Ethernet equipment

Leadership Change in Store for CESRs

The market for carrier Ethernet switch/routers (CESRs) is undergoing a period of rapid change -- both in terms of technology options, choice of supplier and market leadership. In recent months Alcatel-Lucent has been steadily growing its market share, and by the end of the third quarter in 2014 it was only a fraction behind market leader Cisco in terms of CESR sales.

Meanwhile, we estimate Cisco has seen sales of higher-capacity Ethernet Service Edge (ESE) technology grow strongly, while sales of its CESR equipment have grown much more slowly -- less than 2% in the first nine months of 2014.

These two vendors between them hold more than half the CESR market. If the patterns of recent quarters continue through the start of 2015, we should expect to see a change in CESR market leadership soon.

The CESR business remains polarized between a handful of players with significant market share and many players with very low market share. Several suppliers have announced withdrawals or intended withdrawals from aspects of the CESR market, and further market consolidation is expected.

We expect a number of those at the lower end to refocus on enterprise Ethernet, or packet optical technologies, or on data center interconnect, and also to turn to the sale of virtualized carrier solutions. Some vendors have already indicated to Heavy Reading that they expect their own sources of revenue to swing toward provision of virtualized network functions and applications, and away from carrier Ethernet/MPLS transport hardware.

All vendors are grappling with the questions of how network function virtualization fits with the idea of CESR devices, and whether CESR platforms will require more functionality, or will be stripped down (with some routing functions for instance becoming virtualized).

That is not to say the CESR market is going away. CESRs will continue to be required to support wireless and residential fixed broadband backhaul, business Ethernet service aggregation and to replace legacy transport technologies. The market is expected to show modest growth in 2014, following a decline in total global value in 2013, and longer-term forecasts for world sales of CESR equipment are positive, although not dramatic. Global CESR revenues for tech vendors are expected to rise to nearly $4 billion per year by 2020.

Heavy Reading's latest update of the Carrier Ethernet Switch/Router Market Tracker includes technology profiles for 15 market leaders (Alcatel-Lucent, Brocade, Ciena, Cisco, Coriant, Dell, Ericsson, Extreme Networks, Hitachi Cable, Huawei, Juniper Networks, MRV Communications, Tejas Networks, Telco Systems and ZTE). It also provides market-share estimates for these players and revenue forecasts for the global CESR market, split by region, through 2020.

— Simon Sherrington, Contributing Analyst, Heavy Reading

For more information about the Carrier Ethernet Switch/Router Market Tracker, please contact David Williams, Global Director of Sales, Research, Heavy Reading, at 858-829-8612 or [email protected].

Sterling Perrin 4/17/2015 | 9:45:41 AM
Sonet to Packet Shift Simon,

It is interesting that the CESR category is maturing, as is the P-OTS category. A shift in carrier spend that is starting to become significant in my forecasting is the movement in dollars away from P-OTS and into Layer 2/3 switches (CESR, CEAP) that are equipped for transport applications. 

So while more traditional CESR/CEAP applications may be very mature, I think that Carrier Ethernet Transport applications are becoming more significant drivers in the CESR/CEAP mix - this is certainly affecting P-OTS vendor revenue streams, even in 2014-2015.

What I'll be looking at going forward is how do the P-OTS suppliers adapt to this huge shift? Some are betting heavily on OTN switching, but I'm not sure how much this solves for them. Thoughts/opinions from the message boards are always welcome!

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