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Software-defined wide area network (SD-WAN) will continue its upward trajectory. To wit: IHS Markit said in a report on Wednesday that SD-WAN revenue was projected to reach $2.9 billion by 2021.
Last year, SD-WAN revenue clocked in at $87 million, with $31 million of that total coming in the fourth quarter, according to the IHS report.
SD-WAN services can be delivered through a network-based solution or a premise-based model, via the cloud. Enterprises and service providers that utilize SD-WAN can cut down on the cost of relying on expensive MPLS services. With SD-WAN, customers can either use private MPLS circuits for their mission critical traffic, or the public Internet for less sensitive material.
Based on policies that are in a central controller, SD-WAN software forwards traffic across the link that is best suited to handle that flow's SLA requirements, without needing a network engineer.
Service providers, including Orange (NYSE: FTE), AT&T Inc. (NYSE: T), BT , Telstra Corp. Ltd. (ASX: TLS; NZK: TLS) and CenturyLink Inc. (NYSE: CTL), have embraced SD-WAN in order to offer services to their enterprise customers, but there are some concerns about SD-WAN.
While enterprises are clamoring for SD-WAN, there's a plethora of vendors peddling their SD-WAN solutions, which has led some service providers to voice interoperability concerns. (See Tata, Colt Take Vendors to Task on SD-WAN Interoperability.)
In a Telco Transformation Q&A last year, John Isch, director of network and voice practice for North America at Orange Business Services, said that a wave of consolidation among the SD-WAN vendors was inevitable. (See Orange's Isch: Consolidation of SD-WAN Vendors 'Inevitable'.)
According to IHS, the growing popularity of SD-WAN is impacting WAN optimization appliance revenue, which declined 9% in the fourth quarter and fell 20% from a year ago.
Reflecting the move towards virtualization, bare metal switch revenue increased 27% year-over-year in the fourth quarter of 2016. Application Delivery Controllers (ADCs) revenue slipped down 3% sequentially in the fourth quarter of 2016, and was down 8% year-over-year, according to the report.
Worldwide data center network equipment revenue -- including data center Ethernet switches, ADCs, SD-WAN and WAN optimization appliances -- totaled $3.5 billion in Q4 2016, which was a 4% increase from Q3 2016. All told in 2016, revenue was up 10% to $12.9 billion.
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— Mike Robuck, Editor, Telco Transformation
