Enterprise network spending continues to advance at an unbelievable pace, driven by organizations seeking to upgrade their infrastructure, reduce their reliance on legacy technology, improve their organizational efficiency and gain a competitive advantage in their respective marketplaces.
According to a recent study conducted by IHS, U.S. enterprises spent an average of $400,000 each on network equipment in 2014, with spending expected to increase by 19 percent by the end of this year. Those surveyed identified wireless LAN (WLAN) infrastructure as the area that is in greatest need of an upgrade, particularly with the surge of mobile devices and anytime, anywhere connectivity.
“The outlook for network equipment spending in North America remains robust, driven by the move to cloud architectures and the never-ending quest to make IT infrastructure more secure,” Matthias Machowinski, IHS’s research director for enterprise networks and video, explained in the release.
Technology Business Research, meanwhile, reports that this influx in spending amounted to $31.5 billion in revenue for networking vendors over the first two quarters of 2015, with big data and improvements in responsiveness and business efficiency contributing to the sustained spending. As technology continues to improve, it is believed that enterprise network spending will only continue to climb higher.
Having said this, below are three major variables that are fueling this spending growth:
- Cloud computing
Cloud computing is driving spending on network solutions as organizations are embracing the three main categories of cloud computing services: Infrastructure as a Service (IaaS), Software as a Service (SaaS), and Platform as a Service (PaaS). Companies are also beginning to build their own cloud-based data centers, which require massive upgrades to existing network architecture. All in all, Cisco estimates that more than 78 percent of workloads will be processed by cloud data centers by 2018, and that 59 percent of total cloud workloads will be SaaS.
Over the past few years, there have been numerous high profile security breaches at financial institutions, retailers, and healthcare providers. Millions of personal records, social security numbers, and credit card data have been stolen. The average cost of a data breach is now $3.8 million. As a result, organizations are increasingly investing in networking solutions in order to make their IT infrastructure more secure. According to Computerworld’s annual forecast survey of IT executives, 46 percent of those polled said that they would be investing more this year in access control, intrusion prevention, identity management, and virus and malware protection.
As mentioned above, the continued growth of mobile devices is forcing enterprises to find a network solution that enables them to have anytime, anywhere connectivity. Organizations are investing heavily in WLAN infrastructure and other upgrades in order to keep pace with the explosive growth of mobile data demands. Additionally, Computerworld’s forecast finds that 35 percent of IT executives say that their organizations are planning to invest in RFID technology, remote access tools, Wi-Fi, and mobile device management systems this year. Many companies are also implementing Bring Your Own Device (BYOD) programs, which require additional technology.
It’s clear that enterprise network spending is on the rise. What do you expect will further drive spending in 2016?