Data center interconnect (DCI) is reshaping metro and long-haul optical networks. The next wave of data centers will be constructed with a new architecture, ushering in a new epoch for data centers and driving demand for optical components.
Internet content providers (ICPs) continue to investment billions of dollars in building millions of square feet of data centers and they plan to do more. They are expanding into new geographies and adding capacity to serve more bandwidth-intensive consumer and business applications, driving demand for data center square-footage requirements.
ICPs have moved on to “edge” data center construction. Smaller than the web-scale sites, edge data centers are situated closer to user populations to reduce latency and improve application performance. ICPs have also increased their investment in subsea cables for global DCI. The end result is DCI networks that feature a mesh of global subsea links, continental scale interconnect, and metro - campus interconnect right down to edge distribution nodes.
In addition, the market is on the verge of a horsepower upgrade inside the data center, enabled by higher capacity server ports and increased server density per rack.
ICPs have also pointed out that they want purpose-built DCI equipment for their needs. They have emphasized a specific set of capabilities required for networking: compact and stackable form factors; improved spectral efficiency; low power consumption; streaming telemetry data; open network control APIs; Layer-1 encryption; maximum unamplified reach; and automated dispersion management. ICPs represent a large and demanding market segment.
The vendors that can pull together a well-designed product meeting all the ICP requirements will maximize their opportunity in the fast-growing purpose-built DCI segment.
The major optical component opportunity is for 100Gbps short-reach optical transceivers. Inside the data center, the top of rack switches connects to spine switches via short-reach optical links, creating the intra–data center switching fabric. With the port speed and server density increase, the fabric will need to scale from the old 40G to the new 100G fabric. For the optical component community, the new generation of intra–data center fabrics represents a major high-volume opportunity.
For the intra–data center opportunity, the challenges differ. Ovum's view is that the demand side for 100Gbps short-reach closely approximates a step function. For the component vendors, one of the challenges will be to rapidly scale and bring on production capacity to match demand. Again, there will be a window of opportunity that the leading vendors will attempt to maximize.