IHS Markit recently released its Data Center Network Equipment market tracker, which showed that DC Ethernet switch revenue from cloud service providers (CSPs) will reach 23% (up from 16% in CY16) of total data center Ethernet switch revenue ($12B) in CY21, telco to reach 27% (up from 21% in CY16), and enterprise to be the remaining 50% (down from 63% in CY16). Also, we expect DC Ethernet switching capacity shipped to CSPs to reach 48% (up from 36% in CY16) of total capacity in CY21, telco to reach 22% (up from 18% in CY16), and enterprise to capture 30% (down from 46% in CY16).

IHS Markit believes cloud and telco service providers will be the main customers pushing for higher network port speeds as traffic demands on their networks continues to accelerate out to CY21.

“Cloud service providers (CSPs) continue to lead the way for adoption of higher port speeds as requirements for higher bandwidth and lower latency in their data centers grow. The increased use of today’s latest technologies, including artificial intelligence/machine learning (AI/ML), big data analysis, real-time video processing, and other compute-heavy workloads, is the driving force behind the need for higher speeds,” said Cliff Grossner, Ph.D., senior research director and advisor for the cloud and data center research practice, IHS Markit.

During the calendar year 2017, several CSPs and telcos upgraded their networks with 100GE switching to handle rising bandwidth demands, including:

Top Chinese CSPs Alibaba, Baidu, and Tencent who deployed switches with Barefoot Network’s Tofino chip and P4 programming language to introduce new network functionality.

Alibaba selected Cisco’s Nexus 9000 Series switches and NX-OS software to serve as networking core at its new Chinese data center.

AT&T trialed Barefoot’s Tofino silicon to perform standard switching and routing and in-band network telemetry (INT).

More Data Center Ethernet Switch Market Highlights

CSPs are the earliest adopters of higher port speeds and operate the largest scale deployments, resulting in the lowest $/1GE ratios.

The need for greater than 100GE speeds results in 200/400GE shipments beginning in 2019, to the benefit of early adopters.

71% of 100GE ports were shipped to CSPs in CY16, we expect this percentage to drop to 53% in CY21 as migrations to 200/400GE occur.

The continued adoption of 25GE between servers and ToR switches will push adopters of 25GE to upgrade to 100GE for inter-switch connectivity. This shift is now underway in the enterprise.