By Josh Bancroft, senior analyst, DC and enterprise SDN, Networked Services, IHS Markit

Software-defined networking (SD-WAN) software revenue, including appliance and control and management software, rose 26 percent quarter over quarter to reach $359 million in the fourth quarter (Q4) of 2018. VMware led SD-WAN market revenue share with 20 percent, followed by Cisco at 14 percent and Aryaka at 12 percent, according to the “Data Center Network Equipment Market Tracker” from IHS Markit.

In the fourth quarter, vendors began to reap the rewards of partnering with multiple managed-service providers, systems integrators and telcos. Revenue deal sizes have been rising, and the number of enterprise sites deploying SD-WAN continues to grow.

For the foreseeable future, both direct and channel sales will continue to drive SD-WAN market growth. In the IHS Markit “Edge Connectivity Strategies North American Enterprise” survey in February 2019, respondents showed a clear bias for consuming SD-WAN with self-managed on-site hardware and software, or as a standalone managed service bundled with connectivity. However, by 2019 they expect to shift to managed services bundled with other network functions virtualization (NFV) services and connectivity.

“Telcos want to utilize the high speeds and network-slicing capability of 5G, along with the application-traffic steering capability of SD-WAN, to support the industrial internet of things and other new edge applications,” said Josh Bancroft, senior research analyst at IHS Markit. “The telcos view SD-WAN as a key way to ensure various traffic types are automatically steered to the appropriate links. It can also guarantee IoT traffic is prioritized over 5G, and other applications are automatically routed over broadband.”

“If they haven’t done so already, SD-WAN vendors should consider adding IoT-specific features to their offering, such as application identification, prioritization and protocol translation functionality on SD-WAN appliances,” Bancroft said.

Following are some additional data center network market highlights:

  • Application delivery controller revenue declined 4 percent quarter over quarter and 7 percent year over year in Q4 2018, reaching $438 million.
  • Virtual ADC appliances comprised 35 percent of ADC revenue in Q4 2018.
  • F5 revenue declined by 8 percent, quarter over quarter, in Q4 2018, but the company still garnered 47 percent of ADC market share. Citrix followed F5 with 27 percent, and A10 came in third with 8 percent.

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