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Ethernet Share of Channel Revenue Shifts Up

By Khali Henderson
November 11, 2013 - Article

Ethernet’s share of partners' revenue is shifting up, according to the results of Channel Partners' third annual survey of the indirect channel’s current and projected sales activity with Ethernet services. The results of the survey, along with year-over-year comparisons, are published in a September report, "Ethernet Services & The Channel: State of the Market 2013."

Most (five in 10) partners responding to the inaugural survey in 2011 said Ethernet accounted for 1-20 percent of their revenue. In 2012, that number dropped to four in 10. That's because Ethernet is contributing more to partners' pockets. The number of agents reporting that Ethernet accounted for 21 percent or more of their annual revenue rose significantly year over year, from three in 10 in 2011 to nearly five in 10 a year later.  And, the number of partners that reported no revenue from Ethernet sales also decreased by a third year over year — from one and a half in 10 to one in 10.

Respondents predicted more of the same in 2013, with an increasing portion of their revenue expected from Ethernet services. The number of respondents estimating Ethernet to contribute 1-20 percent of their revenue fell to just over 2½ in 10 while the number expecting more than 21 percent of their revenue from Ethernet increased to more than six in 10. The number of partners expecting no revenue from Ethernet sales is expected to decline to less than one in 10.

Interestingly, the number of partners that expect more than half of their revenue to come from Ethernet services will more than double, reaching 22 percent, from 2011-2013.

These bullish forecasts are in line with analyst predictions for the business Ethernet services market. Insight Research Corp., for example, reported in September that enterprises in the United States will spend more than $49 billion over the next five years on Ethernet services provided by carriers. Small and medium businesses comprise the fastest-growing segment, the firm found, adding that overall industry revenue should ramp up from about $5.5 billion this year to more than $13 billion by 2018. That makes for a 19 percent compound annual growth rate.

Indeed, customer demand was cited by partners as a primary driver for adding Ethernet services to their portfolios. Ethernet is seen as a value-based solution to the increasing bandwidth requirements due to its wide availability both over different access and transport methods but also from a diverse set of supplier sources. It also is viewed by many partners as a must-have due to competition in the market and also as an opportunity to move up market to serve ever-larger clients and more sophisticated applications types.

The primary downside — and it’s a big one — is the wide variance in time to install. Partners need to look for providers with good track records on this front and/or work very closely with suppliers to set expectations accurately for valued customers.

Khali Henderson is editor-in-chief of Channel Partners.
Twitter: @khalihenderson


Get your copy of the report "Ethernet Services & The Channel: State of the Market 2013" from the Channel Partners Resource Center.

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