The Australia router market declined by 6.1% in 2014, after the market saw promising growth the year before. Accordng to IDC Australia, the market tumbled from US$281 million on 2013 to US$265 million in 2014.

After sustained growth over the prior three years, the analyst firm is questioning if the ‘party is over' and if demand for routers has plateaued. Are equipment suppliers in for a sustained drought in router revenue?

“Initial indications pointed to open standards and the introduction of virtualised routers,” observes Ahmar Karimullah, IDC analyst. “It's been in the news for the last few years and we suspected SDN solutions had at last arrived in volume.

“Sadly, further investigation revealed another culprit – over provisioned capacity. Virtualised routers are making a dent on the market but they still require software licensing and hardware to support their deployment,” Karimullah says.

“Virtualised routers have yet to make a dent on the high end routers used by telecom service providers. This part of the market still relies on equipment with specialised hardware designed for reliable, high bandwidth, low latency operations. Service providers have been buying capacity over the last few years and 2014 revealed some over provisioning.” Karimullah notes.

IDC observed that providers have simply reduced their purchasing as they wait for this capacity to be filled. The company says there is an expectation that the revenues in this market will recover as data requirements grow to exceed installed capacity.

“Once that happens, they will start spending again” concludes Karimullah.

Enterprise router deployments continued their historical decline, accounting for only $55M in 2014, down from $65.49 in 2013. IDC says this decline is considered due to the introduction of data center services by the likes of HP, Amazon, Telstra, etc. which have started making enterprises outsource their infrastructure requirement to these off premises data centers in order to consolidate their IT resources and reduce expenditures.   While the service provider market declined from 2013, most vendors dropped except for the market leader Cisco, which enjoyed a 32% gain in revenues. Cisco's real growth came from 3rd and 4th quarters of 2014 when it introduced its new ACI products in the market.

IDC says for other players, this growth experienced by Cisco shows that the demand for products which provide a unified view and control of network (e.g Software Defined Networking enabled) is high in the Australian market. Vendors who cannot provide products with such capabilities may not be able to survive.

The good news is that the market will pick up over time, IDC says, however what is not clear is when that will happen. “Capacity demand in Australia is slower than the rest of Asia. IDC expects that virtualised equipment such as routers will begin to be installed in lower demand locations like the edge of the network,” the company says.

“Announcements from suppliers such as Cisco, Huawei and Juniper all point to virtualised network functions,” it says. “However, the role as the dominant routing solution is still some years off.”