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Cost of Ethernet networking expected to plummet

The cost of Ethernet networking will fall to a fifth of the current level in four years, a research firm said. At the same time, bandwidth usage will soar.

The cost of server-class Ethernet networking will drop roughly 80% over the next four years, as enterprises reap the benefits of a highly competitive market with lots of product options, a research firm predicted.

As prices plummet, the amount of networking bandwidth used by enterprises will soar sevenfold, from 200 terabits to 1,500 terabits, San Francisco-based Crehan Research Inc. forecasted this week. Increased video usage, data center virtualization and big data analytics will drive the need for more bandwidth, along with the insatiable appetite of cloud providers with hyperscale data centers.

The cost of all that bandwidth will fall from about $7 per gigabit in 2015 to roughly $1 by 2020, Crehan predicted. Contributing to the drop is stiff competition among major networking vendors, including Cisco, Juniper Networks, Arista Networks and Hewlett Packard Enterprise (HPE).

Also hammering the cost of Ethernet networking are relatively inexpensive, higher-capacity switches. Vendors are selling 25/50 GbE switches at prices only slightly higher, and sometimes the same, as older 10/40 GbE hardware, said Seamus Crehan, president of the research firm.

"We have an awful lot more options, more choices and more diversity in the market today," Crehan said. "If you have more choices and better pricing, then that's generally a good thing for customers."

Keeping costs for Ethernet networking in check are large cloud service providers using their market clout during negotiations with vendors, Crehan said. These providers, which include Microsoft, Google and Amazon Web Services, account for most of the 25/50 GbE market today, with mainstream enterprises expected to follow over the next couple of years.

"It's a highly competitive market, and the large hyperscale [data centers] have more influence in terms of which direction the overall market goes," Crehan said.

Market impact of cloud providers

Cloud providers are opting for 25/50 GbE switches at the access and aggregation layer to cope with growing traffic. IT spending is steadily shifting from traditional technology to cloud services, according to Gartner. The cloud will account for $111 billion in IT spending this year, increasing to $216 billion in 2020.

Many mainstream enterprises will choose the higher-capacity switches in order to future-proof their data centers. Buying more bandwidth in anticipation of the eventual need makes sense because of the backward compatibility between 25/50 and 10/40 GbE devices.

Both hardware types use the same fiber cabling, so enterprises can set the migration pace. Also, enterprise server suppliers, such as Dell, HPE and Lenovo, have released adapters for 25/50 GbE.

Despite the projections for higher switch capacity, 10/40 GbE will remain an important technology for server-class Ethernet networking through 2020, Crehan said. That's because many enterprise data centers are still using 1 GbE for server networking on 10GBASE-T copper cables, which support a maximum of only 10 GbE.

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