Disruptive Technologies and Emerging Markets: Growth Strategies of Enterprise Network Vendors

TBR

TECHNOLOGY BUSINESS RESEARCH, INC.

Disruptive Technologies and Emerging Markets: Growth Strategies of Enterprise Network Vendors

Technology Business Research Webinar Series

Nov. 12, 2013

TBR

2 TBR Webinar Series | 11.12.13 | www.tbri.com ©2013 Technology Business Research Inc.

TBR Contacts

Your presenter:

Scott DennehySenior Analyst, Networking & Mobility PracticeEmail: [email protected]: @scottdTBR

mailto:[email protected]

https://twitter.com/scottdTBR

TBR


TBR Enterprise Network Vendor Benchmark CoverageSuppliers:• Alcatel-Lucent• Aruba

Networks• Avaya• Brocade• Cisco Systems• Citrix• Dell• F5 Networks

• HP• Huawei• Juniper Networks• Microsoft• Polycom• Riverbed• Siemens

Enterprise Communications

Segments:• Network Infrastructure• Wireless Networks• Unified Communications

& Collaboration• Network Security• Services

Geographies:• North America• CALA• EMEA• APAC

Benchmark Coverage Overview

TBR obtains and analyzes the financial performance and strategies of 15 suppliers across 5 main segments and 4 geographies

TBR


Suppliers will leverage improved IT spending in developed markets and new service offerings to drive revenue growth in 2H13

Market Trends and Drivers

Key Themes and Market Trends

An improved spending environment in developed markets, along with growth in key emerging markets, drove growth in the enterprise networking market in 1H13.

Suppliers are investing in services capabilities to strengthen customer relationships and drive long-term revenue growth.

The network is playing a more important role in IT than ever before, serving as the delivery mechanism for a rapidly growing number of enterprise applications.

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Supplier Overview

The ability to offer a broad set of solutions on a global basis provides the best opportunity for long-term growth

Weak Strong

Limited

Complete

Portf

olio

Cov

erag

e

Geographic CoverageSOURCE: TBR AND COMPANY DATA

Competitor Strategies Map

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Enterprise network suppliers benefit from increasing customer adoption of emerging technologies like cloud, mobility and security

Market Overview — Revenue

• Cisco successfully capitalizes on customer demand for new technologies by leveraging its broad and differentiated product portfolio and industry-leading channel partner program to drive growth in key segments and geographies.

• As SDN gains momentum through 2H13 and into 2014, there will be opportunities for suppliers to sell more hardware; however, most customers will be unwilling to “rip and replace” their infrastructures with new hardware and will instead take a piecemeal approach to deploying SDN.

ALU AvayaBrocade

Citrix

Aruba

Dell

Cisco

F5HP

Huawei

Juniper

Polycom

Riverbed

Microsoft

Siemens

-20%

-10%

0%

10%

20%

30%

40%

50%

$0 $5,000 $10,000 $15,000Year

-to-

Year

Rev

enue

Gro

wth

Enterprise Network Revenue for All Lines of Business

1H13 Total Enterprise Network Revenue (Millions USD) TBR

NOTE: SPHERE SIZE REFLECTS VOLUME OF REVENUESOURCE: TBR AND COMPANY DATA

.

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Enterprise network suppliers will improve profitability through cost optimization and organizational restructuring

Market Overview — Operating Margin

• Operating margin leaders such as F5, Cisco and Brocade successfully leverage their strong market positions to charge premium pricing for their products and services.

• Suppliers will focus on restructuring their operating models and expanding revenue in highly profitable segments like software and services to grow margins over the long term.

Avaya

Brocade

Aruba

Dell

F5Cisco

HPHuaweiJuniper

Citrix

Polycom

Riverbed

Microsoft

ALU Siemens

-10%

0%

10%

20%

30%

-$500 $500 $1,500 $2,500 $3,500 $4,500

Ope

ratin

g M

argi

n

Enterprise Network Operating Income (in millions USD)for All Lines of Business

1H13 Enterprise Network Operating Income and Margin TBR

NOTE: SPHERE SIZE REFLECTS VOLUME OF OPERATING INCOME.SOURCE: TBR AND COMPANY DATA

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Data center upgrades will fuel supplier network infrastructure revenue growth in 2H13

Network Infrastructure

• Growth in network infrastructure is being driven primarily by customer demand for switching to support bandwidth demand in the data center — a trend TBR expects to continue for the remainder of 2013.

• Cisco held off aggressive competitors in 1H13 to maintain its share of network infrastructure revenue.

ALU

Aruba

Avaya

Brocade

Cisco

Dell

F5

HP

Juniper

Huawei

Riverbed

Siemens

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

$0 $3,000 $6,000 $9,000 $12,000Year

-to-

Year

Rev

enue

Gro

wth

Network Infrastructure Revenue for All Lines of Business

1H13 Network Infrastructure Revenue (Millions USD) TBR


.

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Wireless network suppliers will drive revenue growth in 2H13 by leveraging customer demand for greater performance and manageability

Wireless Networks

• Suppliers are driving growth by offering solutions that address the bandwidth and management challenges customers face due to the rapid proliferation of mobile devices in the enterprise.

• Cloud-based solutions and software (e.g. analytics) are being added to supplier portfolios to address long term growth opportunities.

ALU

Aruba

Avaya

Brocade

DellCisco

HP

Huawei

Juniper

Siemens

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

$0 $200 $400 $600 $800 $1,000Year

-to-

Year

Rev

enue

Gro

wth

Wireless Network Revenue for All Lines of Business

1H13 Wireless Network Revenue (Millions USD) TBR


..

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Suppliers of UC&C solutions found fewer revenue opportunities in 1H13, a result of customer spending cuts and product commoditization

Unified Communications & Collaboration (UC&C)

• Tight budgets in the U.S. and Europe forced customers to delay purchases of UC&C products or look for less-expensive alternatives to meet their needs.

• UC&C also creates opportunities for suppliers such as Avaya, Cisco and Huawei to sell routers and switches, as network upgrades are often required to support the deployment of bandwidth-hungry applications like video.

ALU

Avaya

CiscoHP

Huawei Microsoft

Siemens

Polycom

-30%

-20%

-10%

0%

10%

20%

30%

40%

$0 $300 $600 $900 $1,200 $1,500

Year

-to-

Year

Rev

enue

Gro

wth

UC&C Revenue for All Lines of Business

1H13 UC&C Revenue (Millions USD) TBR


.

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Security will remain a growth market for suppliers as enterprises face an increasing number of cyber threats to their IT assets

Network Security

• Enterprises continue to prioritize their budgets to invest in products to help mitigate an increasing number of cybersecurity threats.

• Security remains a market where many enterprise customers prefer to purchase best-of-breed point products rather than end-to-end solutions, which enables smaller competitors to gain share over more established players.

ALU

BrocadeCisco

Dell

F5

Avaya

HP

Huawei

Juniper

Siemens

-30%

-10%

10%

30%

50%

70%

90%

110%

$0 $100 $200 $300 $400 $500

Year

-to-

Year

Rev

enue

Gro

wth

Network Security Revenue for All Lines of Business

1H13 Network Security Revenue (Millions USD) TBR


.

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Services revenue growth leaders remain focused on attaching maintenance and professional services to product sales

Services

• Services growth outpaced product growth in 1H13 as many enterprise customers chose to maintain their equipment rather than purchase products.

• TBR estimates SDN will not generate substantial services revenues for suppliers until late 2014 or early 2015, when a larger number of customers will deploy SDN products.

ALU

Aruba

Avaya

Brocade

Cisco

Citrix

Dell

F5

HPJuniper

Huawei

Polycom

Riverbed

MicrosoftSiemens

-12%

-2%

8%

18%

28%

38%

48%

$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000

Year

-to-

Year

Rev

enue

Gro

wth

Service Revenue for All Lines of Business

1H13 Services Revenue (Millions USD) TBR

NOTE: SPHERE SIZE REFLECTS VOLUME OF REVENUE.SOURCE: TBR AND COMPANY DATA

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$14,954

$7,385

$4,115 $1,457

2.9%

3.5%3.1%

5.4%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

$0$2,000$4,000$6,000$8,000

$10,000$12,000$14,000$16,000

NorthAmerica

EMEA APAC CALA

YTY

Reve

nue

Gro

wth

Reve

nue

(in $

mill

ions

)

Region

1H13 Regional Enterprise Network Revenue Growth

Revenue YTY Revenue Growth

SOURCE: TBR AND COMPANY DATA

TBR

Suppliers will benefit from increased spending in the U.S. and Europe while driving growth in emerging markets

EMEA• Top Revenue: Cisco, $3.8B• Top Growth: Citrix, 40%• Regional Drivers: Improved spending

environment in northern Europe; suppliers continue to invest in the Middle East and Africa.

APAC • Top Revenue: Cisco, $1.9B• Top Growth: Citrix, 42%• Regional Drivers: Region remains a key

growth area; the slowdown in China is negatively impacting major suppliers.

CALA• Top Revenue: Cisco,

$1.1B• Top Growth: Citrix,

47% • Segment Drivers:

Growth remains strong for suppliers in high-growth countries such as Brazil and Mexico.

North America• Top Revenue: Cisco,

$9.2B• Top Growth: Huawei,

74.3%• Regional Drivers:

Improved spending from U.S. enterprises; the public sector remains challenged.

Market Overview: Regional Summary

TBR


Scott DennehySenior Analyst, Networking & Mobility PracticeEmail: [email protected]: @scottdTBR

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TECHNOLOGY BUSINESS RESEARCH, INC.

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