Major network IT investments include 5G, smart network cards, and cloud computing

We may not be able to predict the future, but that won’t stop businesses or analysts from trying. After experiencing the pandemic, they are reassessing how to allocate funds and resources. IT teams are responsible for determining which technologies and products should be prioritized.

Professional investors and market analysts from venture and public markets discussed the various technologies they are watching in the coming years during the ONUG Spring 2021 virtual conference. Four panelists weighed their assessments based on a variety of factors, examining emerging trends, market shifts and evolutions, product cycles, and short- and long-term expectations.

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While each panelist had different expectations and priorities, they all agreed on the following investments:

Surprise! Cloud computing again!

It is foreseeable that cloud computing will continue to be part of IT investment conversations.

“Cloud computing is always present in investor discussions,” said Paul Silverstein, managing director and senior research analyst at Cowen & Company.

According to Synergy Research Group, by 2020, enterprise spending on cloud infrastructure services increased 35% year-on-year to nearly $130 billion. As the global pandemic disrupted supply chains and delayed hardware shipments, the flexibility of cloud computing became more attractive, leading more companies to adopt public cloud services. Gartner expects cloud spending to continue to increase in the coming years.

Despite the growth of the cloud market, there are still issues with interoperability, visibility and security in the cloud. These challenges resonated with attendees at the ONUG conference, with speakers and virtual attendees also mentioning management and cost issues. For now, the cloud business case looks inevitable, but still unclear, said Subu Subrahmanyan, principal at AO Asset Management.

“Cloud computing is clearly important, and we have to figure out what it means,” Subrahmanyan said. “There’s every reason to believe that cloud won’t be everything, but it will have an impact. We need to figure out cloud computing.”

network

Silverstein said that historically, the networking market was not considered when it came to investments. Many investors expected the market to struggle at the height of the cloud hype, but networking profits have continued to rise. Rod Hall, managing director and senior equity analyst at Goldman Sachs, said one reason for the rise in networking prices is that enterprises still need local mainframes and workloads. And, thanks to advances in cellular technology and chips, the networking market offers some promising areas for IT investments.

5G

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

One of the focuses is 5G infrastructure, as operators such as AT&T, T-Mobile, and Verizon are building out their 5G networks. For example, Verizon recently announced that it will sell its media group for $5 billion, allowing it to invest more in its 5G mobile network. Meanwhile, T-Mobile announced that it expects to spend between $11.7 billion and $12 billion on 5G by 2021.

Analysts say the spending plans bode well for market growth in the coming years.

“We’re excited about the increased CapEx spending on 5G, coupled with the change we’re seeing now in the data center, moving more and more to the edge,” Chahal said.

Smart NIC

The changes in data center networking also include an emerging market: smart network interface cards (smartNICs). Although the smartNIC market is still nascent, smartNICs offer compelling benefits by offloading certain functions from the server and running them instead.

Previously, NIC chips didn't have enough processing power to run functions like load balancing and encryption, Chahal and Subrahmanyan said. But as networking has moved to software, semiconductor makers have increased the processing power of NICs, opening up opportunities for more efficient enterprise networking at the server level, similar to what hyperscale cloud providers have done for years.

These new advances are critical in the software world because without sufficient processing power, the value of networking wouldn’t exist, Silverstein said.

Other areas of concern

Participants said that software-defined WAN (SD-WAN) has proven to be a very attractive technology with commercial viability. Enterprises have begun to deploy SD-WAN, and in addition to cost savings, they have also realized the value it can bring to the enterprise.

In addition to cloud computing, 5G, smart network cards and SD-WAN, other IT investment opportunities were mentioned by panelists, including the following areas:

• Campus network and video;
• Optical Networks;
• Network as a Service;
• Remote Work and Branch Offices
• APIs and API Security