Industry Voices—Raynovich: SD-WAN market hits the gas pedal

The software-defined wide-area networking (SD-WAN) market is in an accelerating state of expansion, and could represent the most strategic enterprise and service provider networking platform in another decade, say enterprise end users and service providers alike. 

That's what I've found after surveying hundreds of enterprise end users, services providers, including detailed interviews. In Futuriom's just released 2019 SD-WAN Growth Report, Futuriom now expects $2.2 billion in SD-WAN platform and tools revenue by 2020, $2.75 billion in 2021, and​ $2.5 billion by 2022. This forecast was built using a bottom-up model that including collecting revenue estimates from dozens of industry sources. Incumbent networking vendors, startups, and service providers are all poised to benefit from this growth, and they are excited about moving toward a more nimble software delivery model and annual recurring revenue (ARR) business model upon which most SD-WAN services are built.

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Source: 2019 SD-WAN Growth Report, Futuriom

Why is this happening? A new paradigm is emerging. Enterprise end users are tired of adding expensive hardware and proprietary solutions every time they want to add a feature or new functionality to their WAN. SD-WAN platforms enable them to manage and update network functionality with software from the cloud. They also have features that can improve the use of existing WAN connections, such as faster routing of cloud applications. 

On the service provider side, SD-WAN represents an opportunity to quickly build and deliver new software services without requiring complicated hardware and system upgrades. Service providers like this because they believe it will make them more nimble in bringing new networking services, including all-important cybersecurity services, to market. 

Top SD-WAN drivers

There are a few reasons why SD-WAN fits the unique characteristics of enterprises looking to buy connectivity, network management and applications from the cloud. The business world has been conditioned to buy IT services, on-demand, from the cloud. Now enterprises want to buy WAN from the cloud – rather than have it controlled by service providers or hardware vendors seeking customer lock-in with proprietary equipment on expensive private lines. 

In surveys and interviews with end users, the top drivers for adopting SD-WAN often include better network security, streamlined management via cloud software, and the power to automate with cloud orchestration.

Those buying SD-WAN services also believe they can reduce the cost of their operations but optimizing bandwidth by using the WAN optimization, de-duplication, and link balancing features that are common to many SD-WAN solutions. The combination of bandwidth optimization and better management tools means that SD-WAN has the potential to lower both operating costs (opex) and capital expense (capex) of managing enterprise WAN connections. 

All of this has made SD-WAN, or cloud-delivered WAN, a dominant growth area for enterprise communications services. Enterprises will buy SD-WAN to reduce the complexity in configuring branch-office devices, routing schemes, and network addresses. With SD-WAN, much of these functions can be abstracted into the cloud and managed by the service provider or an enterprise manager using a cloud interface, rather than using proprietary networking equipment. 

Vendor shakeout ahead

Growth markets draw interest from the main competitors. That may be why there are now at least 50 vendors engaged in the SD-WAN market. Futuriom has zoomed in on the top 12-14 players we believe will succeed, which include both large networking incumbents and startups. 

Based on our market, the vendors leading in revenue traction likely include Aryaka Networks, VMware/VeloCloud, Silver Peak, and Cisco/Viptela. Although in some cases, the reporting from larger vendors such as Cisco is opaque and difficult to gauge, because Cisco and other hardware vendors often mix in software-based SD-WAN revenue with licensing and sales of their router portfolio. 

Additional vendors distinguishing themselves in the “Top Ten” of the more than 40 SD-WAN software and tools vendors include Cato Networks, CloudGenix, Cradlepoint, Fatpipe Networks, Nuage Networks, and Versa Networks. Futuriom believes most of the players in this group will hit at least $50 million to $75 million in revenue this year -- perhaps much more in some cases. 

Startups have been a key component of the market. For example, there have already been two major acquisitions in the SD-WAN market, including Cisco's purchase of Viptela for $600 million in cash in 2017. VMware closed on the purchase of VeloCloud in 2018 for about $450 million, though incentives will likely take that higher. A number of startups remain active in the market, growing revenue successfully. 

In my next column for FierceTelecom, I'll write about the strengths and weaknesses of specific vendors, including more insight into future M&A activity in this space. 

R. Scott Raynovich is the founder and chief analyst of Futuriom. For two decades, he has been covering a wide range of technology as an editor, analyst, and publisher. Most recently, he was VP of research at, which acquired his previous technology website, Rayno Report, in 2015. Prior to that, he was the editor in chief of Light Reading, where he worked for nine years. Raynovich has also served as investment editor at Red Herring, where he started the New York bureau and helped build the original website. He has won several industry awards, including an Editor & Publisher award for Best Business Blog, and his analysis has been featured by prominent media outlets including NPR, CNBC, The Wall Street Journal, and the San Jose Mercury News. He can be reached at [email protected]; follow him @rayno.

Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceTelecom staff. They do not represent the opinions of FierceTelecom.