At least three key factors will shape the European networking market over the coming years: increased mobility; richer content; and the need for improved security. The current economic malaise will also affect market development, especially in the coming year.
An increasing number of Europeans are no longer office-bound in their working lives, as some degree of teleworking becomes the rule, rather than the exception among white-collar workers.
According to analyst IDC, 28.9 million professionals will work outside the office for at least one day per week by 2005. In the UK alone, 6.9 million people will be mobile or teleworkers by 2005.
It is small wonder, then, that the small office/home office segment of the router market will experience a compound annual growth rate of 13.7% between 2001 and 2006, while most other segments are expected to decline in terms of shipments.
In addition, millions of people are not desk-bound at the workplace, such as hospital staff, or are on the road, such as field service staff. The information needs of these unwired workers will drive networking developments as more companies push electronic business through the organisation and supply chain.
Wireless Lans are one way of providing this connectivity, either inside the enterprise or as a wireless Lan "hotspot" at airports and hotels, where visitors can log on to check mail, download files and so on. The wireless Lan equipment market will grow at a compound annual growth rate of 29% to a value of $807m (£527m) in 2005.
Always-on mobile data connectivity is already a fact since the introduction of the GPRS phone, which now becomes - with limitations such as screen size - a useful business tool for mobile workers. Consumers too are latching on to the new services driven by general packet radio service, such as multimedia messaging.
This means that networks will see an explosion of mobile devices - phones and smart handhelds - transmitting chunks of data and connecting to applications. Mobile network operators hope to capitalise on this increased mobile data use, seeing as IDC expects them to buy network equipment worth $22bn in 2002 and even more in 2003 to roll out third-generation networks.
The trend towards richer content will continue, driven by applications (eg, streaming media and electronic learning) and technology (broadband, fibre to the home, metropolitan Ethernet). Static content represents 78% of the Web content caching revenue opportunity today. However, by 2006 static caching will make up only 13% of a $2.8bn global opportunity.
Service providers were first to embrace content networking, but in 2001 IDC noticed a significant change as enterprises started to build their own private content delivery networks. These networks are crucial for the efficient distribution of rich content, for example in electronic learning.
In 2001 European enterprises represented 34% of datacentre equipment sales, but this share will grow to 43% in 2002 as content networking moves closer to core network functionality. The enterprise datacentre equipment market will be worth $273m in 2002.
The rise in (mobile) devices connecting to key corporate data in a world where e-business is becoming the norm means that security has become even more important to network professionals. IP Virtual Private Networks (VPNs) offer a relatively high level of security for limited cost and the market for IP VPN equipment in Western Europe will be worth $2.2bn in 2005, according to IDC. Increased focus on storage solutions is also at the forefront as the value of data storage and recovery was proven by the aftermath of 11 September.
These trends will play out against the backdrop of a struggling global economy, with stock markets down at levels seen just after the 11 September attacks. Current IDC forecasts are built on the assumption that the European economy will remain mired in relatively slow growth during much of 2002, but will steer clear of recession, with economic activity improving before the end of the year and resulting in increased IT spending growth in 2003. Western Europe has seen the worst of the downturn and IDC forecasts a gradual recovery of the IT market, returning to double-digit levels of growth by 2004.
The network equipment market will face market saturation and longer replacement cycles in the current economic climate, but growth is expected to return to the hardware market by 2003.
Recent surveys done for IDC show that for the current year US organisations - excluding government and education - expect overall network equipment spend to decline by 9% and Lan switches and routers to decline by 13% and 17% respectively.
Although the decline in Europe is expected to be less severe, consensus is that the network market is in for a turbulent time as network managers try to address issues such as increased mobility, richer content and improved security while keeping tight control on spending.
Chris Barnard is research manager, European networking and e-business at IDC