Government and the education sectors increased investment in networking amid an overall decline in the Australian switching and routing markets in the third quarter of 2013, an IDC report found.
Compared to the same quarter in 2012, the switching market declined 17 per cent and the routing market declined 15 per cent in Q3, IDC said.
View our interactive NBN map
"Deals were fewer and revenue was lower than the same period last year," the analyst firm said. "Vendors also saw port count increasing but with limited or no revenue increase indicating more cut-throat pricing in the market."
However, government was one sector that bucked the trend, IDC said.
"This momentum was a result of an uptick in projects resulting from a prior period of cautious investment activity between late 2012 to early 2013.
"Traction in Q3 was especially pronounced because this was the quarter in which a majority of policies for the next four years crystallised within government departments, leading to increased openness to spend."
At the same time, the increasing importance of video streaming and online-based learning drove growth in the education sector, IDC said.
IDC analyst Tafadzwa Marasha attributed the overall decline in routing and switching in part to "cautious spending from organisations that are conscious of [software defined networking (SDN)] and, are waiting for a clear standard to emerge before proceeding with investments".
While most telecom equipment vendors have started to sell first-generation SDN product enhancements, IDC said the various vendor approaches to SDN are "fragmented, with different vendors still leveraging proprietary architectures for their products".
Also, IDC noted that the government's NBN strategy continues to be surrounded by uncertainty.
"The market remains hopeful as the new government has opted to look at alternative technologies for the network other than the originally proposed fibre-to-the-home model," the analyst firm said.
IDC said it saw more interest in converged offerings in Q3 2013. "Vendors with both wired and wireless products have already started offering products here, while pure play vendors are starting to form go-to-market alliances," Marasha said.
IDC said it expects the rise of 802.11ac wireless LAN standard will drive some switching growth in the future since it will require stronger backbone infrastructures.
Comparing the vendors, IDC said Cisco continues to hold the largest market share for switching, with 62 per cent of the revenue. HP, Alcatel Lucent, Citrix and F5 were the closest challengers, it said.