Data center interconnect spurs optical network market; Internet content providers drive growth in 100G

London, 21 January 2015 – Rapidly growing demand to interconnect data centers will help the optical network (ON) equipment market to grow by 3% per year to reach US$17bn by 2019, according to new research from Ovum, the global market analysis firm.

Revenues for data center interconnect (DCI) equipment have surpassed US$3bn globally on an annualized basis, with Internet content and cloud providers emerging as an important new market segment.

“Spending on DCI is having a material effect on the market, particularly in North America where many of the Internet and cloud providers have large networks connecting hyper-scale data centers,” according to Ian Redpath, principal analyst at Ovum. “Our capex research indicates that Internet content providers (ICPs), whose primary business is the creation, storage, and dissemination of digital information, and carrier-neutral providers are spending heavily on data center infrastructure, including optical transmission for DCI. Shipments of 100G equipment in particular are growing strongly in the Internet content and carrier-neutral markets.”

According to Redpath, a number of vendors are jostling for market leadership in the DCI market in North America including Adva Optical Networking, Alcatel-Lucent, BTI Systems, Ciena, Cisco, and Infinera. While Alcatel-Lucent and Ciena have been traditionally strong players in the carrier-neutral and Internet content provider (CN/ICP) market in North America, preliminary data through 3Q14 indicates that Infinera is the fastest growing company in this sector. Other companies with strong growth in the region include Adva Optical Networking and BTI Systems. Ovum kicked off a DCI spending study in September 2014 with expected completion in April 2015.

“China is the second largest market for the broader ON equipment sector after North America and is projected to grow 9% in 2014 as Chinese carriers invested in LTE and fixed broadband rollouts. Over the next five years Ovum is forecasting a 4% CAGR for China.

The Rest of Asia & Oceania (RoAO) region is projected to grow at a 4.7% CAGR to 2019. The RoAO region is rapidly modernizing network infrastructure and optical networks are being upgraded to support wireless growth. Final spending in Europe and MEA will be down for the year but is expected to resume growth in 2015, while North America is projected to grow at a 3.2% CAGR to 2019 largely driven by growth in DCI applications. North America is expected to be the biggest region for DCI in 2015 due, in part, to the rapid emergence of CN/ICP as an important segment, particularly for 100G.

ABOUT OVUM

Ovum is a leading global technology research and advisory firm. Through its 180 analysts worldwide it offers expert analysis and strategic insight across the IT, telecoms, and media industries. Founded in 1985, Ovum has one of the most experienced analyst teams in the industry and is a respected source of guidance for technology business leaders, CIOs, vendors, service providers, and regulators looking for comprehensive, accurate, and insightful market data, research, and consulting. With 23 offices across six continents, Ovum offers a truly global perspective on technology and media markets and provides thousands of clients with insight including workflow tools, forecasts, surveys, market assessments, technology audits, and opinion. In 2012, Ovum was jointly named Global Analyst Firm of the Year by the IIAR.

In addition, Ovum operates a large portfolio of technology conferences annually in Europe under the OvumLive events brand, presenting a more interactive opportunity to learn from its analysts. Its flagship event – Ovum Industry Congress – attracts over 300 end-user attendees every year.

Ovum is a division of Informa plc, one of the leading business and academic publishing and event organisers globally, headquartered in London. Informa is quoted on the London Stock Exchange.