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April 14, 2020
LONDON – Revenue for the software-defined enterprise WAN (SD-WAN) appliance and control and management software market surged by 75% in the fourth quarter of 2019 as service providers increasingly offered SD-WAN as part of managed-service bundles.
SD-WAN market revenue reached $639.5 million in the fourth quarter of 2019, up from $364.5 million during the same period in 2018, according to Omdia. For the entire year of 2019, SD-WAN revenue grew 90%, reaching $2 billion, up from $1.1 billion in 2018. Revenue is set to expand to $4.8 billion in 2024, as reported by the Omdia Data Center Network Equipment Market Tracker.
Market growth is being driven by service providers that are acting as sales channels for SD-WAN vendors' over-the-top solutions by offering SD-WAN technology as a managed service bundled with other services.
Another factor driving growth is the development of an SD-WAN standard by the Metro Ethernet Forum (MEF). An important side effect of this standard is that service providers can offer their customers a choice of SD-WAN vendors all managed from the same back-end service-orchestration software.
"The SD-WAN market is moving toward larger scale and globalized deployments," said Cliff Grossner Ph.D., senior research director, cloud and data center 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 2020 outlook
Omdia has kept its SD-WAN forecast for 2020 unchanged. Several vendors indicated there has been a significant increase in orders and deployments of SD-WAN appliances in residential locations to connect and secure remote workers due to the coronavirus crisis. Omdia will monitor the situation to determine if we can expect a longer-term effect on our forecast.
"The maturity of the SD-WAN market is no longer in question," Grossner said. "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."
The market is also moving downstream to address buyers that want a managed service bundled with connectivity and possibly security. Bundling with security should include the option to choose a third-party security supplier. Security provided by the SD-WAN vendor is not adequate to serve the needs of all buyers.
VMware leads the market
Looking at market share in the fourth quarter, VMware continued to lead with highest revenue, followed by Cisco and Fortinet.
VMware is striving to replicate its success in the United States around the world. The company's recent Nyansa acquisition will extend the reach of its SD-WAN solution from the branch edge to the client.
Cisco said its effort to migrate its existing router client base to SD-WAN is proceeding at a healthy pace. The company noted that cloud is a strong driver for SD-WAN adoption.
Fortinet is gaining significant market share following a strategy of selling SD-WAN appliances as part of a security bundle. An important differentiator for Fortinet is its latest custom ASICs that bundle a competitively priced next-generation firewall with secure SD-WAN.
Additional data-center network market highlights include:
Software-defined enterprise WAN revenue increased 21% quarter-over-quarter in the fourth quarter.
Application delivery controller (ADC) vendors are working to transform their business; security application visibility and performance tuning are key areas being explored for 2020 growth
In the fourth quarter, the market for ADC as a service (ADCaaS) revenue increased 23% quarter-over-quarter (QoQ); virtual software-only ADC appliances grew 2% QoQ, virtualized appliances declined 1% QoQ and hardware appliances decreased 2% QoQ.
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