End-user spending for SOHO routers (under $1,500) has dropped from $430 million in 2004 to just $377 million in 2007 as Unified Threat Management (UTM) devices are filling the needs of small and medium businesses looking for a simple, cost-effective way to enhance their data communications capabilities. These devices, which combine managed security and routing capabilities in a single box, offer an attractive alternative to traditional routers and provide effective and efficient access to data resources within small business environments.

Within the enterprise, routers remain critical for managing traffic between branch offices and headquarters' datacentres. However, in SMB environments, connectivity to the Internet is often sufficient. "Although the demand for routing capacity continues to grow, just as important is the concurrent increases in security requirements," said Charles Kolodgy, research director, Security Products, IDC. "This has resulted in a competitive market dynamic that has been largely overlooked by network equipment vendors. Router vendors are being forced to add a litany of new security services to router products in an attempt to compete more effectively with these robust UTM devices."
Additional findings from this study include the following:

• Consolidation between networking and security will continue in the low-end and SOHO markets.
• Single sites whose connectivity priorities are focused on secure and reliable connection to the Internet are the best candidates for UTM devices.
• SOHO router ASPs have been in decline since 2004, while UTMs of the same price segment have experienced robust growth trends.
• Business model differences between router sales and UTM subscription services enable the acquisition of UTM products competitive with (or even below) that of routers of a similar class.
• The battle over the WAN gateway will escalate as both router and UTM vendors race to add new service options such as WLAN, IP telephony, and application acceleration.

This study, Is UTM a Threat to Routers? We Think So! examines current and future trends in the router and unified threat management markets to identify the competitive dynamics between them. The focus of this research is on routers and UTM devices that sell for under $1,500. By examining shipments of routers and UTM devices tracked in IDC's worldwide router and security appliance trackers, we were able to compare differences in end-user spending over the past several years. It is important to note that end-user revenue for UTM devices excludes subscription revenue paid by customers after the initial trial subscription runs out (typically after one year).