The worldwide market for optical data centre interconnect (DCI) equipment was on fire in 2016 as service providers, internet content providers (ICPs) and enterprises invested to interconnect their expanding and proliferating data centre sites. Globally, optical data centre interconnect (DCI) hardware revenues grew by 49 per cent in 2016 to reach $1.9 billion.
IHS expects that, with continuing data centre growth, the worldwide optical DCI market will hit $4.5 billion in 2021, a five-year compound annual growth rate of 18 per cent.
The big story in 2016, however, was the emergence of a new “compact” DCI segment characterised by purpose-built platforms for deployment in data centre environments. This segment grew 285 per cent in 2016 to account for 8 per cent of worldwide DCI sales, worth $154 million.
Nearly all the major optical equipment vendors started shipping their new compact DCI platforms in 2016, kicking off a fiercely competitive battle for ICP spending. Infinera launched the category with the Cloud Xpress platform, now in its second generation (see Infinera turbocharges DCI category with Cloud Xpress 2). It was soon joined by Ciena with its Waveserver platform, Coriant with the Groove G30 and ADVA with the all-new CloudConnect. Fujitsu and Cisco also have platforms in this category.
Meanwhile, the traditional DCI equipment segment saw strong growth of 41 per cent year over year.
The growth in DCI, a category that does not employ Optical Transport Network (OTN) protocols, will put the brakes on the growth of the OTN hardware market, the analyst firm reports. This market totalled $10.7 billion in 2016, an increase of eight per cent compared to the year prior.
OTN transport and switching capabilities were de facto in all new WDM equipment up until 2016. Close to 80 per cent of all optical equipment revenue and 90 per cent of all WDM equipment revenue last year was tied to OTN-capable equipment.
The emergence of OTN-free compact DCI platforms, combined with sales of WDM equipment for common public radio interface (CPRI) fronthaul applications, signals the start of a reversal in OTN as a percentage of total optical equipment.
“The rise of the ICPs as a tour de force in optical equipment spending has put a new limit on OTN’s dominance of the WDM market,” explained Heidi Adams, senior research director, transport networks, IHS Markit, and author of the report. “ICPs have no need for OTN because they have no legacy Synchronous Optical Networking (SONET) and Synchronous Digital Hierarchy (SDH) traffic to support and are aligned to Ethernet as the base packet transport and switching technology. As a result, OTN as a percentage of overall optical equipment will peak in 2019 and then decline somewhat in subsequent years.”
IHS Markit also reports that revenue for the packet-optical transport system (P-OTS) segment was $2.2 billion in 2016, up 6 per cent from a year ago. The analyst firm expects P-OTS to continue to grow for deployments supporting legacy and more modern Ethernet and wavelength services. The native Ethernet capabilities in P-OTS may also give it a role to play in DCI deployments.
Data come from IHS's biannual IHS Markit DCI, OTN and packet-optical hardware report, which provides worldwide and regional vendor market share, market size, forecasts through 2021, analysis and trends for OTN transport and switching hardware, packet-optical transport systems, and DCI equipment.