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Data center and DCI optics market: challenges and opportunities

22 May 2019 Timothy Munks

Data center optics connections are the backbone of performance and reliability, and their speed, reliability, capacity, and cost are crucial to successful operation. The optical network is rapidly growing and will continue to increase exponentially as the world demands more digital content and better, faster connections. Multiple applications are driving this growth, including mobile transport and enterprise digital transformation. To keep pace with bandwidth demand inside and between data centers, operators are looking closely at ways to solve the data center optics challenge: high-capacity, low-cost, energy-efficient optics that can be quickly and easily tested and deployed within an operating environment.

Driving the demand

Streaming video and augmented reality/virtual reality (AR/VR) are primarily responsible for bandwidth demand increase. In fact, Netflix accounts for 30% of bandwidth in North America and 15% worldwide. YouTube and Amazon Prime make up 58% of downstream traffic, and the AR/VR application market hit $1.8B in 2018.

Mobile transport and enterprise digital transformation are also generating a critical need for improved optics. 5G and IoT are fundamental to mobile transport expansion, and when 5G hits in the 2020s, IoT will have grown to billions of devices, including the major market segment of autonomous vehicles. Enterprises are increasingly digitizing and automating processes across markets worldwide, which is also forcing faster DCI development in a world of constant connectivity in standard business practices that extends to operations and consumers.

Problems and challenges

The growth in DCI optics is undeniable and welcome, yet there are many challenges the industry must face in the quest for high-capacity, low-cost, easy to implement, and efficient systems.

  • Unsustainable ROI curbing incentive for innovation
  • Evolving and multi-dimensional market with a variety of customer types, scale, applications, refresh cycles, system architectures, and operational requirements
  • Relentless pressure on bandwidth requirements
  • Pluggable optics a proven regular point of failure
  • Need for automated operations commissioning and testing
  • Major transceiver issues at a staggering 25% failure rate

The search for solutions

In the webinar Data center and DCI optics: A look ahead, IHS Markit and sponsors EXFO and Fujitsu Network Communications addressed the market outlook, with a deep dive into the current market, near- and long-term growth, challenges, and new options and solutions. These webinar sponsors are among the many solutions providers working to rectify some of the most pressing challenges in the market from multiple viewpoints, including major movement in transport layer evolution and emerging interfaces for data centers. Developments in software and hardware are quickly coming to market to address various challenges, from hyperscale transport to remote testing and commissioning, and much more.

For in-depth coverage of the data center optics market, please watch the full webinar on demand at

The good news is that the fundamental basics are in place for continuing growth and evolution in optical networks. But faster innovation is required, and the race is on to deliver the kind of network infrastructure that will truly deliver in our hyper-connected future.

Timothy Munks is principal research analyst for optical networking technology at IHS Markit
Posted 22 May 2019


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