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
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TBR Contacts
Your presenter:
Scott DennehySenior Analyst, Networking & Mobility PracticeEmail: [email protected]: @scottdTBR
TBR
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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
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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
TBR
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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
.
TBR
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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
TBR
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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
NOTE: SPHERE SIZE REFLECTS VOLUME OF REVENUESOURCE: TBR AND COMPANY DATA
.
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
NOTE: SPHERE SIZE REFLECTS VOLUME OF REVENUESOURCE: TBR AND COMPANY DATA
..
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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
NOTE: SPHERE SIZE REFLECTS VOLUME OF REVENUESOURCE: TBR AND COMPANY DATA
.
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
NOTE: SPHERE SIZE REFLECTS VOLUME OF REVENUESOURCE: TBR AND COMPANY DATA
.
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
TBR
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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
14 TBR Webinar Series | 11.12.13 | www.tbri.com ©2013 Technology Business Research Inc.
Scott DennehySenior Analyst, Networking & Mobility PracticeEmail: [email protected]: @scottdTBR
Q&A
Questions?
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TECHNOLOGY BUSINESS RESEARCH, INC.
About TBR
Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, telecom and enterprise network vendors, and operators.
Serving a global clientele, TBR provides timely and actionable market research and business intelligence in formats that are tailored to clients’ needs. Our analysts are available to further address client-specific issues or information needs on an inquiry or proprietary consulting basis.
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