Cloud Connectivity Drives SD-WAN Growth

The software-defined wide-area networking (SD-WAN) market continues to pick up steam as enterprises and service providers alike deploy the technology in an effort to more efficiently connect to the cloud. Futuriom research projects this market to reach $1 billion by 2019 and $1.6 billion by 2021.

As more users connect directly to cloud applications, moving away from private data centers, there's a need to provide more efficient connectivity over public internet connections. Many SD-WAN technologies use software routing, WAN optimization, and broadband load balancing to increase the efficacy of using public broadband.

As I wrote about a few months ago, web traffic is exploding due to demand for corporate cloud applications, as detailed in data from Aryaka's State of the WAN report. Between 2015 and 2016, enterprise WAN traffic grew by nearly 156% in the Americas, 221% in EMEA, and 247% in APAC as a whole, according to the  report. 

What's interesting about SD-WAN is that a wide range of technology vendors -- as many as 20 or more -- are selling to both enterprises and service providers.  Enterprises are buying SD-WAN, either as a service or in do-it-yourself mode, to lower the capex and opex of their WANs and speed up access to cloud applications. Service providers are buying SD-WAN technology platforms so that they can offer their own SD-WAN services to their enterprise customers.

Here are three primary drivers for SD-WAN technology:

A big trend in enterprise WAN is using SD-WAN technologies to augment, or in some cases, replace legacy WAN technologies such as MPLS. While MPLS is reliable and efficient for connecting private data centers to the WAN, it doesn't help improve connectivity to the public cloud. Internet-based SD-WAN is starting to gain traction because the technology is starting to mature and enterprises are exploring ways to optimize WAN connectivity and costs.

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The flexible, software-based approach of SD-WAN is right for the changing dynamics of the WAN market, which includes a shift to the cloud and SaaS services. Furthermore, broader trends to reduce on-premises equipment and software means that enterprises are looking to purchase more services that offer network-on-demand capabilities.

These drivers are all contributing to market demand. Futuriom gathered data from both SD-WAN software and services players and industry sources to gauge demand. A bottom-up revenue forecast indicates that growth in SD-WAN technology tools and network-as-a-service (NaaS) revenues will exceed 30% annually for the next five years, accelerating to 75% to 100% growth rates through next year.

On the vendor side, this is a crowded space, with at least 12 significant contenders in the market, including startups such as Aryaka, CloudGenix, Cradlepoint, FatPipe, Silver Peak, TELoIP, VeloCloud, and Versa Networks going after this growing revenue. At the same time, large equipment and software vendors including Cisco, Citrix, Huawei, and Nuage Networks also have SD-WAN offerings.

Although it’s by no means a simple task, many of the emerging SD-WAN players have made progress from slideware and the lab and into real customer deployments. The next few years will result in a shakeout as more than a dozen SD-WAN startups are reduced to a core of five to six successful players that could have the wherewithal to stand on their own. The remainder will be sold to service providers looking to build their own SD-WAN solutions or larger players that would like to consolidate the market. It’s going to be interesting to watch as SD-WAN evolves into a more than $1 billion market in the next few years.