Forrester Expects Market Shifts to Limit Network Industry Convergence
guide-p.infoseek.com
08:07 a.m. Aug 25, 1998 Eastern
CAMBRIDGE, Mass.--(BUSINESS
WIRE)--Aug. 25, 1998--The network equipment
industry has witnessed a number of mergers and
acquisitions in recent years, leading many to believe
that the industry will eventually converge to a few
powerful giants. However, this belief is not
supported by a close examination of industry
trends. A new Report from Forrester Research,
Inc. (Nasdaq:FORR), concludes that shifting buying
patterns for network equipment and the emergence
of new vendor specialists will prevent the industry
from shrinking to a handful of giants.
"Sales of network equipment will continue to be
strong over the next five years, but Internet
build-outs and shrinking margins will change the
market's dynamics," said Brendan Hannigan,
director of Forrester's Network Strategies service
and author of the Report "Network Industry
Convergence." "Vendors will come to realize that
success in every segment of the market is
impossible and that they must retool their strategies
to address the new market realities."
Forrester expects the market for LAN products to
flatten out by 2002 as Ethernet and IP standards
make it easy for vendors to build fast, reliable
switches with class-of-service features that are less
expensive than today's offerings. As LAN switch
production simplifies, new competitors will flood the
market with dirt-cheap products, forcing vendors to
compete on increasingly narrow margins.
Meanwhile, demand for Internet access gear and
routing switches will continue to soar, as 2 million
businesses and 30 million consumers move on-line
by 2002. Service providers will cap their
investments in voice networks as data traffic grows
at exponential rates. Vendors that can deliver
products with carrier-class scale and reliability will
experience healthy growth and fat margins. [Sounds right up ASND's alley.]
"To succeed in the years ahead, vendors will need
to refocus their efforts by specializing in one of three
markets -- carrier, business, or consumer -- based
on their product strengths, channel strategies, and
customer base," Hannigan added.
As the carrier market boom continues, multiyear,
multibillion dollar deals will be awarded to vendors
that can deliver the products and services that meet
carriers' stringent requirements. Business suppliers
will need to overcome thin margins by leveraging
volume manufacturing, strong distribution, and an
Internet commerce presence. Other opportunities
exist for vendors that can deliver
policy-management software and directory-enabled
hardware that is capable of automating network
administration. The consumer market, which will
reach $1.2 billion by 2002, will go to vendors that
will deliver reliable plug-and-play boxes through
retail channels and directly over the Internet. Brand
presence will be a significant factor in this market.
By 2001, Forrester expects the network equipment
landscape to be populated by a handful of large
generalists that succeed in multiple markets and a
number of specialists that deliver best-in-class
products to a single target market. Cisco will
continue to dominate the carrier and large business
markets while 3Com will focus on middle-market
firms and the consumer market. Nortel/Bay will
remain strong, chipping away at Cisco's carrier
market but proving at risk in the business market.
The specialists will take advantage of market
openings missed by the generalists, like terabit
routing switches and multivendor integration
services. [How come Forrester always seems to get it wrong?]
Forrester Research, Inc., is a leading independent
research firm offering products and services that
help its clients assess the effects of technology on
their businesses. Forrester provides analysis and
insight into a broad range of technology areas such
as new media, computing, software, networking,
telecommunications, and the Internet, and it
projects how technology trends will affect
businesses, consumers, and society. Forrester's
European research center, located in Amsterdam,
Netherlands, brings the company's unique
perspective to new media developments in Europe.
Additional information about Forrester Research
can be found on the Web at www.forrester.com.
Copyright 1998, Business Wire
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