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Top network IT investments include 5G, smartNICs, cloud

Market analysts showed interest in 5G and smartNICs during an ONUG conference panel on enterprise IT investments. And don't forget the seemingly inevitable mention of cloud.

It may be impossible to predict the future, but that doesn't stop enterprises or analysts from trying. As organizations emerge from a year of unexpected changes, they are reassessing where to invest their money and resources. IT teams are along for the ride, tasked with determining which technologies and products they should prioritize.

In a virtual session at the ONUG Spring 2021 conference, expert investors and market analysts in the venture and public markets discussed the different technologies they're watching in the next couple years. The four panelists weighed their assessments based on varying factors, looking at emerging trends, market inflections and evolution, product cycles, and short- and long-term expectations.

While each panelist had different expectations and priorities, a few market segments were common across the board.

Surprise -- or not -- it's the cloud

Predictably, the cloud is a looming presence in IT investment conversations.

"The cloud is always there, ominous in investor discussions," said Paul Silverstein, managing director and senior research analyst at Cowen & Company.

In 2020, enterprise spending on cloud infrastructure services grew by 35% year over year to reach almost $130 billion, according to Synergy Research Group. As the global pandemic disrupted supply chains and delayed hardware shipping, the flexibility of cloud became more appealing, leading more enterprises to adopt public cloud services. Gartner expects cloud spending to continue rising over the next couple years.

The cloud is always there, ominous in investor discussions.
Paul SilversteinManaging director and senior research analyst, Cowen & Company

Despite growth in the cloud market, cloud still presents issues with interoperability, visibility and security. These challenges resonated throughout the ONUG conference, as speakers and virtual attendees also mentioned management concerns and cost issues. For now, the cloud business case appears inevitable but still somewhat unclear, according to Subu Subrahmanyan, principal at AO Asset Management.

"Cloud is obviously important, and we have to figure out what it means," Subrahmanyan said. "There are good reasons why cloud won't be everything, but it will have an impact. We need to figure out what it is."

ONUG panelists
ONUG panelists discussed the different sectors they're watching for IT investments.

Networking takes a stand

Historically, the networking market has been an outcast in terms of investments, Silverstein said. While many investors expected the market to crater during the peak of cloud hype, networking margins have continued to rise. One reason for the uptick is enterprises still need on-premises mainframes and workloads, said Rod Hall, managing director and senior equity analyst at Goldman Sachs. And, thanks to advances in cellular technology and silicon, the networking market touts some promising areas for IT investment.

5G

Operators and service providers are investing in communications equipment, a point noted by Subrahmanyan and Guru Chahal, partner at Lightspeed Venture Partners.

One such focus is 5G infrastructure, as operators like AT&T, T-Mobile and Verizon build out their 5G networks. Verizon, for example, recently announced it was selling its media group for $5 billion, enabling it to invest more in its 5G mobile network. Meanwhile, T-Mobile announced it expects to spend $11.7 billion to $12 billion on 5G in 2021.

These spending plans foreshadow promising market growth over the next couple years, according to the analysts.

"We're excited about increases in Capex spending on 5G, combined with changes in how we're plumbing data centers now, increasingly at the edge," Chahal said.

SmartNICs

Those data center networking changes include an emerging market: smart network interface cards (smartNICs). While the smartNIC market is still nascent, smartNICs present compelling benefits by offloading certain functions from the server and running them.

Previously, NIC silicon didn't have enough processing power to run functions like load balancing and encryption. But, as networking has veered toward software, semiconductor manufacturers have boosted NIC processing capabilities, opening opportunities for more efficient enterprise networking at the server level, similar to what hyperscale cloud providers have done for years, Chahal and Subrahmanyan said.

These silicon advancements are vital in a software world because, without sufficient processing power, the value isn't there for networking, Silverstein said.

Other areas to watch

Software-defined WAN (SD-WAN) has proven itself as a compelling -- and commercially viable -- technology, according to the panelists. Enterprises have deployed SD-WAN, recognizing the value it can bring to their business, in addition to cost-saving propositions.

In addition to cloud, 5G, smartNICs and SD-WAN, the panelists mentioned other IT investment opportunities, including the following areas:

  • campus networking and video;
  • optical networking;
  • network as a service;
  • remote work and the branch of one; and
  • APIs and API security.
This was last published in May 2021

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