A Changing UPS Tide: It’s Time to Target Networking Gear

Every few years Bill Gates used to write a long memo to Microsoft employees about some inflection point that was going on in the industry and what Microsoft needed to do to take advantage. The most famous was probably the nine-page 1995 memo titled “The Internet Tidal Wave,” that talked of the changes the Internet would bring and how Microsoft needed to respond.

I believe Schneider Electric is at one of those inflection points today. But don’t worry – it won’t take me nine pages to explain it.

Simply put, we need to shift gears. Whereas we once sold UPS systems mainly to protect servers, we now need to also focus on networking equipment, including routers and switches. The reason is two-fold and the first one couldn’t be simpler: server and PC sales are on the decline while networking equipment sales are robust.

According to a press release IDC issued just a few days ago, the worldwide server market decreased 7.7% year over year in the first quarter of 2013, to $10.9 billion.  And this was not a one-time event, as IDC makes clear:

This is the fifth time in the previous six quarters that the server market has experienced a year-over-year decline in worldwide revenue. Server unit shipments decreased 3.9% year over year in 1Q13 to 1.9 million units as consolidation continued to be a strategic focus for many large and small customers around the globe.

It’s a similar story with PC sales, which IDC expects to fall 7.8% in 2013 as users turn instead to tablets and smart phones.

The worldwide Ethernet switch market, on the other hand, grew 7% in the fourth quarter of 2012 (the most recent for which data has been published), to $5.7 billion, while the router market increased 5.6% for the quarter, IDC reports.  Anecdotally, I’ve seen reports from VARs showing even more robust growth in the networking sector, with increases between 17% and 20%.  Whether they’re including additional components, such as wireless gear, or just having more success than average I don’t know. Either way, the point is clear: networking gear is heading up while servers and PCs are flagging.

The second impetus for our focus on UPS backup for networking gear is that with the growth of cloud computing, a company’s Internet connection becomes even more important. When IT services are provided in the cloud, suddenly all users rely on the Internet simply to get any work done. That means the networking equipment that supplies that Internet connection has to be protected and available, as do all the switches, routers and wireless access points that connect users throughout a building.

To me, all this spells one word: opportunity. For the past 20 years, together with our partners, we’ve built a global, multi-billion business on the back of selling power protection for servers. The opportunity going forward is even greater if we can successfully shift gears to offering protection for networking equipment as well as servers – perhaps as much as 10 times greater based on some figures I’ve seen on server shipments vs. networking equipment.

This shift is already happening, as we know some customers are already protecting their networking gear with our UPS systems. They get it. It’s up to you, our partners, to seize this opportunity and educate the rest of our mutual customers on the importance of protecting their networking equipment.

You’ll be hearing more about this topic in coming weeks and months, as we’ll be rolling out UPS solutions specifically geared for the networking market. It’s an exciting time, to be sure, so stay tuned.



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