Will Price Drops Drive 10-GbE to Adoption?

As 10-Gigabit Ethernet products steadily drop in price, some enterprises are seduced by the notion of installing the technology as a hedge against future bandwidth needs while other companies wait for a 'killer app' to spur adoption.

By Kevin Reichard | Posted Apr 27, 2004
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When it comes to networking, speed is usually better. However, the industry has been ahead of customers the last few years during a rollout of 10-Gigabit Ethernet products. Simply put, there just wasn't the need for 10-Gigabit Ethernet implementations on a wider scale, and when you factor in high prices — the kind always paid by early adopters — 10-Gigabit Ethernet was cornered into the server-to-server market.

“...As 10-Gigabit Ethernet products steadily drop in price, more enterprise are seduced by the notion of installing the technology as a hedge against a future when bandwidth needs will (inevitably) increase.”

But this is changing, and many industry observers are saying that 2004 could be the year that 10-Gigabit Ethernet (also referred to as 10-GigE or IEEE 802.3ae) breaks out of the server room and becomes more widely deployed in the enterprise. As 10-Gigabit Ethernet products steadily drop in price, more enterprise are seduced by the notion of installing the technology as a hedge against a future when bandwidth needs will (inevitably) increase. Future enhancements to 10-Gigabit Ethernet will allow it to run over copper lines, making it attractive to implement in current networking schemes, but today's IT department is most likely to install 10-Gigabit Ethernet because of lowering prices.

How Low Will They Go?
How fast are prices falling? Seamus Crehan, a research director at Dell'Oro Group, said in a report that average selling prices for 10 Gigabit Ethernet fell by almost 60 percent in the fourth quarter of 2003, leading to a 288-percent increase in port shipments. According to his research per-port prices have fallen by more than $30,000 since the fourth quarter of 2002.

"Although still a relatively small market in comparison to the more mature technologies such as Gigabit and Fast Ethernet, these dramatic price drops should help facilitate continued strong growth for 10 Gigabit Ethernet," he wrote in a summary to the report. "A 10-Gigabit Ethernet port now offers a discount on a dollar-per-gigabit-of-bandwidth basis over a similar, high-end Gigabit Ethernet port, making it attractive for enterprise applications such as inter-campus, backbone and data center connections."

Leading the way in 10-Gigabit Ethernet shipments: Cisco, Foundry and Extreme. Overall, according to research from The Yankee Group, 10-Gigabit Ethernet shipments grew to $90 million in 2003 after totaling $42 million in gear in 2002.

However, it may be a year or two or even three before 10-Gigabit Ethernet becomes more widely deployed. The market is definitely lagging behind the technology, and many enterprises are just now adopting Gigabit Ethernet, never mind 10-Gigabit Ethernet. A lack of perceived need has prevented a more widespread adoption of Gigabit Ethernet, according to a report issued by market-research firm In-Stat/MDR. Sam Lucero from the Scottsdale, Ariz.-based firm wrote in a summary of his study that "the most significant barrier to adoption of GigE and 10 GigE appears to be the common perception among potential customers of the simple lack of need for a full Gigabit of bandwidth to the desktop, or a full 10 Gigabits of bandwidth anywhere in the organization."

The numbers backed him up: 64 percent of the survey respondents said that the biggest obstacle for adoption was the lack of a perceived need of the high-end networking technology. After that, monetary reasons came into play: over half the respondents said that Gigabit Ethernet just wasn't worth the money and that they lacked the budgets to implement it.

Continued on Page 2: Eyeing the Future

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