consumption Remain Key Catalysts

Global spending on broadband access equipment and CPE is expected to have a 3% CAGR from 2020-2025, which is a solid increase from a 0% CAGR in our January 2021 5-Year forecast edition. The combination of continued residential subscriber growth and increased capacity utilization rates noted by global broadband providers will more than offset the negative impacts of component shortages and labor limitations.

Broadband subscriber additions continue to grow at a furious pace around the world, as the Delta variant continues to limit the return of employees to their offices and has extended hybrid learning environments for students. Even if subscriber growth does slow later this year, broadband penetration rates and the total addressable market for broadband service providers have expanded significantly over the last year. Subscriber growth has also resulted in improved revenue and gross margins for service providers. As a result, providers are pulling forward some of their upgrade projects, including those involving the transition from copper to fiber.

The spending slump we had expected to see in 2021 after the increased investment levels of 2020 is not going to materialize. In fact, spending will continue to grow this year as operators deal with continued subscribers additions, as well as competitors increasing their investments in fiber, HFC, and fixed wireless networks.

PON Equipment Spending Expected to Remain Solid

Our five-year CAGR for PON equipment has been increased yet again to 5% from 3%. China, which has historically accounted for anywhere from 65-80% of total PON spending, has peaked in terms of total ONT units consumed on an annual basis. The Chinese FTTH market has matured, with broadband penetration in the country reportedly nearing 80%. Though subscriber growth is slowing, there is still a tremendous installed base of subscribers that will continue to require new ONTs.

Although China’s ONT volumes are coming down from the peak years of 2017 and 2018, additional growth is expected from the rest of the world—particularly North America and Western Europe. In North America, the FCC’s $20B RDOF (Rural Digital Opportunity Fund) program will help transition a significant number of rural areas to fiber over the next 5-7 years. In Western Europe, major operators including Orange, DT, BT OpenReach, and Proximus are all expanding their fiber rollouts and even moving quickly to XGS-PON for symmetric 10 G services.

Finally, in Asia, India, Indonesia, and Malaysia, along with a 10 G upgrade cycle in Japan and South Korea should also help sustain the market.

Cable Infrastructure Spending Set for Growth

The glut of DOCSIS channel capacity that helped push down cable equipment revenue in 2018 and 2019 was actually beneficial to operators in 2020 as they were able to address significant increases in both upstream and downstream traffic during the pandemic with minimal increases in spending. In most cases, cable operators used the software tools available as part of DOCSIS 3.1 to ensure adequate bandwidth for all subscribers. In other cases, operators purchased additional DOCSIS licenses as part of accelerated node split programs to address systems with the greatest need.

Regardless, after two years of under-investing in infrastructure, the overall cable infrastructure market will see a steady increase in revenue throughout our forecast period, as mid- and high-split projects in North America and Western Europe, designed to increase upstream capacity, are accelerated. Investments in outside plant equipment, particularly new amplifiers and taps, will also continue as operators begin the multi-year process of preparing their networks for DOCSIS 4.0 and its ability to enable extended-spectrum DOCSIS (ESD), low-latency DOCSIS, and full-duplex DOCSIS (FDD).

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About the Report

The Dell’Oro Group Broadband Access and Home Networking 5-Year Forecast Report provides a complete overview of the Broadband Access market with tables covering manufacturers’ revenue, average selling prices, and port/unit shipments for Cable, DSL, and PON equipment. Covered equipment includes Converged Cable Access Platforms (CCAP), Distributed Access Architectures (DAA), DSL Access Multiplexers (DSLAMs), PON Optical Line Terminals (OLTs), Customer Premises Equipment ([CPE] for Cable, DSL, and PON), along with SOHO WLAN Equipment, including Mesh Routers. For more information about the report, please contact dgsales@delloro.com.
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Cloud-Delivered Security to Grow 21 Percent CAGR and Hit $10 Billion by 2025

We just issued the latest edition of our 5-year forecast (2021-2025) for the Network and Security and Data Center Appliance (NSDCA) Market that spans Firewalls, Secure Web Gateways (SWGs), Email Security, Application Delivery Controllers (ADCs), and Web Application Firewalls (WAFs). Nearly 18 months since the COVID-19 pandemic began, the worst of the market turbulence appears behind us. Increased vaccination rates–albeit not fast enough for some countries and regions–have led to an unwinding of lockdown mandates and boosted economic activity. In addition, economic stimuli from central governments have provided additional market tailwinds.

After an anemic 2020, where revenue growth was just 3% year-over-year (Y/Y), we forecast a return to low double-digit growth in 2021 and 2022, and then high single-digit after that through the end of our forecast window (2025).  This revenue growth slightly exceeds the historical revenue growth rate, averaging 8% Y/Y, due to the pent-up demand created during 2020, the recent economic stimuli, and the continued high priority placed on security, creating favorable market conditions.

On a form factor basis, we believe that products sold in a cloud-delivered SaaS (Software-as-a-Service) form factor will grow at a 21% compound annual growth rate (CAGR), reaching nearly $10 B in 2025.  In contrast, the roughly $12 B physical appliance market is anticipated to grow nearly 3% CAGR by 2025.

We attribute the expected strong performance in the SaaS form factor due to the following factors:

  • Elasticity: The elasticity of SaaS solutions–namely, the ease, swiftness, and scaling of deployments–is impossible to match with physical appliances.
  • Cloud-indigenous: As enterprises pivot to embrace cloud architectures and the Internet becomes an extension of the corporate network, SaaS-based solutions are better suited.
  • Nexus of Innovation: The elasticity and cloud-indigenousness of SaaS-based solutions have afforded vendors the ability to innovate and offer new services to their customers rapidly. Examples include zero-trust network architectures and, more recently, the marriage of security and networking services as SASE solutions. (We have published an Advanced Research Report on SASE in which we analyzed the intersections of SWGs, Firewalls, and SD-WAN. Please contact us, if interested in procuring a copy).
  • Economic: Many enterprises are choosing to move away from the traditional capital expenditure (CAPEX) and depreciation model associated with physical appliances toward the operational expenditure (OPEX) subscription model strongly related to SaaS-based solutions.

Our report describes market dynamics by individual segment–including Firewalls, SWG, Email Security, ADC, and WAFs–and shows how each is expected to contribute to the overall SaaS-based revenue picture.  There will be clear winners and others that lag.

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About the Report

The Dell’Oro Group Network Security & Data Center Appliance market 5-Year Forecast Report offers a complete overview of the industry with tables covering manufacturers’ revenue, units shipped and average selling prices for Application Delivery Controller, WAN Optimization Appliances, and Network Security Appliances. Each of these markets is further segmented by Physical and Virtual technologies. The Network Security Appliance market is also segmented by: Content Security, Firewall, IDS and IPS, and VPN and SSL. To purchase this report, please contact us by email at dgsales@delloro.com.