The high growth of the data center networking market is strongly aided by the increasing focus of data centers to improve the bandwidth speed and connectivity. Data centers located in faraway location and in colocation settings store large databases of information that are required immediately. In such a scenario, lags in the relay of data can be detrimental to business operations, fueling the demand for advanced networking technologies such as 100 Gbps and 400 Gbps Ethernet switches and silicon photonics.
The data center networking market is gaining traction owing to the rising adoption of cloud deployments. IoT and cloud computing provide significant cost savings to businesses in terms of reduced capital expenditure and maintenance charges. This has led to the need for replacing traditional networking solutions with hardware that have cloud computing capabilities, fueling the industry growth. In June 2017, Telefonica announced the beginning of the construction of a 2.6 MW data center with cloud capabilities in Peru. The increase in such activities is anticipated to drive data center networking market demand in the coming years.
The trends in the data center networking market indicates that IT & Telecom and BFSI sectors are prime adopters of the technology with BFSI sector valued at over USD 2.5 billion in 2017. These enterprises are required to store and access large amounts of data, which need to be accessed in real time. Additionally, financial services firms need reliable and fast connectivity to support latency applications for tasks such as online trading and payment processing. Countries including China and India have become hubs of outsourced services owing to the low costs of resources such as labor, technology, and space. India data center networking market was over USD 450 million in 2017. In the aftermath of the Digital India campaign and the Start-up India Stand Up India initiative, there is a rise in the number of IT industries, which has amplified the demand for these technologies within the country.
The declining costs of semiconductor components are anticipated to drive the growth of the data center networking market. Th advent of technologies, primarily in countries including India and the Philippines is done at relatively lower costs as compared to their Western counterparts, contributing to a strong growth potential of the industry. Additionally, the trend of outsourcing to emerging Asian countries is further driving the industry.
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APAC seems to have been depicting a contrasting trend as far as the progress of data center networking market is considered. On one hand, countries like Japan, Singapore and South Korea have been on the technologically advanced path to lead the continent, however, largely nascent markets like Myanmar, Vietnam and Malaysia are yet to progress in the regional sphere. Countries such as India and China though, are now remnant of a higher economy, connected lifestyles, and improved broadband infrastructure, and stand to contribute much to APAC data center networking.
China has been hailed as the sleeping dragon in APAC industry. Indeed, experts predict that the country is well on its way to emerge as one of the most prominent leaders in the technology cosmos after having observed the ambitious endeavors of Beijing to cement China’s position in the world stage. Just recently, tech giant Apple laid the foundation of its first data center in China at the Guian New Area to offer iCloud services in the country. Chinese internet behemoth Tencent also has recently commenced trial operations for one of its data centers in the Guizhou Province. This data center in fact, is estimated to store the company’s most important data in the future.
The strong movement toward the cloud and the adoption of highly advanced technologies are the key factors accounting for the dominance of the U.S. in the data center networking market. The country accounts for the increase in data traffic and sports a strong broadband infrastructure, providing an impetus for growth.
The players operating in the data center networking market comprise Brocade Communications, Arista Networks, Cisco Systems, Inc., Delta Electronics, Inc., Dell, Inc., Hewlett-Packard Enterprise, IBM Corporation, and Juniper Networks. As the industry comprises many players, companies are required to undertake strategies like partnerships, mergers and acquisitions, and invest heavily in R&D to sustain continuous growth.