This syndicated post originally appeared at Network World Zeus Kerravala.

IHS Markit report shows the two companies have
jumped out and are leading the SD-WAN market.

Research firm IHS Markit recently released its Data Center Network Equipment market tracker report for Q4 2017 by analyst Cliff Grossner, which includes Software-Defined WANs (SD-WAN). I don’t normally comment on other industry research, but I have tremendous respect for Grossner, and his quantitative numbers are among the best. So, I felt a deep dive into his findings on the SD-WAN market was worth the effort.

It’s important to note that Grossner’s numbers include SD-WAN appliance and control management software revenue and not services, so his numbers will be smaller than other firms, such as IDC, which has the market pegged somewhere in the billion-dollar range. Neither is better than the other, per se; they’re just different.

SD-WAN market sees impressive growth

The first important thing to note is that the SD-WAN market grew an amazing 18 percent quarter over quarter (QoQ) in the third quarter of 2017. All regions were up, as well, with North America growing 11 percent and accounting for the lion’s share of worldwide revenue (60 percent). The Europe, the Middle East and Africa (EMEA) region was 24 percent of revenue and rose 17 percent. Asia Pacific experienced 54 percent QoQ growth and made up 14 percent of worldwide revenue, and the Caribbean and Latin America (CALA) region saw 107 percent growth but is only 2 percent of revenue.

The fact that every region saw growth is a strong indicator that SD-WANs are indeed disrupting legacy networks and should soon be part of every service provider’s portfolio.

Leading SD-WAN vendor: VeloCloud

From a vendor perspective, VeloCloud, which was acquired by VMware during the third quarter, leads the way with $26 million in revenue (22 percent of share). The fact that VeloCloud is leading the pack should be no surprise given it was one of the first start-ups to have a commercially available product and has been perhaps one of the industry’s biggest evangelists for change.

It will be interesting to see what VMware does with VeloCloud. Grossner’s speculation is that it will remain a software-only company that is hardware agnostic. Given how strong VMware has pushed the software-only story with NSX, I agree with this thesis.

Aryaka the fastest-growing SD-WAN vendor

The number two vendor is currently Aryaka at $21 million (18 percent of share). Now that VeloCloud has been acquired, Aryaka becomes the largest independent SD-WAN vendor with more revenue than many of the established vendors, such as Cisco, Citrix, Silver-Peak, Riverbed and Viptela (acquired by Cisco).

Aryaka’s differentiator is that it has a global, cloud-native, private network-based SD-WAN that enables it to deliver significantly better application performance over long distances than other suppliers that use internet links. Proof of this is that Aryaka will commit to SLAs where many SD-WAN providers will not, as broadband is typically “best effort.”

Aryaka also delivers SD-WAN as a service, which appeals to global organizations that want to consume SD-WAN instead of having to contract with possibly hundreds of broadband providers. The managed service approach lets its customers purchase the network services similar to the way it buys cloud services.

Rather than being acquired, Aryaka has its sights set on an IPO and remaining an independent vendor. It has over 700 global enterprise customers, and based on the IHS numbers, it is the fastest-growing SD-WAN vendor.

Silver-Peak a strong contender

The number three vendor — and the only other one over $10 million in revenue — is Silver-Peak at $14 million, which equates to about 12 percent market share. The vendor is best known as a WAN optimization vendor and was the first vendor in this class to aggressively pursue an SD-WAN strategy. At the end of this quarter, Silver-Peak had more than 500 customers, many of which were customers of its WAN optimization product.

In his report, Grossner indicates that the revenue for Silver-Peak includes its Boost product, its WAN optimization module for EdgeConnect, which he estimates is about 25 percent of revenue. This may seem to artificially inflate Silver-Peak’s numbers, but it’s been my thesis that WAN optimization should be part of an SD-WAN deployment. Silver-Peak has also been attacking the traditional router market, which gives it another entry point.

Keeping an eye on Viptela

The other vendor worth noting is Viptela, whose revenue for the quarter was $9.5 million, and when combined with Cisco’s $3.1 million, will push it over the $10 millionmark. The acquisition has created a tremendous amount of confusion as to whether Viptela means Cisco will kill off iWAN. From my conversations with Cisco, I can definitively say that iWAN and Viptela will eventually come together, but Cisco needs to provide more clarity here to clear up the confusion.

There is certainly a plethora of options available to buyers today, with no two vendors being alike. For businesses deciding on an SD-WAN solution, don’t test potential solutions on price or technical specs. Instead, evaluate the solutions on what matters — application performance — because that’s what will impact the business the most.

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Zeus Kerravala

Zeus Kerravala is the founder and principal analyst with ZK Research. Kerravala provides a mix of tactical advice to help his clients in the current business climate and long term strategic advice.
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