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Disruptive Technologies and Emerging Markets: Growth Strategies of Enterprise Network Vendors

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  • 1. Disruptive Technologies and Emerging Markets: Growth Strategies of Enterprise Network Vendors Technology Business Research Webinar Series Nov. 12, 2013 TBR T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C .
  • 2. TBR Contacts TBR Your presenter: Scott Dennehy Senior Analyst, Networking & Mobility Practice Email: scott.dennehy@tbri.com Twitter: @scottdTBR 2 TBR Webinar Series | 11.12.13 | www.tbri.com ©2013 Technology Business Research Inc.
  • 3. Benchmark Coverage Overview TBR TBR obtains and analyzes the financial performance and strategies of 15 suppliers across 5 main segments and 4 geographies TBR Enterprise Network Vendor Benchmark Coverage Suppliers: Segments: Geographies: • Alcatel-Lucent • HP • Network Infrastructure • North America • Aruba Networks • Huawei • Wireless Networks • CALA • Juniper Networks • • EMEA • Avaya • Microsoft Unified Communications & Collaboration • APAC • Brocade • Polycom • Network Security • Cisco Systems • Riverbed • Services • Citrix • • Dell • F5 Networks Siemens Enterprise Communications 3 TBR Webinar Series | 11.12.13 | www.tbri.com ©2013 Technology Business Research Inc.
  • 4. Market Trends and Drivers TBR Suppliers will leverage improved IT spending in developed markets and new service offerings to drive revenue growth in 2H13 Key Themes and Market Trends The network is playing a more important role in IT than ever before, serving as the delivery mechanism for a rapidly growing number of enterprise applications. An improved spending environment in developed markets, along with growth in key emerging markets, drove growth in the enterprise networking market in 1H13. Suppliers are investing in services capabilities to strengthen customer relationships and drive long-term revenue growth. 4 TBR Webinar Series | 11.12.13 | www.tbri.com ©2013 Technology Business Research Inc.
  • 5. Supplier Overview TBR The ability to offer a broad set of solutions on a global basis provides the best opportunity for long-term growth Competitor Strategies Map Portfolio Coverage Complete Limited Weak SOURCE: TBR AND COMPANY DATA 5 Strong Geographic Coverage TBR Webinar Series | 11.12.13 | www.tbri.com ©2013 Technology Business Research Inc.
  • 6. Market Overview — Revenue TBR Enterprise network suppliers benefit from increasing customer adoption of emerging technologies like cloud, mobility and security TBR Year-to-Year Revenue Growth 50% 1H13 Total Enterprise Network Revenue (Millions USD) Citrix 40% 30% Huawei Riverbed Dell 20% Microsoft Aruba 10% Juniper Siemens F5 0% HP Polycom $0 $5,000 -10% Brocade ALU Avaya Cisco $10,000 $15,000 -20% Enterprise Network Revenue for All Lines of Business NOTE: SPHERE SIZE REFLECTS VOLUME OF REVENUE . SOURCE: TBR AND COMPANY DATA • Cisco successfully capitalizes on customer demand for new technologies by leveraging its broad and differentiated product portfolio and industry-leading channel partner program to drive growth in key segments and geographies. • As SDN gains momentum through 2H13 and into 2014, there will be opportunities for suppliers to sell more hardware; however, most customers will be unwilling to “rip and replace” their infrastructures with new hardware and will instead take a piecemeal approach to deploying SDN. 6 TBR Webinar Series | 11.12.13 | www.tbri.com ©2013 Technology Business Research Inc.
  • 7. Market Overview — Operating Margin TBR Enterprise network suppliers will improve profitability through cost optimization and organizational restructuring 1H13 Enterprise Network Operating Income and Margin TBR Operating Margin 30% Cisco F5 20% Brocade 10% Microsoft Juniper Huawei Citrix HP Siemens 0% ALU Polycom Aruba Avaya -$500 $500 $1,500 $2,500 $3,500 $4,500 Riverbed Dell Enterprise Network Operating Income (in millions USD) -10% for All Lines of Business NOTE: SPHERE SIZE REFLECTS VOLUME OF OPERATING INCOME. SOURCE: TBR AND COMPANY DATA • • 7 Operating margin leaders such as F5, Cisco and Brocade successfully leverage their strong market positions to charge premium pricing for their products and services. Suppliers will focus on restructuring their operating models and expanding revenue in highly profitable segments like software and services to grow margins over the long term. TBR Webinar Series | 11.12.13 | www.tbri.com ©2013 Technology Business Research Inc.
  • 8. Network Infrastructure TBR Data center upgrades will fuel supplier network infrastructure revenue growth in 2H13 1H13 Network Infrastructure Revenue (Millions USD) TBR Year-to-Year Revenue Growth 35% 30% 25% 20% Huawei Dell Riverbed 15% Juniper Aruba 5% Siemens 10% Cisco 0% HP $3,000 -5% $0ALU -10% F5 Brocade -15% Avaya $6,000 $9,000 $12,000 Network Infrastructure Revenue for All Lines of Business . NOTE: SPHERE SIZE REFLECTS VOLUME OF REVENUE SOURCE: TBR AND COMPANY DATA Growth in network infrastructure is being driven primarily by customer demand for switching to support bandwidth demand in the data center — a trend TBR expects to continue for the remainder of 2013. • Cisco held off aggressive competitors in 1H13 to maintain its share of network infrastructure revenue. • 8 TBR Webinar Series | 11.12.13 | www.tbri.com ©2013 Technology Business Research Inc.
  • 9. Wireless Networks TBR Wireless network suppliers will drive revenue growth in 2H13 by leveraging customer demand for greater performance and manageability 1H13 Wireless Network Revenue (Millions USD) TBR Year-to-Year Revenue Growth 35% Huawei 30% Cisco 25% Dell 20% 15% HP Juniper 10% Brocade 5% Siemens 0% -5% -10% $0 Avaya $200 Aruba $400 $600 $800 $1,000 ALU Wireless Network Revenue for All Lines of Business . . NOTE: SPHERE SIZE REFLECTS VOLUME OF REVENUE SOURCE: TBR AND COMPANY DATA • • 9 Suppliers are driving growth by offering solutions that address the bandwidth and management challenges customers face due to the rapid proliferation of mobile devices in the enterprise. Cloud-based solutions and software (e.g. analytics) are being added to supplier portfolios to address long term growth opportunities. TBR Webinar Series | 11.12.13 | www.tbri.com ©2013 Technology Business Research Inc.
  • 10. Unified Communications & Collaboration (UC&C) TBR Suppliers of UC&C solutions found fewer revenue opportunities in 1H13, a result of customer spending cuts and product commoditization 1H13 UC&C Revenue (Millions USD) TBR Year-to-Year Revenue Growth 40% 30% Microsoft Huawei 20% 10% 0% $0 -10% Cisco Polycom HP $300 ALU $600 Siemens -20% $900 $1,200 $1,500 Avaya -30% UC&C Revenue for All Lines of Business . NOTE: SPHERE SIZE REFLECTS VOLUME OF REVENUE SOURCE: TBR AND COMPANY DATA • Tight budgets in the U.S. and Europe forced customers to delay purchases of UC&C products or look for less-expensive alternatives to meet their needs. • UC&C also creates opportunities for suppliers such as Avaya, Cisco and Huawei to sell routers and switches, as network upgrades are often required to support the deployment of bandwidth-hungry applications like video. 10 TBR Webinar Series | 11.12.13 | www.tbri.com ©2013 Technology Business Research Inc.
  • 11. Network Security TBR Security will remain a growth market for suppliers as enterprises face an increasing number of cyber threats to their IT assets 1H13 Network Security Revenue (Millions USD) TBR Year-to-Year Revenue Growth 110% Dell 90% 70% 50% Huawei 30% HP Brocade Avaya 10% Siemens F5 -10% $0 $100 ALU -30% Cisco $200 $300 $400 $500 Juniper Network Security Revenue for All Lines of Business . NOTE: SPHERE SIZE REFLECTS VOLUME OF REVENUE SOURCE: TBR AND COMPANY DATA • Enterprises continue to prioritize their budgets to invest in products to help mitigate an increasing number of cybersecurity threats. • Security remains a market where many enterprise customers prefer to purchase best-of-breed point products rather than end-to-end solutions, which enables smaller competitors to gain share over more established players. 11 TBR Webinar Series | 11.12.13 | www.tbri.com ©2013 Technology Business Research Inc.
  • 12. Services TBR Services revenue growth leaders remain focused on attaching maintenance and professional services to product sales 1H13 Services Revenue (Millions USD) TBR Year-to-Year Revenue Growth Riverbed 48% Citrix 38% 28% 18% Huawei Aruba F5 Cisco Dell Polycom 8% Microsoft Siemens Juniper -2% Brocade HP $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 Avaya ALU -12% Service Revenue for All Lines of Business NOTE: SPHERE SIZE REFLECTS VOLUME OF REVENUE. SOURCE: TBR AND COMPANY DATA • Services growth outpaced product growth in 1H13 as many enterprise customers chose to maintain their equipment rather than purchase products. • TBR estimates SDN will not generate substantial services revenues for suppliers until late 2014 or early 2015, when a larger number of customers will deploy SDN products. 12 TBR Webinar Series | 11.12.13 | www.tbri.com ©2013 Technology Business Research Inc.
  • 13. Market Overview: Regional Summary TBR Suppliers will benefit from increased spending in the U.S. and Europe while driving growth in emerging markets 1H13 Regional Enterprise Network Revenue Growth $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 5.4% 6.0% 5.0% $14,954 4.0% 3.5% 3.1% 2.9% 3.0% $7,385 2.0% 1.0% $4,115 $1,457 North America EMEA Revenue SOURCE: TBR AND COMPANY DATA APAC CALA Region YTY Revenue Growth 0.0% YTY Revenue Growth North America • Top Revenue: Cisco, $9.2B • Top Growth: Huawei, 74.3% • Regional Drivers: Improved spending from U.S. enterprises; the public sector remains challenged. Revenue (in $ millions) TBR CALA • Top Revenue: Cisco, $1.1B • Top Growth: Citrix, 47% • Segment Drivers: Growth remains strong for suppliers in high-growth countries such as Brazil and Mexico. EMEA • Top Revenue: Cisco, $3.8B • Top Growth: Citrix, 40% • Regional Drivers: Improved spending environment in northern Europe; suppliers continue to invest in the Middle East and Africa. 13 APAC • Top Revenue: Cisco, $1.9B • Top Growth: Citrix, 42% • Regional Drivers: Region remains a key growth area; the slowdown in China is negatively impacting major suppliers. TBR Webinar Series | 11.12.13 | www.tbri.com ©2013 Technology Business Research Inc.
  • 14. Q&A TBR Questions? Scott Dennehy Senior Analyst, Networking & Mobility Practice Email: scott.dennehy@tbri.com Twitter: @scottdTBR TBR Social Media: Twitter: @TBRinc SlideShare: www.slideshare.net/TBR_Market_Insight YouTube: www.youtube.com/user/TBRIChannel LinkedIn: www.linkedin.com/company/technology-business-research 14 TBR Webinar Series | 11.12.13 | www.tbri.com ©2013 Technology Business Research Inc.
  • 15. About TBR Contact Us Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, telecom and enterprise network vendors, and operators. 1.603.929.1166 info@tbri.com www.tbri.com 11 Merrill Drive Hampton, NH 03842 USA Serving a global clientele, TBR provides timely and actionable market research and business intelligence in formats that are tailored to clients’ needs. Our analysts are available to further address client-specific issues or information needs on an inquiry or proprietary consulting basis. TBR has been empowering corporate decision makers since 1996. To learn how our analysts can address your unique business needs, please visit our website or contact us today. TBR T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C . This report is based on information made available to the public by the vendor and other public sources. No representation is made that this information is accurate or complete. Technology Business Research will not be held liable or responsible for any decisions that are made based on this information. The information contained in this report and all other TBR products is not and should not be construed to be investment advice. TBR does not make any recommendations or provide any advice regarding the value, purchase, sale or retention of securities. This report is copyright-protected and supplied for the sole use of the recipient. Contact Technology Business Research, Inc. for permission to reproduce.