Executive Summary

Networks have experienced an unprecedented rise in number in the last 5 years and now constitute one of the fastest growing areas of information technology (IT) spending in the UK and globally. Key Note estimates that the network market was worth £1.56bn in 1995, or 5.5% of the overall IT market in the UK. This figure is set to rise overall by an estimated 18.8% in 1996 (absorbing a fall in hardware prices of around 10%). There are around 5 million networked personal computers (PCs) in the UK today, and it is estimated that by the end of the century, 80% of computers worldwide will be linked to a network.

A network is a collection of computers linked by a common medium and software for the purposes of communicating, exchanging data and sharing common peripherals and applications. This report considers the market for hardware, software, and services involved in the implementation of local and wide area networks.

One of the underlying reasons for the rise in networking has been the growth in overall IT budgets as a result of the UK coming out of the recession. The UK was the fastest growing corporate IT market in Europe in 1995, growing by approximately 28% in the 5 quarters from January 1994.

The main impetus for networking products has come from the increasing dominance of client/server technology which is seen as a flexible and cost-effective way of distributing, processing and empowering end users. The growing trend towards teleworking and flexibility in working patterns has increased the demand for networks, allowing employees to connect `remotely' to the office database or to communicate with other employees using E-mail or groupware products. Another major factor has been the introduction of multimedia computing and the meteoric growth of the Internet.

Looking ahead, the rising trend towards networking is likely to continue unabated until 1998. By the end of 1995, 70% of organisations with over 500 employees had already installed local area networks (LANs), compared to approximately 35% of smaller companies. By the year 2000, most corporate computers are likely to be networked in some way to other computers and all PCs will be sold with network hardware and software as standard equipment, a trend which is already in evidence. An interesting development will be the entry into the market of the network computer (NC), enabling cheap connection to the Internet which may take a significant share away from the traditional PC market.

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