February 2024 - Dell'Oro Group

We are in the midst of an AI revolution. Enterprises recognize the need to harness this technology to propel their businesses forward. However, amidst what seems like unlimited potential, IT leaders can be at a loss as to what concrete steps to take next.

AI training and inference has been a major influence on data center investments over the past few quarters. Orders for Data Center Physical Infrastructure, accelerator server components, and high-capacity switch ports have grown along with hyperscaler cloud expansion; in some cases, this growth has offset declines caused by pandemic-related supply problems.

Meanwhile, enterprise investments in AI infrastructure are only just beginning. The unfolding trends, described in more detail below, point to the need to invest not just in data centers, but also in campus networking.

Local Area Networks Trends

The need for a higher-capacity, high-performance LAN is growing. By 2027, the percentage of APs shipped to enterprises with multi-gig ports will rise to over 60% of the total APs shipped, almost double the rate of 2022. The combined shipments of 2.5, 5 and 10 Gbps campus switch ports will grow by over 150% between 2022 and 2027, fueled by increasing traffic on the LAN and higher-capacity Access Points (AP).
Spending on software licenses delivering AI Operations (AIOps) enhancements for WLAN management is forecasted to grow to 20% of WLAN spending in 2027, increasing faster than the overall WLAN market. Vendors embracing AIOps are expected to elevate the frequency of feature updates, such that enterprises will have access to new features on a monthly or even weekly basis.

Enterprise Data Center Trends

Over the next five years, enterprises will increase adoption of Hybrid Cloud infrastructures. Mission-critical AI workloads will drive investments in accelerated computing for private data centers. Enterprises will also benefit from a consumption-oriented cost structure of the Public Cloud for AI workloads. Cloud service providers will offer a variety of AI-enabled applications to enterprises to increase efficiencies and shorten product development cycles.
Enterprises will invest in Edge Computing deployments for business to business and business to consumer applications such as virtual and augmented reality, smart manufacturing, and smart retail.
Dell’Oro Group predicts that in 2027, over a quarter of data center switch ports shipped to large enterprises will be 400 Gbps or higher, compared to 9% in 2022. The adoption of higher speed interfaces will be driven by AI and High-Performance Compute (HPC) applications.

The trends indicate that whether an enterprise will use predictive, generative, or conversational AI—IT architectures must adapt. Where should leaders start investing, given that it is still early days? What overarching principles should guide the enterprise’s IT transformation?

Analysis of some recent network transformation projects and discussions with industry leaders have shown that certain common themes have been guiding investments. Two of these themes, discussed below, are helping enterprises prioritize investments to meet their IT needs today, while allowing them to prepare their networks and computing infrastructure for the future.

1. Focus on Experience

The best way for an enterprise to align IT investments to its core business strategy is to center requirements on its customers’, its employees’, or its users’ experiences. As the use of AI applications intensifies in enterprises, network performance is becoming critical in the pursuit of excellent user experience. IT organizations are adopting various strategies to ensure that their IT infrastructure is meeting users’ needs.

Many organizations are implementing a Wi-Fi First approach, deploying high-quality wireless connectivity across the entire footprint of an office space, even extending to outdoor spaces. This is particularly important for companies that have embraced a hybrid work model.

IT departments are able to prepare for the future by deploying software defined radios (SDR) on Wi-Fi APs. On the latest generations of Wi-Fi 6E and Wi-Fi 7 APs, SDRs can be reconfigured from operating in the 5 GHz band to operating in the new 6 GHz band. The decision to open a radio in the 6 GHz band can be made once there is a sufficient number of clients supporting the new frequency, resulting in increased throughput and reduced interference. SDRs are especially useful in countries that have regulations regarding use of the 6 GHz band that are expected to change in the future.

Because of the proliferation of Wi-Fi and IoT, enterprises must expand their campus backbone and switching capabilities. Dell’Oro Group predicts that in 2024, over 40% of WLAN APs will be shipped with a multi-gig port. The plethora of IoT devices has driven up the number of connections and increased demand for switch ports supporting Power over Ethernet (PoE). Higher grade, even optical, cables will all be necessary as network users rely more and more on quality network connectivity and data-rich applications.

With cutting-edge network and data center technologies available, enterprises can consider the ways in which latency improvements may enhance their operations. For example, in its September 2023 paper “Get Ready for Wi-Fi 7”, the Wireless Broadband Alliance (WBA) identified industrial uses cases for which more deterministic latency could be beneficial. Autonomous Mobile Robots and wireless industrial safety controls may become possible with the implementation of Stream Classification Service (SCS) in Wi-Fi 7. An IEEE task group has also demonstrated that Wi-Fi 7 using SCS QoS characteristics provides significant latency gains over previous technologies (Figure 1).

Figure 1 – Wi-Fi 7 SCS shows higher determinism for end to-end latency between 1-10 ms

Source: Dave Cavalcanti, Intel Corporation, for IEEE 802.11-22/634r0

Latency can be further reduced with the deployment of computing infrastructure in close proximity to the users of latency-sensitive applications. For geographically distributed enterprises, the management of multiple data centers can be complex. In this case, data center orchestration and unified management applications become critical for deploying and configuring services and workflows across multiple data centers, without risking security or reliability.

At the same time, As IT experts design their infrastructure, they have an additional lever on which they can pull to enhance user experience: the deployment of application-aware systems. Traditionally, networking has followed the OSI model of communications, with each layer of the model being unaware of the communications occurring at the layer above. Application aware systems can make connection-level decisions based on information provided by the application operating at a higher level in the stack.

Videoconferencing is an application that can greatly benefit from application-aware networking. IT departments can collect data from end-user devices, videoconference applications, and network operations platforms. They can use Machine Learning (ML) to identify the source of network problems and propose resolution suggestions. Networking equipment schedulers can be enhanced to optimize video streams or improve performance for certain groups of users, for specific applications, or for special events. Enhancements to support the high bandwidth of today’s video applications will lay the groundwork for the next generation of applications using very high resolution and volumetric video.

As data from different domains – data center, network, and application – come together, the management of IT infrastructure becomes more powerful. The power of unification becomes evident with the application of uniform security policy, faster resolution of problems and a broader high-performance connectivity. These three factors are the underlying pillars of an exceptional user experience.

2. Automate to Increase Efficiency

Enterprises are only just beginning to develop strategic plans that include the benefits of AI applications. However, investments in AIOps can be made today, and will dramatically improve an organizations’ efficiency.

AIOps make use of advanced analytics and ML algorithms to support the complex tasks of network and data center operations, helping to increase data center storage efficiency, predict network performance issues, or even automatically suggest and apply fixes to problems.

The foundation of AIOps is accurate input data. Network mapping ensures that all IT resources are identified, understood, and visualized, and that the relationships between them are captured, even as configurations change. AI/ML algorithms applied to the combination of network mapping data and real-time usage metrics can automate a wide range of operations tasks –and may even lead the industry to the nirvana of network management: closed-loop, or fully automated, operations.

Figure 2 – Beneficial Features of AIOps and Advanced Management

Whereas full closed-loop automation remains a distant target for most organizations, AIOps applications are commercially available for both LAN and data center solutions. Enterprises using AI-based management are providing compelling insights into the benefits of AIOps. One company with which we spoke told us they have reduced their LAN trouble tickets by over 90%, and an AIOps application identified a configuration problem in the network that had been reducing user quality of experience for years.

Deploying advanced network management capabilities is critical because enterprises across the world are having trouble finding and keeping IT staff. Companies want to focus the employees that they do have on projects that are valuable to their core business objectives. Spending valuable hours just “keeping the lights on” can hamper the introduction of other innovative IT projects.

A journey of a thousand miles begins with just one step, and the path to an AI revolution begins with a high-performance network. Automation of network and data center management will be an early win for IT leaders—just one of the many revolutions that AI models are sure to bring.

Near the end of last year, there were a number of public announcements highlighting the growing adoption of 25GS-PON. Arguably the most important of these was Google Fiber’s announcement that it will be using 25GS-PON along with a Wi-Fi 7 router to deliver symmetric 20Gbps residential services through its Gfiber Labs Division. Currently, Gfiber Labs is delivering the 20Gbps service to the University of Missouri-Kansas City and the United Way of Utah County, but plans to expand availability to individual subscribers in select markets, including Kansas City, Raleigh-Durham, as well as markets in Arizona and Iowa.

The 20Gbps service tier is intended for power users and is priced accordingly at $250 per month. But as Wi-Fi 7 devices including phones, laptops, tablets, and TVs, begin to proliferate in the home, the need for each of these devices to access data at multi-gig speeds will also grow. As part of its announcement, Google shared a number of demonstrations designed to showcase what is available through the combination of 20Gbps of bandwidth and Wi-Fi 7, including a total throughput of 15Gbps across multiple devices using Wi-Fi 7’s MLO (MultiLink Operation) capability, and 25ms latency between a wired game console and a WI-Fi mesh extender.

Google’s cache as an innovative ISP, along with its demonstrated ability to change the competitive dynamics in the markets where it offers FTTH services has helped spark additional industry interest in 25GS-PON for not only high-end residential services but also services for enterprises, campus environments, access network aggregation, as well as wholesale connections.

Membership in the 25GS-PON MSA (Multi-Source Agreement) Group has grown substantially, now encompassing a diverse range of service providers, equipment vendors, and component suppliers. Most importantly, product development for critical equipment, including ONTs and coexistence elements, has accelerated. At least 10 different ONT vendors have joined the MSA. These vendors all have decades of experience designing ONTs as either OEMs or ODMs. Having a diverse vendor ecosystem for ONTs is critical for service providers to feel comfortable deploying the technology. In January, Actiontec announced its XVG-99SK, a 25GS-PON SFP ONT that is already in tests with customers and partners. We expect additional ONTs to be announced as the year progresses, likely corresponding with expected service provider field trials and deployments.

25GS-PON Window Staying Open Longer

One of the driving factors for the growing interest is 25GS-PON is its ability to coexist with GPON and XGS-PON without having to deploy additional feeder fiber, splitters, or other ODN elements. The other is the ability for service providers to expand the addressable markets of their PON networks to support residential, enterprise, mobile transport, and wholesale services over a shared infrastructure with sub-millisecond latency and guaranteed capacity.

Those two factors are why there are now nearly 900KK 25Gbps-Capable OLT ports in service provider networks around the world. In our most recent 5-year forecast, published in January, we estimate that a total of 23,400 of these 25Gbps-capable OLT ports were actually purchased by service providers to support revenue-bearing traffic, with the bulk of these being purchased in North America and Western Europe.

We expect these purchases to increase to over 200k OLT ports by 2028, We see more scenarios now in which service providers are relying on on XGS-PON to deliver broadband to the vast majority of their residential subscribers while also layering on 25GS-PON to offer premium tiers of 10Gbps or more, as well as enterprise connectivity, all at just a small incremental increase in cost.

With average annual growth rates in bandwidth consumption returning to more normal, pre-pandemic levels, the need to dramatically increase billboard speeds has become less pressing. Instead, the focus for service providers now is how to maximize their access infrastructure investments to flatten the network and address more use cases and market segments, while also building sustainable networks that consume less power than their predecessors. These are the target characteristics of hybrid XGS and 25GS-PON networks.

Because of our more normalized expectations for bandwidth growth, along with conversations with both equipment vendors and service providers, we have reduced our short-term forecasts for 50G-PON, pushing out the ramp in adoption from 2026 to 2028. Though we do expect to see early deployments of asymmetric 50/25 PON, primarily in China, work to define the specification for symmetric 50G-PON is still underway. Symmetric speeds are what service providers want to deploy going forward, so the vast majority of those considering 50G-PON as their next step will likely have to wait until at least 2026 for product availability. Even then, there is no guarantee that the expected higher costs associated with the required transmitters, DSPs (Digital Signal Processors), and ADCs (Analog-to-Digital Converters) will be reduced with volume shipments.

The additional time required for all elements of the 50G-PON ecosystem to mature keeps the window open longer for 25GS-PON, as enterprises will demand symmetric 10Gbps+ speeds to their facilities to allow them to continue expanding their reliance on cloud-based services. Additionally, service providers, like Google Fiber, will continue to innovate their residential broadband offerings, staying in front of cable’s DOCSIS 3.1 Plus and DOCSIS 4.0 service offerings.

5G has come a long way since the Korean operators launched mobile 5G in early 2019. In the first five years, operators have invested around $0.4 T globally in 5G-related capex, deploying 20 M+ macro and small cell radios. Even so, the results are mixed. From a RAN investment and coverage perspective, 5G has accelerated at a much faster pace than previous mobile technologies. Preliminary findings suggest that 5G already covers around 45% of the global population, according to Ericsson’s Mobility Report. To put things into perspective, LTE reached the same milestone in early 2016. In addition to the reduced gap between the advanced and less advanced markets, the capacity boost realized with the upper mid-band taken together with the proliferation of Massive MIMO is providing a step function reduction in data delivery costs. The SK Telecom 5G/6G white paper focusing on 5G lessons points to a 70% reduction in cost-per-bit relative to LTE. At the same time, 5G has so far been mostly about improving the economics and increasing the data buckets for the existing use cases. However, 5G has so far had limited success in expanding the use cases and reversing the carrier revenue trajectory.

As we look to the next phase of this 5G journey, any incremental technology advancements that can improve spectral efficiencies will be valuable in a world where spectrum is limited and both humans and machines consume increasingly greater amounts of data. Additionally, any enhancements that can promote the growth prospects for Enterprise/Private 5G and Cellular IoT (cIoT)—ultimately helping to realize more aspects of the broader 5G vision—will also play an important role in this next phase. The objective of this blog is to provide updates on the 5G Advanced blogs we previously posted and to review the technologies, opportunities, and RAN implications with 5G-Advanced/5.5G.

What is 5G-Advanced?

The 3GPP roadmap is continuously evolving to fulfill the larger 5G vision. In this initial 5G wave that began in 2018, 3GPP has already completed three major releases (new releases every 1.5 to 2 years): 15, 16, and 17.

These initial releases have been key to the success of both MBB and FWA. But there are still shortcomings that need to be addressed, in order to fulfill the broader 5G vision. Current plans for Release 18 and beyond (often referred to as 5G-Advanced or 5.5G) involve gradual technology improvements aimed at elevating 5G to the next level, creating a foundation for more demanding applications and a broader set of use cases. In addition to performance improvements and support for new applications, sustainability and intelligent network automation are also important building blocks in the broader 5G-Advanced vision (Ericsson).

Source: Huawei

Current priorities with 5G-Advanced include:

More capacity and better performance. Some estimates suggest that MIMO enhancements, better beam management, and full duplex technologies taken together with other advancements, including multi-band serving cell (MB-SC) and Extremely Large Antenna Array (ELAA) will deliver another 20% of efficiency improvements relative to today’s 5G. Enhanced uplink (UL) and multi-cell UL improvements could pave the way for greater data rate and latency improvements in the UL. For reference, Huawei defines 5G-Advanced as a site that can support at least 10 Gbps of cell capacity. ZTE is also targeting 10 Gbps+ with 5G-Advanced.

Expanded coverage. In addition to MIMO and IAB coverage enhancements, 5G-Advanced includes Non-Terrestrial Network (NTN) connectivity improvements, building on the NR/LTE-based NTN support that was introduced with Release 17.
More intelligence. Releases 15-17 already include some AI/ML features. 5G-Advanced will offer AI/ML enhancements in the RAN (including the air interface) and the management layers. In addition, Intelligent RAN and AI-powered analytics will help operators to improve the performance and proactively address network issues before they become a problem.
Energy savings. Release 18 includes a confluence of static and dynamic power-saving enhancements for the radios and the overall RAN. Also, the specification is targeting to define a base station energy consumption model with various KPIs to better evaluate transmission and reception consumption/savings.
Flexible spectrum (FD, DSS, CA). NR is currently based on TDD or FDD spectrum. Full duplex (FD), a 5G-Advanced contender, improves spectrum utilization by allowing UL and DL to share the same spectrum (FD should improve capacity and latency, especially in the UL). Release 18 also includes DSS capacity enhancements (increasing PDCCH capacity by allowing NR PDCCH to be transmitted in symbols overlapping with LTE CRS). Other spectrum-related upgrades with 5G-Advanced include multi-carrier enhancements and NR support for dedicated spectrum bandwidths below 5 MHz.
Critical IoT. 5G-Advanced includes multiple industrial and IoT related advancements. Release 17 included support for Time Sensitive Networking (TSN), which will be expanded in 5G-Advanced to support Deterministic Networking (DetNet).
RedCap IoT. NR-Light or Reduced Capability (RedCap) was introduced with 3GPP NR Release 17. 5G-Advanced will introduce lower-tier RedCap devices, seeking to find a better set of tradeoffs between cost, performance, and power consumption.
Ambient IoT. Passive IoT, sometimes referred to as Ambient IoT, will allow devices/objects to connect without a power source.
Sensing. Harmonized communication and sensing (HCS) is a Release 19 study item.
Positioning. Positioning is already supported in Release 16/17, though 5G-Advanced is expected to improve positioning accuracy and power consumption (Nokia has said sub-10 cm positioning is doable). In addition, Release 18 will include support for RedCap devices.

Source: Nokia

Where are the opportunities?

Looking ahead, operators will continue to invest in new RAN technologies and architectures that will allow them to better navigate stable carrier revenue trends and increased network complexities. 5G-Advanced is not the only toolkit. But it will play an important part as the operators incorporate more virtualization, intelligence, and automation into their RAN roadmaps. AI and ML already play a role in current 5G, and they are expected to penetrate further across the RAN stack.

It might not be the most exciting revenue growth opportunity for carriers, but one fundamental aspect of 5G-Advanced will be to support more demanding consumer MBB applications. The days of exponential data traffic growth are clearly in the past; however, global mobile data traffic is still projected to increase threefold over the next five years, reaching 0.5 ZB/month by 2028 (mobile plus FWA). While operators are currently in a fairly good position from a capacity perspective, especially those not aggressively pursuing FWA, some of the technology improvements with 5G-Advanced can help to address capacity limitations in hotspot areas.

Since the base case is built on the assumption that AR/VR will comprise only a small part of total mobile data traffic throughout the forecast period, the successful introduction of a new AR device for the masses could significantly alter the data traffic growth trajectory and corresponding RAN requirements.

With 5G RAN growth now slowing and carrier revenues staying flat, both operators and enterprises appear cautiously optimistic about the industrial focus promised by 5G-Advanced. Private LTE/5G is trending in the right direction, but the market remains small. The slower start is not impacting the long-term growth thesis: proliferating cellular connectivity into enterprises and industrial settings where WiFi or public cellular connectivity is poor remains a massive growth opportunity. Although LTE and 5G NR Releases 15-17 are sufficient to address the majority of existing use cases, 5G-Advanced will provide important IoT and industry-focused enhancements.

Fueled by the vision that 5G has a growing role to play in the Factory of the Future, expectations for 5G and 5G-Advanced in manufacturing are rising. While WiFi and LTE still dominate the smart manufacturing connectivity market, our assessment indicates that 5G RAN revenues to support the manufacturing vertical are on the rise. In fact, manufacturing already accounts for a double-digit share of Huawei’s, Nokia’s, and Ericsson’s ongoing private wireless projects. Huawei recently reported that manufacturing constitutes approximately 40% of its enterprise ToB revenues, and its enterprise 5G RAN revenues experienced rapid growth in 2023

Nonetheless, it is still early days outside of China, and the majority of enterprises are in the exploratory phase when it comes to using 5G-based AGVs, Digital Twin, AR/VR, and quality inspections. The improved reliability, latencies, device costs, positioning accuracy, and UL throughput should all contribute to improving the industrial 5G business case, but as with most enterprise verticals, it will take time.

Another area gaining attention is RedCap, a 5G NR-based cellular IoT technology introduced in Release 17 and further improved in Release 18. RedCap offers “slimmed down” 5G capabilities, targeting mid-tier IoT use cases that require reasonable bandwidth and robust battery life, albeit not the most stringent latency requirements (though still suitable for many applications). Bearing in mind that the industry has been discussing Cellular IoT for decades now, expectations are more tempered this time around

Passive IoT, sometimes referred to as ambient IoT, is also contributing to the renewed interest in Cellular IoT. In addition to the improved economics compared to RFID-based sensors, Passive 5G-Advanced IoT solutions are expected to be advantageous from a power consumption perspective. According to Huawei, some passive IoT devices (C tags) should potentially consume 100 times less power than NB-IoT devices.

What does this mean for the RAN forecast?

After a couple of years of exponential growth, 5G RAN investments are now slowing. Yet, it is still early in the broader 5G cycle, and total 5G NR plus 5G-Advanced RAN revenues are poised for further gains. Although the base case assumes that 5G-Advanced will not trigger another capex cycle, Release 18 and future releases are expected to play pivotal roles in this next chapter of 5G.

Predicated on the assumption that ongoing trials are successful, the ecosystem is in good standing, and the first part of the 5G-Advanced standard will be frozen in early 2024, the first wave of commercial deployments could become a reality by the second half of 2024 and into 2025.

5G-Advanced encompasses a broad array of technology enhancements. Some operators are already planning to upgrade their networks to support 10 Gbps (China Mobile recently announced the completion of 1K 5G-Advanced gNBs using 260 MHz of BW), while others might focus more on the IoT aspect. The majority of 5G base stations deployed in the latter part of the forecast period will incorporate some 3GPP Release 18+ features.

In short, 5G-Advanced is soon ready for prime time, with initial commercial deployments commencing in 2024. There is nothing wrong with a little bit of optimism and thinking big. At the same time, following the mixed results in the first 5G wave and the resulting rise in skepticism about the broader 5G business case, the industry now has an opportunity to recalibrate expectations.

About three years ago, Zscaler’s CEO Jay Chaudhry expressed a viewpoint in an SDxCentral article that distanced the company from the SD-WAN market. Chaudhry stated, “Network security is not really very meaningful. We decouple network access and application access with zero trust. We don’t put people on the network, we connect a person to a particular application or service. If you believe that network and security should be decoupled, there’s no reason for Zscaler to get into the SD-WAN space.” This stance highlighted a philosophy focused on securing direct application connections rather than managing the broader network layer.

Fast forward to last week’s Zscaler Zero Trust (ZT) SD-WAN announcement. Zscaler unveiled a strategic pivot that places them squarely into the SD-WAN space, indicating a significant expansion of their focus towards networking. By introducing new hardware appliances, the Z connector series, Zscaler targets small to medium-sized branches, aiming to blend zero trust security with SD-WAN capabilities. This move positions Zscaler as a competitor against existing SD-WAN behemoths like Cisco, departing from Chaudhry’s earlier assertions.

I had the opportunity to sit down with Zscaler this week for a briefing on the new Z connector appliance family encompassing three models: the ZT 400, ZT600, and ZT 800. The hardware appliances range in performance from 200Mbps to 1Gbps, which Zscaler stated was sufficient for small to medium branches. Zscaler admitted the need for higher throughput hardware and is actively investigating. Until faster hardware arrives, customers must rely on the VM-based software appliance (Zscaler Branch Connector) that can scale horizontally with 3^rd-party load balancers.

A critical application of Zscaler’s strategy is enhancing IoT environments, with the appliances featuring IoT device discovery, yet, notably, they do not include Wi-Fi capabilities. Distinctively, Zscaler adopts a subscription-based model for its Z connector appliances, marking a departure from most of the industry’s standard practice of selling hardware solely through a capital expenditure (Capex) model. Details on the pricing remain confidential, with an announcement scheduled for this month (February) alongside the release of the Z connector software.

Zscaler’s SD-WAN strategy presents a streamlined, cloud-based alternative to complex traditional networking frameworks, emphasizing ease of management. The conversation underscored Zscaler’s potential to enhance or supplant current SD-WAN infrastructures. Yet, Zscaler recognizes its significant challenges in evolving into a hardware-centric enterprise. These challenges span the spectrum from regulatory compliance and establishing efficient distribution networks to ensuring next-day hardware replacement capabilities and bolstering support services. Additionally, Zscaler is focused on refining its SD-WAN solutions to enhance competitiveness and expand its offerings to support larger branch networks, necessitating integration with campus and Network Access Control (NAC) systems (in the vein of “Universal ZTNA”).

Adopting Zscaler Z-connector appliances positions Zscaler as a central network provider, managing secure application access via its Zero Trust Exchange and linking an enterprise’s operational integrity to its performance. This shift towards consuming a secure network as a service, akin to how cloud services for servers and storage are utilized, marks a significant change in enterprise networking that may feel foreign to some. Networking goes from hardware with blinking lights to an ephemeral service from the cloud. Despite this, it’s part of an industry-wide transformation, with other progressive vendors like Aryaka, Cato Networks, Cloudflare, and Versa Networks offering some or all their network services in a similar fashion.

This trend toward network as a service, the SASE framework, and multi-cloud networking are key pillars of my Distributed Cloud Network concept, which I discussed in my op-ed on SDxCentral. Collectively, these elements represent the future of enterprise networking, integrating new technology and consumption models into the broader, evolving landscape of enterprise IT strategies.

Zscaler’s evolution from sidestepping SD-WAN by exclusively relying on integrations with third-party SD-WAN vendors to now offering SD-WAN capabilities natively underscores the company’s adaptability and strategic growth. This shift highlights Zscaler’s responsiveness to changing market dynamics and marks a significant new chapter in its journey as a single-vendor SASE provider.

My SWOT analysis follows:

Strengths

Market-leading SSE with a strong security focus with zero trust architecture.
Simplified cloud management and deployment.
Targeted solutions for small to medium-sized branches.
Adoption of a modern subscription-based business model.

Weaknesses:

New entrant in the hardware-focused networking market.
Limited hardware portfolio breadth.
Pricing strategy not clearly defined.
Convincing established customers to switch from traditional vendors and approaches may pose challenges.
ZIA and ZPA are built on separate technology stacks and operate as distinct networks, unlike some newer SASE vendors that utilize a single network with a common technology stack. Having separate technology stacks/networks increases the risk of subpar networking performance and reliability.

Opportunities:

Rising demand for integrated security and networking solutions.
Shift towards service-oriented and cloud-based network management.
Opportunity to capture a niche market looking for simplified SD-WAN solutions.

Threats:

Competition from better-established SD-WAN vendors like Cisco, Fortinet, and Palo Alto Networks.
Resistance from customers loyal to traditional networking methods that rely on more of the security and networking smarts embedded in each SD-WAN device.
Need for continuous innovation in a rapidly changing SD-WAN and security landscape.
Newer SASE vendors offering a unified technology stack across functions may appeal to customers seeking streamlined solutions, posing a competitive threat to Zscaler’s dual-product approach.

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Local Area Networks Trends

Enterprise Data Center Trends

What is 5G-Advanced?

Where are the opportunities?

What does this mean for the RAN forecast?