Total year-over-year spending change in networking, (Percent of respondents) 37% 36% 35% 37% 29% 26% 16% 13% 0% 20% 40% 60% 80%

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1 Research Brief 2012 Networking Spending Trends Date: March 2012 Author: Jon Oltsik, Senior Principal Analyst; Bob Laliberte, Senior Analyst; and Bill Lundell, Senior Research Analyst Abstract: According to ESG s 2012 IT Spending Intentions Survey, more than half of all organizations will increase networking spending in the upcoming year. Survey respondents highest spending priority is, once again, network security, followed by network management and WAN optimization. Furthermore, more than one-third of organizations adding IT staff in 2012 also plan to hire additional network administrators, making networking one of the top five areas of demand for IT hiring in Introduction ESG recently completed an IT spending intentions survey of 614 IT professionals working at midmarket (i.e., 100 to 999 employees) and enterprise (i.e., 1,000 or more employees) organizations across North America, Western Europe, and Asia. 1 As part of that research, respondents were asked about their networking spending plans for 2012: as shown in Figure 1, more organizations are planning to increase spending on networking technologies this year than any other time in the past four years. Specifically, more than half of (58%) of respondent organizations will increase their spending on network infrastructure and services in 2012 relative to Perhaps more notably, the number of organizations decreasing their spending levels has declined by half (26% vs. 13%) between 2009 and Figure 1. Networking Spending Change, Four-year Trend Total year-over-year spending change in networking, (Percent of respondents) Networking spending will increase 37% 49% 47% 58% 2009 (N=492) Networking spending will stay flat 36% 35% 37% 29% 2010 (N=264) 2011 (N=327) Networking spending will decrease 16% 16% 13% 26% 2012 (N=301) 0% 20% 40% 60% 80% 1 Source: ESG Research Report, 2012 IT Spending Intentions Survey, January 2012.

2 Research Brief: 2012 Networking Spending Trends 2 There are a number of factors are driving increased spending for network infrastructure, including: Increased use of server virtualization. Server virtualization continues to be the top overall IT priority 2 reported by ESG survey respondents. As organizations continue to expand their virtual server footprints, increasing virtual machine (VM) densities are driving greater throughput requirements that call for 10- Gigabit or even as high as 16-Gigabit networks. The advanced virtual machine mobility capabilities that server virtualization provides also has network ramifications, including the need for networked storage and associated infrastructure to better support the movement of virtual machines between physical resources. The continued consolidation of data centers. According to recent ESG research, 63% of network executives and administrators reported that their organizations were currently engaged in or had recently completed a data center consolidation project. 3 These initiatives are the result of a desire to drive efficiencies, integrate acquired companies, and build out larger but more agile and dynamic data centers. Consumerization of IT. IT organizations are under increasing pressure from end-users to provide access to applications and data from anywhere, at any time, via any device. As a result, campus networks need to be adapted and scaled to accommodate and secure connections between mobile devices including smartphones, tablets, and laptops and the data centers that host virtual desktops and enterprise applications. From a company size perspective, larger organizations are more likely to be increasing their network spending in Indeed, nearly two-thirds (64%) of enterprise organizations have earmarked more funds for networking equipment and services this year compared to 2011 (see Figure 2). For their part, half of midmarket organizations will increase networkrelated spending in Increased spending among enterprise organizations is not surprising since so many large organizations are engaged in the network-centric projects referenced previously. Figure 2. Networking Spending Change, by Company Size 2012 networking spending change relative to 2011, by midmarket vs. enterprise. (Percent of respondents) Networking spending will increase 50% 64% Networking spending will stay flat Networking spending will decrease 13% 14% 36% Enterprise (1,000 employees or more, N=169) Midmarket (100 to 999 employees, N=132) 0% 20% 40% 60% 80% 2 Source: Ibid 3 Source: ESG Research Report, Data Center Networking Trends, January 2012.

3 Research Brief: 2012 Networking Spending Trends 3 Network Spend Varies by Purchasing Patterns As done in previous IT spending studies, ESG created a psychographic profile of organizations based on how individual respondents view their organization s overall purchasing pattern for IT products and services. Analyzing the data through this lens, ESG found that leading-edge purchasers of IT products and services will be making far more aggressive 2012 investments in network infrastructure. Figure 3 illustrates that 80% of such organizations will be increasing their networking spend in 2012, compared to 49% of average and 43% of laggard IT buyers. Based on the fact that leading-edge organizations are more focused on initiatives like mobile workforce enablement and server virtualization as well as the usage of public cloud services, it follows that they expect to spend money to ensure underlying network infrastructure is sufficient to handle these new applications and services. Figure 3. Networking Spending Change in 2012, by IT Purchasing Patterns 2012 networking spending change relative to 2011, by organization's purchasing patterns for IT products and services. (Percent of respondents) Networking spending will increase Networking spending will stay flat 12% 49% 43% 37% 80% Leading-edge consumer (N=90) Average consumer (N=178) Networking spending will decrease 8% 14% Laggard consumer (N=30) Networking Spending Priorities 0% 20% 40% 60% 80% 100% It is clear that most organizations will spend more on the network in 2012, but on what exactly are they going to be spending? Figure 4 provides some insight into that question and highlights just how intertwined networking and security have become: network security was the top priority, from a spending perspective, selected by nearly half (46%) of respondent organizations. Given the sheer number of new devices hitting corporate networks and greater levels of risk from APTs (advanced persistent threats) and other sophisticated security threats, it is easy to understand why improving network security is a priority for so many organizations. Network management was the second-highest on the list a capability that becomes increasingly important as networks grow in both scale and complexity. With continued consolidation of data centers and centralization IT operations, there is more pressure on WAN connectivity to deliver business applications and data to remote/branch office locations, as well as mobile and remote workers. This is especially true for the delivery of virtual desktops, as well as access to latency-sensitive applications like video and VoIP. As a result, WAN optimization was also a top-three network spending priority, cited by one-third () of organizations. The percentage of respondents citing WAN optimization as a top priority increases among enterprise organizations (see Table 1). This is consistent with previously-conducted ESG research, which revealed that larger organizations with more

4 Research Brief: 2012 Networking Spending Trends 4 facilities/locations are more likely to use the technology. 4 Enterprise organizations are also more likely to be upgrading their core data center network infrastructures to 40- or 100-Gigabit Ethernet than are their midmarket counterparts. Figure 4. Networking-specific Investments over Next Months In which of the following network infrastructure areas will your organization make the most significant investments over the next months? (Percent of respondents, N=305, five responses accepted) Network security 46% Network management 39% WAN optimization / acceleration Voice over IP (VoIP) Wireless LAN Remote meeting solutions Unified communications Upgrade core data center network to 40-Gigabit or 100- Gigabit Ethernet Campus network upgrades or improvements Upgrade core data center network to 10-Gigabit Ethernet 26% 24% 21% 19% 18% Application delivery controllers 8% 0% 10% 20% 30% 40% 50% Table 1. Networking-specific Investments over the Next Months, by Company Size Which of the following business initiatives do you believe will have the greatest impact on your organization's IT spending decisions over the next months? Midmarket (100 to 999 employees, N=136) By company size Enterprise (1,000 or more employees, N=169) WAN optimization / acceleration 25% 40% Upgrade core data center network to 40-Gigabit or 100- Gigabit Ethernet 14% 27% 4 Source: ESG Research Brief, WAN Optimization Usage at Remote/Branch Offices, October 2011.

5 Research Brief: 2012 Networking Spending Trends 5 Networking Skills Remain in Demand More than half (52%) of the organizations surveyed by ESG believe they will add new IT staff positions in Within that group, more than one-third (36%) plan on hiring network administrators, making this category the second-most sought after skill set behind information security (see Figure 5). This makes sense in light of the fact that organizations are building out larger and more complex network environments and, subsequently, struggling to keep up with all the manual processes and regular procedures. In fact, 18% of the total survey population reported a problematic shortage of network administration skills within their IT organizations. Figure IT Hiring Priorities You have indicated that your organization will add new IT staff positions in In which of the following areas will your organization hire those staff? (Percent of respondents, N=277, multiple responses accepted) Information security Network administration Help desk / service desk Server administration Application development Database administration IT architecture / planning Storage administration Data protection (i.e., backup and recovery) Business intelligence / data analytics Server virtualization / private cloud infrastructure Mobile application development Compliance management, monitoring and reporting Mobile device management Mainframe administration 39% 36% 32% 27% 25% 22% 21% 19% 15% 0% 10% 20% 30% 40% 50% The Bigger Truth Overarching trends such as data center consolidation, server virtualization, and the consumerization of IT are driving rapidly-increasing network scale and complexity. Left unchecked, these developments will eventually lead to a breaking point at which network teams can no longer effectively manage their environments. ESG calls this condition network discontinuity where legacy networking equipment and operations process are no longer an appropriate match for new business requirements and IT scale. ESG research shows that organizations are already feeling the impact of network discontinuity in their environments. Overall network infrastructure spending is increasing, more network administrators are being hired, and organizations are concerned about their ability to effectively manage the network and its security. As organizations continue to 5 Source: ESG Research Brief, 2012 IT Staffing & Skills Trends, February 2012.

6 Research Brief: 2012 Networking Spending Trends 6 consolidate data centers and IT assets, it will be imperative to ensure that all applications and services are delivered with appropriate quality of service and a satisfactory end-user experience. This is leading to more organizations increasing their spending on WAN optimization technologies. Most importantly, organizations should recognize that as server virtualization environments continue to mature and, in some cases, serve as the foundation for private cloud deployments, the network must be an enabler, not a bottleneck, to the business. By making the appropriate investments today, organizations will be better prepared to meet the changing and often unforeseen IT and business requirements of tomorrow. All trademark names are property of their respective companies. Information contained in this publication has been obtained by sources The Enterprise Strategy Group (ESG) considers to be reliable but is not warranted by ESG. This publication may contain opinions of ESG, which are subject to change from time to time. This publication is copyrighted by The Enterprise Strategy Group, Inc. Any reproduction or redistribution of this publication, in whole or in part, whether in hard-copy format, electronically, or otherwise to persons not authorized to receive it, without the express consent of the Enterprise Strategy Group, Inc., is in violation of U.S. copyright law and will be subject to an action for civil damages and, if applicable, criminal prosecution. Should you have any questions, please contact ESG Client Relations at (508)