Secure Router Revenue Down Despite Growth
Infonetics says secure router sales are booming, but competitive pressures are keeping revenue in the market down.
The enterprise router market continues to show increased unit shipments, but research firm Infonetics says competitive pricing has been driving revenues down.
According to Infonetics Research, the global enterprise market shipped 14 percent more routers in 2005 than 2004. Despite that growth, pricing pressures actually caused a 3 percent decline in overall revenues to $3.3 billion, down from $3.4 billion in 2004.
Growth in the secure router segment, both in terms of units and revenues, was positive. Secure router revenues on a year-over-year basis grew by 121 percent to $803 million in 2005; shipments nearly tripled.
Matthias Machowinski, directing analyst for enterprise voice and data at Infonetics, said the difference between a secure and insecure router is that the former has some form of included firewall or encryption capability built in.
Branch offices, as opposed to central headquarters, are the most likely candidates to deploy secure routers. Machowinski commented that secure routers allow branch offices with limited resources to converge services onto one box, providing ease of management.
"At headquarters, enterprises are more likely to keep security separate and use purpose-built appliances," Machowinski told internetnews.com. "Typically, it's a performance issue."
It could also just be an issue of inertia, because enterprises have traditionally deployed separate security and routing appliances.
According to Infonetics' ranking, Cisco dominated the global enterprise router market with a 71 percent unit share and 81 percent of worldwide revenues. China-based Huawei held down the number-two spot in terms of revenue and shipments; Nortel was third.
Looking forward, Infonetics forecasts a five-year, compound annual growth rate of 8 percent for revenue and 9 percent for units in the worldwide enterprise router market.
The core drivers of growth in the marketplace appear to be the need for integrated security features, quality of service and support for VoIP. (define)
In the short term, Machowinski did not see IPv6 (define)as a potential driver for enterprise router upgrades. IPv6, which is the next-generation Internet protocol, is not factored into Infonetics' forecasts for demand.
Machowinski noted that in user surveys, Infonetics asks users to rank various priorities, and, in general, IPv6 on routers ranks very low.