SD-WAN Roundup: 'Not Everyone Is Going to Make Money' in Crowded Vendor Race

Everyone’s selling SD-WAN these days.

Our latest column observes the mass entrance of IT and telecommunications companies into the market — and the migration shows no signs of slowing down. We spoke to an analyst about why we’re seeing such a logjam of SD-WAN branding, and we chatted with a partner about how to sell the technology.

A recently published Dell’Oro Group study predicts SD-WAN sales to average 35 percent growth for the next five years. The rate is high, but a Dell’Oro analyst notes that the market is on track to hit $2.2 billion in 2022, with a quarter of that number in hardware and the remainder in software.

Dell’Oro’s Shin Umeda

Despite the rapid growth rate, the industry remains relatively small, according to Dell’Oro’s Shin Umeda. He says enterprise routing is worth more today at approximately $3 billion.

“It is relatively small. There are a lot of vendors here who are vying to share a $2 billion market in four years. Divide that by 40 vendors. That’s not a lot of money to go around,” said Umeda, who leads market research for router and carrier Ethernet switch, NFV, and SD-WAN.

That being said, more and more businesses see the value of the technology. Umeda tells Channel Partners that the most important driver is the changing nature of enterprise traffic. Traffic traditionally traveled from branch office to data center, but now the movement is from branch offices to cloud-based applications and cloud-based infrastructure.

Moving directly to the cloud “circumvents” the traditional architecture and removes steps. Connecting the cloud requires additional bandwidth with an increased cost, making the internet an increasingly popular route for those applications. SD-WAN’s ability to harness the internet has made it an attractive option, according to Umeda.

The business customer must still address problems that the internet’s shared infrastructure presents. Security is of course a hot topic, and many enterprises have policies that prevent particular applications from leaving the private network. The need to send traffic through multiple connections leads customers to another task SD-WAN does well: application path control.

Dell’Oro reports that enterprises will comprise the biggest piece of the SD-WAN market in the upcoming years; meantime, the study projected a 40 percent annual growth rate for the deployments of SD-WAN as a managed service. And the fact that service providers and their customers can manage upgrades and configurations of various offices from one location is another adoption driver, Umeda said.

Vendor Pile-Up

Analysts have repeatedly used the words “saturation” and “consolidation” as they make projections for the SD-WAN market, which vendors continue to crowd. If the years 2012-2016 were about small, pure-play vendors acquiring venture capital and coming to market, 2017 was the year of two gigantic acquisitions by established IT companies Cisco and VMware. Cisco bought Viptela, and VMware followed by purchasing VeloCloud.

But 2018 might be remembered as the year public companies like Fortinet and Aruba announced their entrance into the market. Perhaps more interesting than the size of the new entrants is their startling diversity. Fortinet, which went from partnering with SD-WAN vendors to making its own solution, is a security company. Aruba is known for …

… wireless access points. VMware does virtualization. And Cisco — well, you’ve heard about them.

And that’s just the IT side.

NTT Com was an early telecommunications company to buy an SD-WAN company (Virtela), and AT&T, Verizon and Sprint have been active in the market over the last two years. Windstream says it now has more than 1,000 customers deploying the technology.

The question is then, how many of these companies are serious about selling SD-WAN. And is SD-WAN that easy to make?

Umeda says numerous companies are responding to competitive threats. He says many wanted to match Cisco, even as Cisco was responding to startups that threatened to depose its architecture.

“Fundamentally, some of the technologies are not difficult to create. Control point software, configuration capabilities — things like that which make a low barrier to entry, which is why 30-40 companies are making these claims,” he said. “That’s all fine and good, because it forces other innovations.”

Some of the large vendors might legitimately use their historic skill sets – be it security, virtualization or wireless – to bring a unique value proposition. But for a number of companies, it’s enough to assure customers that they too have an offering for the hot new technology.

“The reality is not everyone is going to make money off of this, and some are doing this just to do it,” Umeda said.

He says consolidation or elimination are inevitable for many of the standalone vendors. Markets near the size of $2 billion rarely support more than three or four vendors, according to his research.

The winners of this race are the ones that will make SD-WAN “a component of a bigger picture,” Umeda said.

A Partner Perspective

INFINIT Consulting’s Darrin Swan

Darrin Swan also views SD-WAN as a means to an end rather than an end unto itself. Swan leads Infinit Consulting, a California-based firm whose branding has evolved from a consultant to an MSP to a cloud service provider and to a digital-transformation provider.

SD-WAN plays an important role for him and his company, but selling the technology to customers is not the end goal.

“[Digital transfomation] work doesn’t mean SD-WAN. I consider SD-WAN part of the foundation now. It’s not transformational. It’s just making things run a little smoother,” Swan said.

I asked Swan if customers are demanding SD-WAN. He says people …

… depend on the network even if they don’t understand the details, much like a clock.

“Clients don’t care about the gears and all the pieces of technology that make the watch tell time. They just want [it] to tell the time. SD-WAN just ensures the accuracy of the time it’s telling,” Swan said. “It ensures that it’s always going to tell the time. It’s not something that’s transformational; it’s just a standard for us.”

The company prides itself on systematizing workflow to collect data and glean intelligence on the best ways to make their customers more efficient. It’s this holistic approach of digital transformation that Swan says differentiates a company like his from the numerous carriers that sell SD-WAN.

Infinit frames the customer conversation around applications, remote locations and other aspects that Swan summarizes as “the business value.” This contrasts with the approach of the big carriers.

“They’re going at it [like] a knife fight trying to sell SD-WAN. And what they’re missing is the business value, the business applications [that are] essential for the business to execute,” he said. “So they’re going in with speeds and feeds and price and availability, and that’s their weapon of choice.”

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