Ovum Thinks Data Center Interconnect is a Booming Market for Suppliers

The Revenues for data center interconnect (DCI) continue to grow at a break-neck pace according to a recently completed market study by Ovum, which is a global analyst firm. The year 2014 saw revenues flow to the tune of US$2.5bn, a more than 16% growth from 2013. Virtually one-half of all DCI spending in the previous year was from communications service providers (CSPs), but interestingly the Internet content provider (ICP) segment grew 64% on the year.

Probably I should explain a few terms, like what in the Queen’s English is a CSP, a CNP, or ICP. To wit, CSP refers to all service providers providing telecommunication services or some combination of information and media services, entertainment, content and applications services over networks, leveraging the network infrastructure as an abundant, functional platform. CSPs consists three categories: Telecommunications carrier, content and applications service provider (CASP), cable service provider, satellite broadcasting operator, and cloud communications service provider. And now, introducing Carrier neutrality, quite the catchy phrase in the data centre industry; it’s often thrown around alongside colocation and connectivity and is one of the many pieces that have to be ticked off on the corporate check list when making a choice for a data centre provider.

I should note that if you have ever ventured into the data centre environment or maybe you work in it, you’ll probably be made aware of the debate that rages of whether a data centre can be considered truly ‘carrier neutral’. The crux of the moot is that every Tom, Dick, and Harry, Mary, Jane, and Sally has their own definition of carrier neutrality. There’s an urban that a data centre provider can’t be carrier neutral if its proprietary status is by a carrier. Naturally, such a relationship would be biased right? Au contraire.

Thing is, as long as that data centre provider allows any customer to use any carrier within the data centre, then it is carrier neutral. The ICP is as it implies, now you didn’t expect me to give you everything, did you. There you have it, I can have my fair share of caffeine intoxication now with that while I continue writing….

Based on the study, the DCI market is specifically strong in North America, where ICPs and carrier-neutral providers (CNPs) account for the majority of DCI outlay. Below are some of the key findings:

  • Enterprise IT evolution to cloud and the explosive augmentation of video is fueling robust growth in data center builds and fundamentally altering how networks are architected.
  • The ongoing onslaught in DC build-outs has made DCI the quickest growing application for optical networking (ON) equipment. Like I above-mentioned, DCI revenues grew 16.2% in 2014, surpassing US$2.5bn.
  • Majority of data center operators lease managed DCI services from CSPs; although an increasing number of ICPs, for instance Google, Facebook and enterprises are securing fiber assets and constructing their own interconnect networks, augmenting the chance for optical networking (ON) vendors.
  • Surge in the number of data centers clustered in metro and campus environments is growing the prerequisite for high-capacity, diminished-cost optical networking gear that is fundamentally different than traditional metro ON equipment.
  • Ciena is the global market share leader for the total DCI market. With regard to segment, Ciena also tops the Government/R&E and Enterprise end-user segments. Alcatel-Lucent heads the CSP market, whilst Infinera grows the ICP/CNP combined segment.
  • The global DCI market is projected to grow at 10.5% CAGR in the 2014–19 period, surpassing US$4.2bn in 2019. DCI growth is strongest in the ICP segment, which is slated to grow at a 12% CAGR for 2014–19.

The Principal Analyst at Intelligent Networks at Ovum, Ron Kline, noted “2015 is shaping up to be a very exciting year as metro-optimized 100G and adaptable-rate flex-spectrum 200G/400G capabilities enter the DCI market. We see tremendous opportunity for specialists such as Adva Optical Networking, BTI Systems, and Infinera to challenge their much bigger rivals for a larger share of this booming market.” Right from the horse’s mouth.

Ovum is a leading global technology research and advisory firm. Through its 180 analysts worldwide it offers expert analysis and strategic insight across the IT, telecoms, and media industries. Founded in 1985, Ovum has one of the most experienced analyst teams in the industry and is a respected source of guidance for technology business leaders, CIOs, vendors, service providers, and regulators looking for comprehensive, accurate, and insightful market data, research, and consulting. With 23 offices across six continents, Ovum offers a truly global perspective on technology and media markets and provides thousands of clients with insight including workflow tools, forecasts, surveys, market assessments, technology audits, and opinion. In 2012, Ovum was jointly named Global Analyst Firm of the Year by the IIAR.

Additionally, Ovum operates a large portfolio of technology conferences annually in Europe under the OvumLive events brand, presenting a more interactive opportunity to learn from its analysts. Its flagship event – Ovum Industry Congress – attracts over 300 end-user attendees every year.

Ovum is a division of Informa plc, one of the leading business and academic publishing and event organizers globally, headquartered in London. Informa is quoted on the London Stock Exchange.


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