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Switching's summer of discontent

With spending down and clouds in the forecast, is networking's perfect storm approaching?

By Jim Duffy on Tue, 07/02/13 - 5:01pm.

Is the perfect storm coming for the networking industry? IT spending has been downcast by one reputable forecaster, while a shift in network equipment spending was seen in Q1 by two market research firms.

Gartner throttled back on its IT spending forecast for 2013 - back to the 2% growth it predicted last fall from 4.1% growth forecast last quarter. Spending will come in at $3.7 trillion after all, off by about a half billion from what Gartner expected earlier this year and right where it thought it would be last fall. 

As overall IT spending softens, so too is that for data center networking gear. Infonetics Research says worldwide revenue for equipment like Ethernet data center switches, application delivery controllers and WAN optimization appliances fell 11% in Q1 from Q4 of 2012, to $2.3 billion. The firm notes that cost containment in network equipment is one of the top four priorities for enterprises in the coming year, along with beefing up security, virtualizing IT and adopting cloud architectures and services.

[MIA: Hey Amazon, where's your private cloud?]

It is that last priority - adopting cloud - that was noted by both Infonetics and Dell'Oro Group as a marked trend during Q1. Procurement of network equipment is shifting from physical customer premises-based installations to virtual, Infrastructure-as-a-Service subscriptions from cloud providers. Enterprises are outsourcing their networks.