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 rise in the prominence of hyperscale solutions will also drive the demand as they contain a large number of hardware systems such as ADCs and servers. In May 2018, PointOne announced the launch of a hyperscale division that has devoted USD 7.5 billion to the construction of hyperscale campuses for cloud companies, providing an impetus for the data center networking market growth. Hardware devices, such as servers and routers, form the key components of the infrastructure. In organizations that operate in real-time settings and requires the constant interchange of data, such as banks and financial institutions, the presence of highly functioning and advanced systems is a pre-requisite. Additionally, the movement of data at very fast intervals is required mandating the need for these systems.
The rise in the number of IT & Telecom players and increase in outsourced activities, primarily to countries of the Asia Pacific region, are fueling the demand for the data center networking market. Telecom providers rely heavily on this architecture to generate higher profits owing to the influx of consumer data. For instance, in July 2017, Odata announced that it was investing USD 100 million in Colombian data centers as a part of its international expansion strategy.
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The segmentation of the data center networking market indicates that the solutions segment contributed to over 75% of the overall revenue in 2017. This growth is largely due to the increase in construction activities and the modernization of the existing outdated technologies by organizations seeking to stay ahead of the competition. The adoption of Ethernet switches is anticipated to drive hardware solution growth in the data center networking market owing to companies switching to 100 Gbps ports that allow for faster speeds and the movement of data. ADCs are the important components of the architecture as they are deployed predominantly to support the function of on-premise legacy applications.
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. However, the increase in outsourced service activities and rise in the number of SMEs in Asia Pacific are contributing toward the high projected growth of the region?s data center networking market.
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.