Network managers can switch on to Layer Two (L2) bargains as rival vendors begin to slug it out in an aggressive price war, according to research group, Dell'Oro.
The US company analysed 1998 fourth quarter sales of switches and revealed a huge boost in the Layer Three market, which led it to predict massive price cuts for L2 equipment.
John Spruce, technology support controller at Nationwide Building Society, is looking forward to costs being slashed.
"We don't need L3 at the moment so we'd be pleased by L2 price cuts so we can get the benefits before our technology changes again," he said.
Bruce Medhurst, IT director at NIG Skandia, endorsed this view: "If companies are making huge margins then it's only right they cut the price, but we wouldn't want a commoditised market to stifle innovation."
Greg Collins, Dell'Oro analyst, stated: "The vendors know that the market is still elastic so if they cut prices it could still help sales. When vendors sense that buying is slowing down they will have even more incentive to cut prices."
However, in contrast to the L3 market, which doubled in Q4, L2 increased by less than one third.
The fourth quarter last year saw dramatic revenue increases of 84 per cent from L3 Ethernet switch sales. 3Com is currently leading in terms of L2 fixed Fast Ethernet switch sales against main competitors, Nortel and Cisco.
The report explained that users are changing their purchasing habits. At one third the price of L3, fixed L2 is seen as a compelling desktop solution. It predicted: "Manufacturers will aggressively market inexpensive, high speed desktop connections in order to drive sales of high end, higher margin Gigabit and L3 switches."
However, L3 switches are edging into the high end due to a "significant increase in functionality" over L2 offerings, with a "relatively small 65 per cent price premium".
Steve Last, technology manager at Nissan Motors, agreed: "We're adding L3 switches to the backbone. L2 is becoming increasingly less attractive because of the extra traffic we've got. We'd like to buy as cheap as possible, but unfortunately the latest kit doesn't come at the lowest price."
For more stories see 7 April issue of Network News UK
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