Cisco feels the heat as Amazon may enter networking space

Amazon Web Services (AWS), the cloud business of Amazon.com, is planning to launch its own network switches to business customers at lower prices.
Amazon web services
With this move, Amazon could tap the $25 billion Ethernet switch market taking on the US-based Cisco Systems, the dominant player.

The size of the Ethernet switch market was $6.29 billion (+10.9 percent) in the first quarter of 2018, said IDC. The size of the Ethernet switch market in the US alone was $2.44 billion in the first quarter of 2018.

The move will impact enterprise networking companies such as Cisco, Huawei Technologies, Juniper Networks, Arista and Hewlett Packard Enterprise (HPE).

The networking devices will consist of open-source software and unbranded hardware known as “white-box” switches and come with built-in connections to AWS cloud services, such as servers and storage, the Information said.

Amazon Web Services could price its white-box switches 70-80 percent less than comparable switches from networking giant Cisco.
Switch vendor market share Q1 2018
“If true, we think this would be a notable negative for the networking equipment space going forward,” RBC Capital Markets analyst Mitch Steves wrote in a note.

AWS expects to launch the switches for sale within the next 18 months, the report said.

Cisco’s shares fell 5 percent, wiping off nearly $11 billion from its market capitalization. Shares of Juniper Networks and Arista Networks fell 4 percent as investors feared that Amazon’s scale and pricing power could disrupt the enterprise networking sector, Reuters reported.

“The emergence of next-generation software-based network intelligence platforms that add to the intrinsic value of networking, and the push by large enterprises, hyperscalers, and service providers to leverage faster Ethernet switching speeds for cloud rollouts are contributing to the growth,” Rohit Mehra, vice president, Network Infrastructure at IDC, said earlier.

Cisco has 53.4 percent share in the global Ethernet switch market in Q1 2018. Cisco share plummeted from 55 percent in Q1 2017 and 58.9 percent in Q1 2016.

Huawei’s Ethernet switch market share increased to 8.1 percent as compared with 6.3 percent in Q1 2017.

Ethernet switch market share of Hewlett Packard Enterprise (HPE) was steady at 6 percent during that time.

Arista Networks has a share of 6.5 percent in Ethernet switch market, up from 5.1 percent in Q1 2017.

Junipers Ethernet switch share fell to 3.7 percent from 4.3 percent.

IDC in another report said vendor revenue from sales of infrastructure products such as server, storage, and Ethernet switch for cloud IT, including public and private cloud, grew 45.5 percent to $12.9 billion in Q1 2018.

Dell is the market leader in the global cloud IT infrastructure market 15.9 percent share in the first quarter of 2018 against 11.5 percent share for HPE.

IDC also raised its forecast for total spending on cloud IT infrastructure in 2018 to $57.2 billion (+21.3 percent).

Baburajan K