To: djane who wrote (53134 ) 8/29/1998 3:33:00 AM From: djane Read Replies (1) | Respond to of 61433
Forrester Expects Market Shifts to Limit Network Industry Convergenceguide-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