FEATURE COMPONENTS
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Search engines of change
Demand from Internet companies is remodelling the network equipment market. Andy Extance talks to telecoms market research firm Ovum about the consequences
I
t’s getting ever harder to remember what the world was like before Google and Facebook. Not only do what many people think of as simply websites play big roles in our daily
lives, they also shape the physical structure of the Internet itself. And in doing so, they present both opportunities and threats to the rest of the networking industry. Spending on telecommunications networks
has long been dominated by the need to carry information over long distances. Such systems are high performance, but sold in low volumes, explained Daryl Inniss, practice leader for components at telecom research company Ovum. However, today ‘Internet content providers’ (ICPs) are spending ever more on shorter-range data centre technology, packed with connections. ‘Tey are pushing to get size, power
consumption, cost and density in a timely manner,’ Inniss explained. ‘Faceplate density is very important, to be able to put as many
The capital intensity of Internet content providers is steadily growing
transceivers or optical interconnects as possible in the front plate of a piece of equipment.’ Te Internet companies’ direct influence
first became notable around 2008, when they began deviating from the normal telecoms model of only buying gear from system providers. Tey wanted cheap and quick access to 8 Gb/s Fibre Channel transceivers, Inniss recalls. ‘Companies like Google would go directly to transceiver vendors like Finisar and JDSU, as opposed to going through the middleman,’ he said. ‘Tey’re looking for greater control over the ecosystem.’ Tese efforts at ‘disintermediation’ by
Internet companies remain focused on transceivers today. Tey source components across all data rates, but with most revenue concentrated at 10 Gb/s and 40 Gb/s, according to Ovum. Far from simply being a message to system vendors to move faster, it is a concrete and significant industry trend. ‘On a quarterly basis we’re talking about
30% 25% 20% 15% 10% 5% 0%
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Internet content providers buying around $250 million worth of components directly,’ said Inniss. ‘Tat’s about 12 per cent of the total optical component market. Tis is not a game – this is a real model of how the market is behaving today and will likely continue for some time.’
Fixed CSP Mobile CSP ICPs CNPs
Beyond the data centre In the last 2-3 years, Internet companies’ capital expenditure has also become significant in the far larger systems market, said Matt Walker, principal analyst covering intelligent networks at Ovum. ‘Components were followed by data centre interconnect applications of optical transmission products, in some cases using customised product designs,’ Walker noted. ‘2012 was probably the watershed year, when ICP capex grew to $41 billion, from $32 billion in 2011.’
Capital intensity by provider type
Ovum
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