August 21, 2018
By Kurt Marko
SD-WAN shouldn’t be a new concept to partners since we have previously covered the basics, along with the most common SD-WAN use case for remote site connectivity. However, SD-WAN is a dynamic field and both the market and technology have subsequently evolved, as small, pure-play startups have been acquired by traditional IT vendors and early SD-WAN users have increased their understanding and usage of the technology, prompting demands for new features.
In an upcoming report, we will update trends in SD-WAN technology, including how the maturing market is now focused on the management challenges of large-scale, production deployments. In the meantime, partners should be laying the groundwork for new SD-WAN-based services since customer interest and resulting usage is set to explode.
Size estimates for the SD-WAN market vary widely due to imprecise and inconsistent product categorizations and the difficulty of measuring any emerging product type, but everyone agrees on two things: The market is small and it’s rapidly expanding. Gartner figures SD-WAN sales will grow 59 percent compounded annually through 2021, reaching $1.3 billion, which implies a current size of about $200 million. Alternatively, IHS Markit is more optimistic, estimating SD-WAN revenue will hit $862 million this year, up 12 percent in the last 12 months. It has an equally rosy prediction for 2021, expecting total SD-WAN sales of $3.3 billion, or an implied CAGR of 40 percent. Splitting the difference, it’s safe to assume that SD-WAN sales will be about $500 million this year, growing to about $2-2.5 billion over four years. Yes, it’s a small market, but one with plenty of upside for vendors and service providers that establish a leadership position now that we’ve passed the early-adopter phase.
The past year or so has seen two major IT vendors, Cisco and VMware, acquire pure-play SD-WAN startups, but the market consolidation is unlikely to end there as other vertically integrated behemoths look to enter the SD-WAN market. So far, SD-WAN is dominated by product, not service providers, which leaves ample opportunities for partners to enter by bundling the right technology, carrier circuits and services.
As our new report discusses at length, SD-WAN products have moved beyond the basics of stitching multiple WAN circuits into a logical circuits, to concentrate enhancements in two areas:
Central control, management and security policy enforcement over all links and virtual circuits in an organization, or those operated by a service provider, from a single management console.
The ability to add features and insert network and security services such as WAN optimization, firewalls, content filters or data-loss prevention systems on any link by using virtual network functions (VNFs).
While central management consoles with Web interfaces and customizable dashboards are the norm, an emerging area of product differentiation is the use of AI – notably machine learning – to digest network data for use in two ways: routing optimization and path selection, along with anomaly detection and predictive management of network configuration. We also note that intent-based network (IBN) management is making its way to SD-WAN to simplify configuration through natural language semantics.
Our report also includes some advice for how partners can exploit SD-WAN, virtual servers and storage, along with cloud services, to become a virtual network operator in a model some call the software-defined carrier (SDC). Like a cellular MVNO, an SDC insulates customers from the details of physical carriers and circuit types behind a software and service abstraction layer. Indeed, the versatility of today’s SD-WAN products when paired with other virtual services offer many opportunities for partners to create valuable new business services that provide strategic competitive differentiation.
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