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Enterprise networking continues to grow more sophisticated

Spending that was withheld is expected to clear in the near-term, with enterprises advancing their operations, and service providers winning more business by offering comprehensive solutions to customers.

The Covid-19 pandemic and changing workforce expectations have led companies to a more globally distributed remote workforce. The networking market is regularly adjusting its hardware and software components to meet the growing data demands of users, both in corporate and residential settings.

Networking use-cases and network solutions are expanding as the cloud computing, Internet of Things (IoT), and edge computing markets continue to grow. And, enterprise networking infrastructure now has to support users in their individual homes.

As remote work continues to become a standard approach, users and enterprise devices, numbers having increased from 8 billion in 2021 poised to reach 29.3 billion by 2023, making it 3+ devices per person need technical support that was normally provided in the office. Companies are adopting AI solutions to assist with customer experience and support requirements of the network.

Gartner estimates that 74 percent of organizations by the end of this year will move at least five percent of their normally full-time, on-site workers, who had switched to working from home temporarily, into permanent remote-working positions; and by 2023, more than 50 percent of large organizations will connect to cloud providers using direct cloud connectivity from their WANs. By 2024, 74 percent of the new UC licenses purchased by organizations will be cloud-based, up from 48 percent in 2019. Gartner’s Magic Quadrant for UCaaS shows it is dominated by innovative new-age companies, while traditional telecom enterprise solution providers have lost the race.

Networking technology continues to grow more sophisticated. Particularly, with the more widespread use of software-defined networking (SDN), intent-based networking is being used more in enterprise networks that want additional business intelligence (BI), configuration management, and other features embedded in their networks.

As networks continue to evolve their software-defined, cloud, and edge, and solutions, many networking vendors are offering more holistic networking packages to manage every aspect of the network. And enterprise client-to-cloud connectivity is emerging as one of the biggest drivers behind more unified networking packages.

Digital Transformation has become imperative for all businesses. In 2021, business strategies developed and put a focal point on the continued development of business operations and technologies. Long-term remote workforces are one of the many reasons that cloud adoption is accelerating faster than ever, along with an array of other networking technologies, 5G, automation, artificial intelligence, and security.

John-David Lovelock
distinguished research vice president,

“This year is proving to be one of the noisiest years on record for CIOs. Geopolitical disruption, inflation, currency fluctuations and supply chain challenges are among the many factors vying for their time and attention, yet contrary to what we saw at the start of 2020, CIOs are accelerating IT investments as they recognize the importance of flexibility and agility in responding to disruption. As a result, purchasing and investing preference will be focused in areas including analytics, cloud computing, seamless customer experiences, and security.”

Sameh Boujelbene
Senior Director, Data Center and Campus Ethernet Switch Market Research,
Dell’Oro Group

“Despite a challenging supply environment that is expected to persist through most of 2022, we project strong double-digit revenue growth in the Enterprise Network Equipment market in 2022. This optimism is underpinned by healthy outlooks provided by most vendors as a result of increased visibility and robust backlogs. Additionally, ongoing supply challenges will continue to encourage customers to place advance orders, which will have a positive effect on bookings first, then a few months later, on revenues, depending on lead times.”

In today’s cloud-first world, it is not just about connecting to the cloud, but about connecting multiple clouds efficiently. Businesses have already started to understand the benefits of having private, direct cloud connections, as many are now way past the adoption phase.

Organizations are expected to manage clouds across their infrastructure even more effectively in 2022, as visibility and security become even more important. They will also need to decide between integrated security versus standalone security and hardware (appliances) or software. More companies are transforming into cloud-first organizations, making the right underlay network a necessity to support them. They need a simple, efficient, and effective way to connect their network infrastructure.

Convergence of network and security. With the need for direct internet access and increasing security vulnerabilities; networking and security cannot be perceived as siloes anymore. Enterprises are looking out to partner with vendors and technology partners who can provide a solution that can encompass both the elements (network + security), rather than bringing in disparate solutions into the network ecosystem. Solutions like secure access service edges have enabled the tight integration of multiple-point solutions together and can deliver it cloud-native through secure gateways.

Network management. Enterprises are also faced with difficulties relating to network management, which got amplified by the pandemic-induced lockdowns across the country. Multiple activities related to deploying new branches, and troubleshooting were a challenge. The trend of cloud-based management is starting to pick up, where vendors are now offering a single management and orchestration platform to manage all their networking infrastructure under a single management console.

Importance of Wi-Fi 6 in modern enterprise. Though the market for wireless access points declined because of the pandemic, wireless will still be a game-changer in bringing employees safely back to offices. Wi-Fi 6 access points, accommodating increased bandwidth and capacity needs coupled with location-based services, will play a pivotal role in Covid-19 contact tracing. Wi-Fi 6 has seen a significant surge in demand over the last few quarters. With capabilities, such as MU-MIMO, TWT, and OFDMA, Wi-Fi 6 would prove to be the de facto technology for wireless connectivity, demanding high bandwidth (video content) and low-latency needs.

2022 could also be an interesting year to use more 5G for last-mile connectivity. 5G eliminates the last-mile barrier through faster speeds and lower latency, enhancing enterprise connectivity end-to-end in the most challenging situations.

With 5G, provisioning and deployment issues commonly associated with last-mile connectivity could be eliminated. It allows businesses to get the connectivity they need instantly, where they need it, without needing to wait for physical connections to go live. In addition, it reduces the risk of physical disruptions while maximizing performance and efficiency.

Both 5G and Wi-Fi 6 are expected to complement each other and enhance user experience thus incentivizing simultaneous adoption and proportionate investments.

The shift from MPLS to SD-WAN is expected to continue in 2022 across enterprise. When looking at their continual transformation strategies, enterprises are seeking more cost-effective ways to maintain or even improve control and security across their networks. SD-WAN provides methods to prioritize critical business traffic and take advantage of internet broadband connections – previously used for backup and redundancy – to connect directly to multi-cloud resources. SD-WAN simplifies management of the WAN fabric with a controller-first overlay that is independent of transport layers – MPLS, Ethernet, internet, leased lines, DSL, and LTE networks. SD-WAN controllers intelligently choose among the available transport mediums to deliver the best application performance, as defined by SLA.

Further, traditional WAN architecture worked well when all connections were from branches and a distributed workforce flowed back to a central data center through MPLS lines (traffic backhauling), where security policies were applied. But the hub-and-spoke WAN architecture broke down as more direct internet connections were needed to access multi-cloud resources and SaaS applications.

Backhauling all traffic to data center before routing to internet cloud applications has resulted in increased MPLS cost, bandwidth inefficiencies, increased latency, and poor experience (on applications).

And as SD-WAN adoption continues to flourish, the market has begun to stabilize and competitive pressures have begun to force prices lower. This is particularly at the lower-capacity end of the market, but then the majority of SD-WAN sites are at the lower end of the capacity scale – think branch offices and retail stores – means that they might only require 50 Mbps to 100 Mbps of WAN bandwidth, so the costs are lower. Prices at the higher end of the SD-WAN market are not falling by the same amount, albeit are expected across the board to decline.

The fact is that buying SD-WAN as a managed service, instead of simply buying an appliance from a vendor, is about 1.9 times more expensive, and using an SD-WAN implementation in the first place can save organizations 50 percent or more compared to traditional WANs.

2022 will also see data security become a stronger focus, both because of the rise in security breaches as well as the increasing costs associated with them. The impact of even just one hack can be severe for a business’ reputation and bottom line.

As a result, risk management will heavily shift from reactive to proactive. Increasingly, organizations will seek business-continuity solutions that can guarantee 24×7×365 protection, and provide them with the steps to move forward in the event of a security breach.

Moving to the cloud may offload some security issues to cloud providers, but that may simply increase the uncertainty over who is responsible for securing client data. It is crucial to ensure client data is handled with utmost care, all year round. Having the right business-continuity plan in place will help you maintain long-term success and brand confidence.

Enterprises will be seeking more security solutions, and service providers will be implementing and integrating higher levels of security into their offerings for customers. Additionally, these service providers are likely to establish and invest in customer-experience functions focused on service delivery, user satisfaction, and other value-added services.

Enterprise services requirements are changing. Telecom enterprise network connectivity solutions are seeing significant transformation.

Corporates have significantly invested in applications and services. Traditional networks have now become bottlenecks in exploiting their full potential and corporates are re-engineering the network architecture.

Delinking of network and services is a key factor driving network transformation. Traditionally, telcos have monetized network investments through specific services. Vertically integrated ecosystem has helped telcos cross-subsidize networks, services, and devices, thereby removing customers’ barrier to entry, e.g., PSTN network, where voice was a killer application. However, services are now delinked, and telcos need to monetize bandwidth connectivity independently from services.

The new ICT stack, as the enterprises procure services and connectivity solutions separately will include at bottom, bandwidth connectivity and at the top, three types of services, UC, SaaS and IoT.

It also throws business opportunity at the middle layer between connectivity and service layer. This layer includes key enablers’ devices management, security, analytics, and scalable computing infrastructure and platforms.

Telcos have been perceived as a utility providing cost-efficient bandwidth to customers. Smart telcos have bandwidth economics, but they also know other requirements of clients. These telcos are developing products and services including middle-level capabilities to enable services over the network infrastructure. They also orchestrate ecosystem of other service providers, leveraging their reach, analytics and infrastructure capabilities. Like IT industry, new-age telcos are building multiple partnership models, thereby bringing the best to customers. It can be assumed that operators building a very efficient platform will be able to truly become a smart telco.

As telcos move up the ladder, their CapEx intensity would fall, and their reach would expand to globe. It is a huge economic opportunity; hence enterprise solutions can be truly new value-creation engines for next-gen enterprise-focused telcos.

As the digital economy expands, telcos must expand their service portfolios far beyond their current scope. They must also learn which service niches best suit their competencies, and define how to manage these diverse service portfolios. They can do so by identifying their competitive advantages and the relative market strengths of competing OTT players.

Huawei sees five digital destinations for telcos on digital transformation scale, starting from infrastructure-centric to service-centric. The telcos would ideally aim for digital transformation involving evolution into a sophisticated digital service provider, but very few may be able to scale the ladder. We see huge value-creation possibility if telcos come close to IDSP (integrated digital services provider), stage four on the digital transformation scale.

Rates of inflation, geopolitical disruption, and talent shortages are not expected to slow IT investments, says Gartner. Inflation impacts on IT hardware (e.g., mobile devices and PCs) from the past two years are finally dissipating and are starting to spill over into software and services. With the current dearth of IT talent, prompting more competitive salaries, technology service providers are increasing their prices, which is helping increased spending growth in these segments through 2022 and 2023.

Troy Morley
Senior Industry Analyst, Information & Communications Technology,
Frost & Sullivan

“The network infrastructure that enables 5G is only a few years old but is rolling out much faster than 4G did a decade ago. As the 5G network is now dependent on software running in the cloud, network functions have been redesigned entirely as cloud-native software. Such new infrastructure and new architectures make the 5G network significantly different from past networks and enable new use-cases for consumers and especially across industries that were previously not possible.”

The rise of enterprise application software, infrastructure software, and managed services in the near and long term demonstrates that the trend toward digital transformation is not a one- or two-year trend, rather it is a systemic and long-term. For example, infrastructure-as-a-service (IaaS) underpins every major consumer-focused online offering and mobile application, accounting for a significant portion of the almost 10-percent growth in software spending in 2022.

Gartner expects digital business initiatives, such as experiential end-consumer experience and optimization of supply chain, to push spending on enterprise applications and infrastructure software into double-digit growth in 2023.

The Russian invasion of Ukraine is not expected to have a direct impact on global IT spending. Price and wage inflation, compounded with talent shortages and other delivery uncertainties, are expected to be greater impingements on CIOs’ plans in 2022 but will still not slow down technology investments.

CIOs anticipate having the financial and organizational ability to invest in key technologies throughout this year and next. Some IT spending was on hold in early 2022 due to the Omicron variant and subsequent waves but is expected to clear in the near-term. CIOs who keep their eye focused on key market signals, such as the shift from analog to digital business and buying IT to building it, as well as negotiate with their vendor partners to assume ongoing risks, will fare better in the long-term. At this point, only the most fragile companies will be forced to pivot to a cost-cutting approach in 2022 and beyond.

2022 will ultimately be an interesting year for all types of businesses. With the use of leading-edge technologies, enterprises can advance their operations, while service providers can improve customer experiences and win more business by offering comprehensive solutions to customers.

Sudharsan Raghunathan
Senior Market Analyst, Enterprise Networking,
IDC India

“Though vendors were struggling with operational challenges like ever-expanding lead times and increasing input costs, demand for network infrastructure remained healthy. The market for campus investments – both for wired and wireless business – expanded rapidly during Q4 21. Vertical segments like education, which did not spend for a considerable period, started spending on network infrastructure. Cloud-managed infrastructure was gaining more traction than usual, considering the ease of deploying and managing infrastructure specifically in verticals such as services, education, retail, etc.”

Cloud, SD-WAN, automation, artificial intelligence, 5G, and security are just some of the technologies that will enable more companies to continually transform and achieve new levels of success in the future.

The next few years will see advanced technologies help enterprises unlock value, enhance customer experience, and discover new business models.

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