SD-WAN software sales grow twice as fast as hardware

28 Aug 2018

Sales of Software Defined Wide Area Network (SD-WAN) technologies will grow at a compounded annual growth rate of 35% over the next five years, Dell'Oro has predicted.

The research firm's new Advanced Research: SD-WAN Report forecasts that SD-WAN software sales will grow at almost double the rate of hardware.

SD-WAN solutions comprise software and networking hardware technologies that promise to help enterprises adapt their WANs to cloud.

“The SD-WAN software components are the key differentiators of vendors’ offerings, and we expect controller and virtualized network functions software revenue to account for the large majority of the market size,” said Shin Umeda, vice president at Dell’Oro Group.

“Over time, software innovation will drive the SD-WAN market while hardware will increasingly be commoditized,” Umeda concluded.

More than the sum of its parts

According to Tao Wenqiang, chief planning engineer of high-end router product at ZTE, providing interconnection between branches and migrating enterprise services to cloud, SD-WAN solution brings virtualization and computing capabilities to the enterprise branches.

“A primary challenge for telcos looking to grow their SD-WAN related business would be to adapt to this new software based mindset for networking. At Orange we have been able to successfully accompany our enterprise customers on their managed SD WAN journey, thanks to our early adoption of an agile software-based approach that has enabled us develop and deliver flexible managed networking solutions,” Orange Business Services head of Connectivity BU for Asia Pacific Matthieu Smessaert said.

He noted that it is essential to have secure, flexible, programmable, high-speed connectivity for digital transformation to be successful. The software-defined networking world today includes hybrid global connectivity, comprehensive internet coverage, and managed SD-WAN, and is evolving even further to include Universal or Virtual CPE (single hardware) and VNFs (software-based functions).

Expanding on this, ZTE’s Tao added that “[Software-Defined] applies the technologies of white-box hardware, virtualized software, container, light deployment, access of large volume sites, and unified management, which also play important roles in 5G scenarios such as IoT, multi-access edge computing, virtual reality/augmented reality, and auto driving, with high-bandwidth, low latency, large-volume access demands. The boom of SD-WAN will definitely push forward the deployment of various 5G applications in the industry.”

By the numbers

Dell’Oro forecasts sales of SD-WAN technologies, including customer premises equipment (CPE) and software, to grow at a 35% CAGR and reach $2.2 billion in 2022, with software outpacing hardware sales (41% and 21% respectively).

A spokesperson from Huawei issued a far more optimistic outlook of the opportunities presented by SD-WAN (see Figure 1):

Figure 1: 2020 SD-WAN enterprise interconnection market

Source: Huawei

Dell’Oro concluded that the large majority of SD-WAN revenue will come from enterprise customers that deploy and manage solutions on their own, or use a value-added reseller (VAR) or system integrator to assist them. However, implementations by service providers (SPs) that offer SD-WAN as a managed service will increase at a faster rate.

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