Dell’Oro Group just published an updated forecast for the enterprise Wireless LAN (WLAN) market, and expects demand to be robust over the next five years, growing to almost $9 B, as Wi-Fi becomes the default connectivity option for users and devices. In spite of a severe worldwide economic downturn, the enterprise WLAN market has proven remarkably resilient in 2020—revenue is on track to decline modestly supported by remarkable government stimulus that became available in 3Q20. We estimate government funding to grow to a disproportionate portion in 2021, which means the magnitude and duration of funding could move the market significantly.

One of the big winners in 2020 was cloud-managed WLAN: adoption of cloud-managed Wi-Fi access points jumped by 6 points in 2020 as the pandemic triggered interest in remote management capabilities, given the difficulty of visiting locations in person. However, going forward, we don’t expect this surge to continue, rather we expect adoption to grow at a more moderate pace as businesses balance the need to manage a distributed network with the desire to maintain control over their data. Issues such as high priced egress fees, and disputes over who owns the data have emerged and need to be resolved.

We were surprised to learn enterprise class Wi-Fi 6E access points are planned for the summer of 2021, as most vendors we spoke with were planning six-to-nine months later. Another surprise was the first products will be 2×2 rather than 4×4. Lower-end products spearheading a technology transition is different from previous technology introductions, and has a huge implication on market penetration, and moving the market. The obvious first impact could be users delaying purchases as they wait for 6E products from their favorite supplier, with the most notable pause coming from the high-end and high portion of the midrange market. We forecast 6E to fuel the market growth through the forecast horizon.

Our discussions with system integrators indicate a notable increase in deployments of competitive wireless technologies (5G, private cellular, Broadband Fixed Wireless) in 2020, particularly from schools and municipalities connecting constituents during the pandemic. We believe the impact on the WLAN market will be limited, as Wi-Fi is not a good fit for these types of deployments due to range, and coverage requirements. There is an opportunity for vendors to build network management systems that bring these different networking technologies together under one roof.

In sum, we address factors suppressing as well as accelerating the WLAN market in our forecast report. One of the main drivers of traffic and network upgrades—the growth engine—is people returning to work.

 

About the Report The Dell’Oro Group Wireless LAN 5-Year Forecast Report offers a complete overview of the industry, covering Enterprise Outdoor and Indoor markets, with tables containing manufacturers’ revenue, average selling prices, and unit shipments by the following wireless standards: 802.11ax (Wi-Fi 6), 802.11ac (Wi-Fi 5) Wave 1 vs. Wave 2, 802.11n, and historic IEEE 802.11 standards. It includes forecasts for regions of the world and for Cloud-managed vs. Premises-managed. To purchase these reports, please contact us by email at dgsales@delloro.com.

 

Campus switches are used for the purpose of connecting users and devices to the corporate Local Area Network (LAN). With the Work from Home or from Anywhere predicted to become a permanent aspect of the future of work, one of the fundamental questions is whether there is room for growth in the campus switch market. And if so- where will this growth come from?

We just published the latest edition of our 5-year forecast for the campus switch market. In the report, we discuss some of the negative impact from the pandemic such as the following:

• • Downward pressure on the number of campus switch ports needed to be installed: A more distributed workforce, working remotely either from home or from smaller distributed office spaces, will negatively impact the number of switch ports needed in those campuses. Initial data on commercial real estate, for example, suggests that prices are expected to fall significantly in 2020 and 2021 as demand for new office buildings is suppressed, which will in turn affect demand for campus switches.
  • Further cannibalization from WLAN: We expect WLAN to become more favorable for user connectivity than wired Ethernet, as it supports features and services that help businesses comply with re-opening guidelines, such as contact tracing, people counting, and other location-based services. Additionally, our interviews revealed that companies need to provide real mobility to the employees working from home. When these employees return to their offices, even in smaller numbers, their companies want to connect these users via Wi-Fi, as well, so as to maximize use of office space.

Despite the potential downside risk from COVID-19, we expect that the pandemic will also have some upside impact that will drive the market recovery, as detailed below:

• • Accelerated pace of digital transformation initiatives: Our interviews revealed that customers may be putting many budgets on hold, except for automation. We also learned that the timeline of some of these automation and digital transformation projects has been pulled in by about one to two years. Although the majority of IoT devices will be on wireless, some devices such as security cameras, industrial lighting or some sensors are expected to remain on wired Ethernet.
  • A greater portion of higher-priced PoE devices: We expect IoT devices to drive an increased portion of the higher-priced PoE ports. We expect this trend to help boost market average selling prices (ASPs).
  • Accelerated pace of the campus switch refresh cycle: We expect the adoption of digital transformation to accelerate the pace of the campus switch refresh cycle. In order to enable digital transformation, the network must undergo numerous changes. Automation, security, visibility, and analytics/intelligence are several added functionalities that IT managers need for the new digital era.

Any other impact from the pandemic on the campus switch market?

The pandemic is also expected to accelerate the adoption of Cloud-managed switches to accommodate the distributed workforce. Additionally, our interviews with end-users, system integrators, and VARs revealed an increased interest in Network as a Service (NaaS) during the pandemic, an interest that is expected to persist even after the pandemic ends.

If you need to access the full report to obtain revenue, units, pricing, relevant segmentation including regions and vertical markets, etc., please contact us at dgsales@delloro.com.

 

About the Report The Dell’Oro Group Ethernet Switch – Campus 5-Year Forecast Report offers a complete overview of Ethernet switches built and optimized for deployment outside the data center, for the purpose of connecting users and things to the Local Area Networks. The report contains tables covering manufacturers’ revenue, average selling prices, and port/unit shipments by speed (Fast Ethernet, Gigabit Ethernet, 2.5 Gigabit Ethernet, 5/10/25/40/50/100 Gigabit Ethernet) plus regional breakouts, and Power Over Ethernet (PoE) Forecast.

400 Gbps and 800 Gbps adoption is expected to accelerate and drive nearly half of the revenue in the market by 2025

We just published the latest edition of our 5-year forecast for the data center switch market.  Six months ago, when we published our July 5-Year forecast, we predicted that the data center switch market will be for the most part resilient to the pandemic. We also explained that most of the downward adjustment relative to our January 2020 Pre-pandemic forecast was driven by the non-Cloud segments, which include enterprises as well as Telco Service Providers (SPs). In the meantime, our July 2020 forecast for the Cloud segment showed only a slight downward revision relative to our pre-pandemic January forecast.

We are now pleased to announce that we hold to our prior view that the pandemic won’t significantly depress the growth in the data center switch market (Chart). We even had to raise our forecast slightly compared to our prior July report, as certain segments of the market, namely Tier 2/3 Cloud SPs and large enterprises, have been performing better than expected.

Our current forecast shows that the Ethernet switch data center market will decline only for one year (in 2020), at a low single-digit rate (-2%). We expect the market will return to growth in 2021 and will be able to exceed its 2019 pre-pandemic revenue level.

Other takeaways from the January 2021 5-Year Ethernet Switch Data Center Forecast Report include the following:

• The 200/400 Gbps adoption has been so far driven mostly by Google (starting 4Q18) and Amazon (starting 4Q19). We expect the 200 Gbps adoption by Facebook to accelerate in early 2021, and the 400 Gbps adoption by Microsoft to accelerate in the second half of 2021.
• We expect early 800 Gbps deployment to start in 2022, driven by the availability of 100 G SerDes. However, initial 800 Gbps deployments will not be based on native 800 G Ethernet MAC, but rather deployed as either 2×400 GE or 8×100 GE. In other words, 100 Gbps SerDes will allow building high-density, low-cost 400 Gbps or 100 Gbps systems. We expect early adoption to be propelled by Google and Amazon. We also expect Microsoft to adopt 800 Gbps (which will be deployed as 2×400 GE) by 2023.
• 200 G SerDes may be available in the market by 2024. However, the availability of 200 G Lambda may lag 200 G SerDes. Given that connecting 200 G SerDes to 100 G Lambda requires Gearboxes which add complexity, cost, and power consumption, we expect 100 G SerDes with 100 G Lambda to dominate over the next five years.
• Power is one of the major constraints for speeds beyond 400 Gbps. Future data center networks may require a combination of photonic innovation, such as co-packaged optics (CPO) and optimized network architectures.
• Our current revenue forecast does not reflect an increased portion of optics sold by switch system vendors (For example, Cisco selling more optics with their switches). We plan to reflect that in separate tables to avoid inflating the market size.
• We are assuming that CPO may start to ramp towards the end of our forecast period. However, the business model between chip suppliers and switch manufacturers is not yet clear to us (i.e who is going to carry the physical CPO inventory is not yet determined). Hence we elected to not reflect additional revenue associated with CPO in our current forecast until we have a better view of the business model.

If you need to access the full report to obtain revenue, units, pricing, relevant details including speeds, regions, market segments, etc., please contact us at dgsales@delloro.com.

 

About the Report The Dell’Oro Group Ethernet Switch – Data Center Five Year Forecast Report provides a comprehensive overview of market trends and includes tables covering manufacturers’ revenue, port shipments, and average selling price forecasts for various technologies: Modular and Fixed by Port Speed; Fixed Managed and Unmanaged by Port Speed. We forecast the following port speeds: 1000 Mbps; 10 Gbps; 25 Gbps; 40 Gbps; 50 Gbps; 100 Gbps; 200 Gbps; 400 Gbps, 800 Gbps. We also provide Regional Forecast as well as forecast by different market segments (Top 4 U.S. Cloud SPs, Top 3 Chinese Cloud SPs, Telco SPs, Rest of Cloud, Large Enterprises, Rest of Enterprises).

Post-Pandemic Work from Anywhere and Digitization Initiatives to Fuel Strong Demand

We just published the latest edition of our 5-year forecast for the Network and Security and Data Center Appliance (NSDCA) Market that spans Firewalls, Secure Web Gateways, Email Security, IDS/IPS, Application Delivery Controllers, and Web Application Firewalls. A year ago, we debated the effects of the US and China relationship and Brexit on the market, but this year all attention is on the COVID-19 pandemic. The pandemic is reverberating through the market with both near-term and long-term consequences.

Near-term, we see overall NSDCA market growth muted that will only attenuate as societies turn the corner on the pandemic. We forecast the market will post meager growth of just 2% year-over-year (Y/Y) in 2020. Historically, the total market has been averaging 7% to 9% Y/Y growth. Fortunately, we believe the market will begin reverting to more robust growth in the latter half of 2021 as vaccination against COVID-19 ramps up.

We project post-pandemic growth to be stronger than what we predicted pre-pandemic in January 2020 and rise from $17.6B in 2020 to $28.8 B in 2025, representing a 10% five-year compound annual growth rate. The key difference from a year ago is the pandemic’s expected long-term effects on how businesses operate:

• The Work Anywhere Workforce – The pandemic substantially increased the ranks of teleworkers as many people worked from home in compliance with state and local government health mandates. While some workers are beginning to return to corporate offices, we believe that many will continue to telework post-pandemic, whether full- or part-time. According to our analysis relying on US Bureau of Labor Statistics data, 10% of the US workforce worked remotely pre-pandemic. We anticipate that post-pandemic, 20% of the total US workforce will work remotely. On a global scale, we foresee similar dynamics.
• The Fully Digital, Multi-cloud, Mobile user-friendly Enterprise – The pandemic forced businesses from paperwork and handshakes to digital documents and online transactions. While the multi-year journey of enterprises to be fully digital was well underway before the pandemic’s arrival, it accelerated upon its onset. We see this momentum continuing post-pandemic.

Though a rising tide lifts all boats, in our report, we dig into the details on how cloud-friendly technologies will rise faster than on-premise technologies post-pandemic.  For example, the Firewall segment, representing over 50% of the overall market, is not expected to match our pre-pandemic forecast. We do expect the Firewall segment to rebound, but not as strong as other segments. The Firewall segment has traditionally been biased towards physical appliances and on-premise corporate deployments.  We see physical appliances playing a shrinking role in the market as enterprises move to virtual and software-as-a-service embodiments.

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 for Firewall, Secure Web Gateway, Email Security, IDS/IPS, Application Delivery Controller, and Web Application Firewall product segments. Each of these segments is further split by Physical, Virtual, and SaaS (Software-as-a-Service) form factors. Manufacturers’ units shipped and average selling price is provided for the Firewall and Application Delivery Controller segments. To purchase this report, please contact us by email at dgsales@delloro.com.

The Outlook Is Improving, but Mixed

At the beginning of 2020, we expected a solid year for the WLAN market, driven by a still humming economy and a technology upgrade cycle to Wi-Fi 6. After the pandemic hit, we revised our forecast down steeply (double digit decline)—similar to prior economic declines. As the year progressed, however, WLAN proved resilient and 2020 revenue is on track to come slightly lower than 2019—a remarkable result of government stimulus coming primarily from the US, followed by China and select countries in EMEA such as Germany. For example, the US’ E-Rate program, which provides telecommunications funding for K-12 schools, was opened to a second round in September 2020 to allow schools to request additional funds for 2020-21 to address surging bandwidth demand stemming from remote learning. In China, the government’s Made in China 2025 initiative has provided incentives for manufacturers to modernize their processes.

Recently, during financial publications conference calls, a number of WLAN manufacturers announced that government stimulus would spill into 4Q20, and possibly into early 2021. Several economists at world leading banks recently raised GDP forecasts. With this brighter picture on the macro-economy, we raised our outlook for 2021. There are many promising signs, like the distribution of vaccines, and approval of another economic aid package in the US.

But there are also warning signals. We have read real estate reports highlighting over 40% Y/Y increases in excess commercial real estate in 30 major cities in the US. If real estate companies use technology to increase the attractiveness of their buildings WLAN sales could rise. Alternatively, spaces could remain empty or converted to residential. We are watching for indicators.

Another WLAN market constraint includes surging infection rates that are once again causing targeted shut-downs of economic sectors. Several WLAN vendors attributed 3Q20 softness in Europe to resurging infections particularly in southern counties. Meanwhile, a new strain of COVID-19 in the UK is spreading more rapidly than previous strains and many countries have banned travel to/from the UK. Clearly, there remains tremendous uncertainty and potential for volatile demand swings in 2021 as businesses open and close.

Could Wi-Fi 6E Stall Market Demand In 2021?

The 802.11 standard has seen regular updates over its 20+ year history, and so the looming update to 6E should not seem out of the ordinary. But two trends are changing market dynamics:

• Wi-Fi technology cycles have been shrinking, from every 4-5 years to 3 years. That makes it more compelling for buyers to sit out a cycle in anticipation of even better features and enhancements. We can see this playing out right now in the Wi-Fi 6 cycle, where adoption is significantly running behind what unfolded with Wi-Fi 5 Wave 2.
• Manufacturers advise us that client devices with Wi-Fi 6E capability will ship in early 2021. Early-to-market manufacturers of enterprise class access points advise that shipments may be as early as 2Q20. However, we don’t expect the majority to launch 6E products until end of 2021/early 2022. With Wi-Fi 6E just around the corner, users may pause purchases and wait for their favorite supplier to launch its 6E products. We anticipate high-end users and the high-end of the midrange market, which combined could comprise 20% or more of market revenues, will be willing to pay a premium to harness the benefits from Wi-Fi 6E.

Pandemic Accelerates Cloud Management

In the past several months, the pandemic has triggered intense interest in remote management capabilities given the complications around visiting locations in-person to install, upgrade, or troubleshoot equipment. The speed of innovation on cloud platforms is another benefit; for example, several vendors quickly repurposed their existing location-based technologies to develop contact-tracing applications to combat the spread of COVID-19.

Vendors have responded with increasing the variety of cloud managed products and pricing options, including lowering prices. Lower prices stimulate demand.

We expect this interest to carry into 2021 as the effects of the pandemic linger and organizations are going to be permanently more distributed over the long-term (working from home, more but smaller offices), all of which favors a cloud-based management approach.