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Revenue for SD-WAN (software-defined wide area network) appliance and control and management software surged by 75% year on year in the fourth quarter of 2019, partly as a result of service providers offering enterprise SD-WAN in managed-service bundles, according to research by analyst Omdia.
SD-WAN market revenue reached $639.5m in the fourth quarter of 2019, up from $364.5m in the equivalent period in 2018, the Omdia Data Centre Network Equipment Market Tracker calculated. For the entire year of 2019, SD-WAN revenue grew by 90% year on year, reaching $2bn, up from $1.1bn in 2018.
One of the key drivers for growth in the fourth quarter was the trend for service providers to act as sales channels for SD-WAN suppliers’ over-the-top systems by offering SD-WAN technology as a managed service, bundled with other services. Another factor driving growth was the development of an SD-WAN standard by the Metro Ethernet Forum (MEF).
Omdia said an important side-effect of the MEF standard was that service providers could offer their customers a choice of SD-WAN suppliers all managed from the same back-end service-orchestration software.
Another key trend was that application delivery controller (ADC) suppliers were working to transform their businesses. Comparing this market on a quarter-on-quarter basis, Omdia’s research noted that software-defined enterprise WAN revenue increased by 21% in the fourth quarter, while ADC as a service (ADCaaS) revenue increased by 23%.
By contrast, virtual software-only ADC appliances grew by 2% quarter on quarter, while virtualised appliances fell by 1%. Hardware appliance revenue slipped by 2% compared with the previous quarter.
As regards the leading market players at the end of the fourth quarter, VMware continued to record the highest revenue, taking 16.3% of the revenue market, followed by Cisco (13%) and Fortinet (12.3%). Omdia noted that VMware was striving to replicate its US success around the world and believed its recent Nyansa acquisition will extend the reach of its SD-WAN offering from the branch edge to the client.
Cisco’s effort to migrate its existing router client base to SD-WAN was said to be proceeding at a healthy pace, with the cloud a strong driver for SD-WAN adoption.
Fortinet was found to be gaining significant market share following a strategy of selling SD-WAN appliances as part of a security bundle. An important differentiator was that its latest custom ASICs bundle a competitively priced next-generation firewall with secure SD-WAN.
Bunched together below the leading pack were Aryaka with 7.8%, Silver Peak with 7.7% and Versa Networks with 7.5% of overall revenues. Huawei (4.8%), Nuage Networks (4.4%), Oracle (3.8%) and CradlePoint (3.7%) completed the top 10.
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“The SD-WAN market is moving toward larger scale and globalised deployments,” said Cliff Grossner, senior research director, cloud and datacentre research practice, at Omdia. “In the fourth quarter, vendors released new SD-WAN features designed to support deployment at scale, allowing multi-tenancy where enterprises can define sub-regions for their WANs that are to be managed independently.
“The maturity of the SD-WAN market is no longer in question. Although there is still a lot of education to do in some markets, the business has reached a stage when SD-WAN vendors are focusing on explaining to customers why a particular offering is best and how it aligns with strategic corporate directions. The net effect of this is that sales cycles are becoming shorter.”
Looking at the prospects for the market, and even taking into consideration the Covid-19 outbreak and the subsequent surge in home networking, Omdia said it was still keeping its original forecast for 2020 in place. It said several suppliers had indicated a significant increase in orders and deployments of SD-WAN appliances in residential locations to connect and secure remote workers, and security application visibility and performance tuning were key areas it was exploring for 2020 growth.
But Omdia cautioned that even as suppliers need to address buyers that want a managed service bundled with connectivity and possibly security, security provided by the SD-WAN supplier is sometimes not adequate to serve the needs of all buyers. It advised that bundling with security should include the option to choose a third-party security supplier.
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