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In March, I attended the 2019 Open Compute Project (OCP) Global Summit at the San Jose Convention Center. The event is growing with 3,600 participants this year, including a broad representation of vendors and end users who make up the OCP community. We continue to see innovation in the server rack for hyperscale Cloud, edge computing, and enterprise environments for OCP-based designs.

Following are three key takeaways in server network connectivity:

 1.  OCP NIC 3.0 (Network Interface Card) specification continues to evolve and is Smart NIC-ready.

The OCP NIC 3.0 specification addresses shortcomings of the OCP NIC 2.0 specification in the areas of the thermal and mechanical profile, connector placement, and board space. Key members, including Broadcom, Facebook, Intel, and Mellanox, contributed to the 3.0 development process. As it currently stands, the OCP NIC 3.0 specification is defined in two form factors: SFF (small form factor) and LFF (large form factor). The LFF form factor is designed to accommodate accelerated processors, such as an ARM SoC or FPGA for Smart NIC applications.

A Smart NIC designed for OCP is a wise future-proofing strategy. In Dell’Oro Group’s 2019 Controller and Adapter Market 5-Year Forecast January report, I projected that Smart NIC will become a $500 M market by 2023, representing 20 percent of the total controller and adapter market.  Furthermore, most of the earlier adopters of Smart NICs are hyperscale and telecom data centers are also expected to widely deploy OCP-based designs within the server rack.

2.  The introduction of 56 Gbps PAM-4 NICs enables server connectivity to 400 Gbps networks.

Another important development is the availability of Ethernet adapter products with 56 Gbps PAM-4 SerDes lanes by Broadcom (NetExtreme), Intel (800 series Columbiaville), and Mellanox (ConnectX6). All are available in the OCP 3.0 form factor. The SerDes lane transition from 28 Gbps NRZ to 56 Gbps PAM-4 will enable Ethernet connectivity up to 100 GbE (based on 2 SerDes lanes) or 200 GbE (based on 4 SerDes lanes). We see strong demand for server connectivity at 100 GbE and higher speeds, especially by Tier 1 Cloud service providers, as this segment transitions to 400 GbE networking at the top-of-rack (ToR) switch over the next one to two years. (See Dell’Oro’s press release,“Cloud Service Providers Drove Demand Volatility of High-Speed Network Adapters”)

3.  Multi-host NICs have the potential to streamline and densify server connector connectivity.

It is exciting to see multi-host NICs gaining additional support from vendors. This technology has the ability to streamline the network by reducing ToR connections while providing a dense compute rack architecture. Mellanox was first to market with multi-host NICs for Yosemite servers, which provide 50 Gbps Ethernet connectivity to four server nodes. At OCP, both Broadcom and Netronome announced network adapter products supporting multi-host connectivity for the Yosemite platform. Broadcom’s announcements are based on the NetExterme series with the Thor chipset, which provides single and multi-host connectivity for up to 200 GbE with a PAM-4 solution. Netronome’s solution, the Agilio CX, is also a Smart NIC that provides connectivity up to 50 GbE.

I believe that OCP will continue to grow in strength as the industry transitions from off-the-shelf equipment to open designs optimized to end-users’ technical and cost-of-ownership requirements.

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China Market to Decelerate and Grow at Pace with the Rest of Asia Pacific

The latest Dell’Oro Group Wireless LAN (WLAN) 5-Year Forecast report (2018-2023) indicates that the Enterprise WLAN market will slow as it approaches $9.6 B over the next five years. The China market is expected to decelerate and grow at pace with the rest of the Asia Pacific region.

Chinese service providers are no longer deploying WLAN equipment in mobility environments, resulting in 2018 as one of the slowest growth years to date.  Despite the slowdown, we expect the WLAN market in China to grow over the forecast period. We anticipate wireless expansion and transition to new 802.11ax (Wi-Fi 6) technology in the enterprise segment as key growth drivers for the China market.

While 5G will enter the market during the forecast period, we maintain our position on its impact on WLAN.   As discussed in our report, we do not recognize cellular (including 5G) and private LTE networks as drivers for enterprise customers to substitute WLAN for in-building connectivity. Following are additional key takeaways from the WLAN 5-Year Forecast Report:

  • Demand for WLAN equipment and an increase in average selling price will move the WLAN market to approach $17.6 B in revenue over the next five years.
  • In comparison to previous technology (802.11ac), we expect 802.11ax to sustain a price premium for a longer period.
  • The revenue contribution from licenses is expected to exceed the contribution from access points for the Enterprise Cloud.
  • In the SOHO market, wireless router shipments are projected to surpass 50 million.

About the Wireless LAN 5-Year Forecast Report

The Dell’Oro Group Wireless LAN 5-Year Forecast Report offers a complete overview of the industry, covering Enterprise Outdoor and Indoor markets, SOHO markets with tables containing manufacturers’ revenue, average selling prices, and unit shipments by the following wireless standards: 802.11ax, 802.11ac Wave 1 vs. Wave 2, 802.11n, and historic IEEE 802.11 standards.

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Last week, I attended Extreme NOW Forum 2018, Extreme Networks’ customer and partner conference in San Jose California, the first in a series of events to be held around the world—more than 50. What impressed me was how familiar the senior staff were with individual customers. This clearly was not the first time interacting.

A few items caught my attention:

  • Senior staff knew many of the customers by name and there was a joviality and friendliness indicative of familiar relationships. Clearly the priority is on tight customer relationships, and this is coming from the top.
  • Software application development consumes over 95% of research and development spend—led by customer requests and use cases.
  • Two use cases amused me:
    • The first one was a large retail customer which deployed security cameras throughout its stores—monitoring theft was not its primary purpose! Instead the shop managers used technology to identify facial patterns—sadness or happiness. If a shopper was sad, an assistant would be immediately dispatched to offer help.
    • The second use case was a firm in the education sector which used security cameras in the classroom—not to just monitor cheating, but whether or not students were falling asleep during lectures. This monitoring allowed management to evaluate professor performance.

Certainly Extreme has its work cut out to harmonize the technologies and operations of its recent acquisitions, but its steadfast connection with its customers creates a lasting loyalty.

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NBASE-T technology is significantly impacting the market with the biggest transition we’ve seen in campus switching since 2000.

That’s a bold statement backed up by data and trends we’ve noted in our extensive research in the campus network market. With the new generation of 802.11ax access points supporting NBASE-T ports, this trend will only accelerate. At Dell’Oro Group, we predict a major refresh of the Ethernet Switch Campus market as 802.11ax shipments ramp up, taking NBASE-T to 20 percent of campus switch ports by 2022.  This transition will enable enterprises to transform their networks, support new high bandwidth devices, and provide the “always on” network experience expected today.

One clear example of this growth is in the education market. One administrator we spoke with said they are seeing big differences in their freshman class use even from one year to the next. Each incoming class is taking a step up. They use to plan their network needs based on 3 devices per student, and that has jumped to 5 devices per student in just the past couple years. Devices like Amazon Alexa and gaming devices have become even more prolific, and the number of users has also jumped from 10K to 22K in that same timeframe.

Members of the Dell’Oro Group team including Tam Dell’Oro, Ritesh Patel and myself, recently discussed these findings in a webinar with Peter Jones of the NBASE-T Alliance. NBASE-T Campus Network Market Update from Dell’Oro Group includes significant data points, price trends and discussion on the mix between 2.5GE/5GE. Decision makers can use this information to inform their strategic infrastructure plans and purchases.

Dell’Oro Group reports provide more in depth findings on Campus Networks – Wired and Wireless report, Ethernet Switch – Campus report, and Wireless LAN report.

We see 802.11ax driving the continual growth and expansion of NBASE-T adoption in a vast range of markets. From the high end to the low end of the market, there is a broader range of product offerings happening in a shorter time frame than with most previous technologies. Across the industry, NBASE-T technology is clearly powering a major inflection point in campus networking.

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Last week, Dell’Oro Group hosted a webinar with the NBASE-T Alliance about recent Campus Network updates.  Spearheaded by users’ need for mobile connectivity everywhere, wireless LAN deployments are heralding in NBASE-T, particularly with the availability of the newest 802.11ax access points. Yet early indicators reveal that 802.11ax adoption is not following historic patterns.

Three disruptions are unfolding:

  • 802.11ax access points will have an amplified impact on the Ethernet network as they connect into the Ethernet network with two ports rather than the traditional one port. One of the Ethernet ports will be either 2.5 Gbps or 5.0 Gbps. This will have a cascading effect through the network.
  • The price premium for 802.11ax will be significantly lower than previous technologies. This suggests that adoption may be faster.
  • China may not lag adoption.

Enterprise class 802.11ax access points with NBASE-T shift wireless LAN from being cannibalistic to Ethernet Switch market sales

The rate of migration of enterprise users away from desktop PCs to laptop and/or tablets has slowed. Some applications and functions, such as CADCAM, and laboratory work are most efficient on desktop PCs. Annual desktop PC shipments appear to be stabilizing.

Most Wireless LAN deployments now expand, rather than replace, the Ethernet network. Through our end-user interviews, Dell’Oro Group learned that the majority of wireless LAN deployments are in areas where Ethernet never existed, such as common areas in the Education sector, public areas in government buildings, museums, and shopping malls.

Wireless LAN access points have reached a significant level—annual shipments worldwide are in the tens of thousands of units—and they all need to connect to the Ethernet network.  This has driven Ethernet switch port shipments. Previews of 802.11ax access-point configurations indicate that a single port of NBASE-T will be incorporated at all price points, from the highest end to the lower-mid-range products with one port 5.0 Gbps at the high end and 2.5 Gbps into the lower-mid-range products.  We estimate that these segments capture approximately 50% of the market volume.  1 Gbps Ethernet will be the secondary port on high- and-mid-range product, and will dominate the low-end access points.

Wireless LAN will become an accelerator

As wireless LAN access points connect into the network at 2.5-and-5.0 Gbps, switches in the next layer of aggregation will likely need to be replaced with higher speeds.  This will cause a cascade effect through the network.  NBASE-T currently commands a price premium over 1 Gbps, which will have an accelerating effect on switch sales.

The penetration rate of 802.11ax will be much faster than previous technologies

Manufacturers are launching mid-range to lower-range 802.11ax products in addition to high-end.  This contrasts with the product launch plans of previous technologies such as 802.11ac and 802.11n.  The implications are much wider range of products will be available and price sensitive users will enter the market sooner.  The price premium will be lower on the 802.11ax technology vs. 802.11ac.  As a result, we predict 802.11ax will have a faster market penetration.

In our next blog, we’ll continue to explore another disruption – China may not lag adoption.

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