Did Europe miss the SD WAN bus?

2017 may well become the year that SD WAN (software defined wide area networking) routing and the SD WAN edge-to-cloud infrastructure paradigm is adopted by SMEs globally. It may also be the year where European telco manufacturing loses a big chunk of the global routing market to nimbler North American and Asian rivals. IDC’s most recent market figures estimated the global market in 2015 for SD WAN products and services at $225 million rising to $1.9bn this year and growing at 69% CAG through to 2021 and thus hitting $8bn.

The SD WAN industry now counts over 40 manufacturers with global distribution potential. They include all the incumbents (Nokia, Cisco, HPE, Huawei), entrants from neighbouring technologies like WAN optimisation (Silver Peak), network security vendors (Barracuda), network virtualisation (Citrix), MPLS service (Aryaka), to pure plays like Viptela, Talari and Peplink. This gives customers a wide range of choice – dictated by configurations, prices, availability, existing infrastructure and demonstrated capabilities in similar vertical industry configurations.

Most importantly, the shift to SD WAN can come at a low CapEx level and lower than hitherto OpEx costs – all with improved network performance. This is achieved by combining (and thus achieving a higher utilisation level) of the company’s existing WAN access channels (fixed, cellular, point-to-point, satellite, etc.). SD WAN creates that single virtual access – and provides the software to give quality of service (QoS) to best effort links – thus doing away with costly multi-protocol labelling service (MPLS) support for latency sensitive, mission-critical applications.

An SD WAN infrastructure allows a company to centrally configure and manage their branch office access to cloud resources.
Obviously, with that many companies emerging on the market the coming years will see consolidation down to the 5-10 global players that this market will support, once it reaches maturity in 2020. This may deter large enterprises from going down the SD WAN route just yet – they see this as a vetting period. But for the SMEs, now is a good time to engage with the SD WAN vendors who are eager to develop industry specific configurations.

European SD WAN players?

Nokia with its Alcatel take-over also acquired the US-based SD WAN company Nuage Networks. This company helps service providers including BT, China Telecom, Telefonica, and Telia to deliver fully automated and self-service SD-WAN systems. These allow enterprise customers to connect their users quickly and securely to applications in private and public clouds. Nuage Networks is the only major ‘European’ foothold in this exploding market – the rest is, to all intents and purposes, niche. In fact, I have only found two European vendors in this space:

  • Swedish vendor Icomera develops hardware/software solutions for passenger Internet access on trains and planes, as well as fleet management and telematics for remote monitoring.
  • In Germany, Viprinet’s hardware/software concatenates different types of access media (such as ADSL, SDSL, UMTS / HSPA+ / 3G, and LTE / 4G) for mobile, ad-hoc and remote location connectivity.
  • Icomera and Viprinet specialise in mobile network access

    Icomera and Viprinet specialise in mobile network access

Bypassing the stumbling blocks

The SD WAN market is price sensitive, very competitive and capital intensive. So to enter this market, the VC community needs to be more active, as do public venture funds. Hitherto, we have seen little VC interest in this field, and what interest there is does not seem to be in for the long haul. They prefer the usual 3-year get-in, get-out strategy. Public funding including the huge EU funds in the Horizon 2020 program also seem to have bypassed this market opportunity.

The traditionally strong European telco industry has never played particularly well in the consumer and small business space. So manufacturers like Ericsson, Nokia and Siemens may not feel it is in their sweet spot. However, SD WAN is very much software based. Companies like Talari in the US generate as much revenue from software and services as it does from hardware sales.  So, European software companies in the logistics and automotive business could build a new line of business in SD WAN using standardised hardware.

The European auto industry should also be very interested in this technology where mobile connections play a key role. Developing 5G-enabled SD WAN could align interests between telco vendors and auto manufacturers.

Now is the time for European software vendors to step up to this challenge. Not only are there the relatively straightforward examples as outlined above, but the emerging world of the internet of things (IoT) also offers a whole raft of new and lucrative opportunities.

It would be a pity to see such a green field site of new opportunities be defaulted to the incumbent US companies or the highly dynamic and hungry Asian companies.  Europe can make a strong play, looking back to its heartlands of strong software innovation.