Why Is Networking Growing So Fast?

By Sean Michael Kerner

May 23, 2007

IDC analyst gives five reasons why networking growth continues to outpace all other sectors of IT.

LAS VEGAS -- Did you know that the growth of networking spending is outpacing all other sectors of IT? Abner Germanow, director of enterprise networking at IDC, gave his reasons why to a standing-room only audience during a morning session here at Interop.

According to Germanow's IDC data, enterprise networking growth was 17 percent in 2006. In contrast, servers grew by 6 percent, packaged software grew by 8 percent and storage grew by 6.2 percent.

When he reported the figures to his management at IDC, they asked him to double check since they couldn't believe that networking could be growing that fast because it's a mature market.

So what is propelling networking? According to Germanow it boils down to five driving factors.

The No. 1 reason is voice and video. Germanow noted that analysts and vendors have been talking about voice and video for years, mostly as a future-proofing topic. But in 2006, voice became a reality.

IDC is projecting an 11 percent growth in compound annual growth rate (CAGR) for IP-PBXs through 2011 and a 22 percent CAGR for IP phone gear. That growth will fuel additional demand on the network.

Video is also a massive networking bandwidth hog and is placing large demands on IT infrastructure. It's not just YouTube users that are driving networking video demand, either. Germanow noted that there is a solid case also for IP surveillance and video training, and that there is a lot of excitement around conferencing and tele-presence.

The No. 2 reason for the growth of networking is the rise of network-based businesses. Because the network is the business, Germanow said, networking-based business is all businesses and not just Amazon, Google and eBay.

"The way that companies succeed is the applications that they use to reach their customers," Germanow said.

There is also a shift toward an appliance-based model across the networking space where both hardware and software services co-exist in one form factor.

Originally appliances were just for security devices but now the trend is more wide spread. "The new context for hardware appliances is as a simple service delivery component," Germanow said.

The third reason for the growth of networking, according to Germanow, is the fact that intelligent networks are winning. With all the applications and users coming onto the network, the need for intelligent networking gear is a key enterprise requirement.

The fourth reason for the growth of networking is end-point growth. Germanow noted that their has been an explosion of network touch points, which means that more items are connecting to the network.

Virtualization is the No. 5 reason on Germanow's list of factors driving networking growth.

"The first thing that happens is you consolidate servers, which reduces your port count, and as a network guy that's scary," Germanow said. "You lose low utilization connections and move to highly utilized connections where the importance of each port is increased."

While new application demands are helping to drive adoption, Germanow urged the audience to remember performance.

"While the market is shifting from speeds and feeds to features and functions, performance is still critical," he said. "Performance has to be there."



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