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SD-WAN: Providers could see strong growth, but face hurdles

The SD-WAN market beckons with high-growth potential, but channel partners must confront incomplete feature sets, training requirements and market consolidation.

Virtualization separates hardware from software and makes it easier for businesses to deploy and manage their systems.

The technology has branched out from servers to areas, like storage systems and networks. Next up is the software-defined WAN: International Data Corp. expects SD-WAN revenue to reach $6 billion by 2020, fueled by a 90% compound aggregate growth rate. But channel partners that want to become SD-WAN providers will need training and to think creatively in order to take advantage of the high growth.

Virtualization is changing data center equipment design. Vendors have moved from hardware-based systems to software-based offerings. However, in the networking space, the ramp up has been slow. "[Software-defined networks] are complex and the business case is often hard to make," stated Jon Kim, director, NextGen Networking at Force3, a federal government-focused channel supplier with annual revenue of $300 million.

An easier sell

SD-WANs are an easier sell. Many organizations have deployed multiple WAN connections to link remote offices to corporate networks "The cost of WAN lines can be significant," noted Andrew Lerner, research vice president at Gartner Inc. Pricing for 100 megabits per second (Mbps) consumer-grade internet can be as low as $70 per month while a business-grade T1 (1.5 Mbps) multiprotocol label switching (MPLS) line can be priced at $250. SD-WANs help organizations consolidate connections and move traffic off of higher-priced lines, resulting in lower costs.

Selling an SD-WAN is different from other WAN solutions.
Jon Kimdirector, NextGen Networking, Force3

Republic National Distributing Company, which markets premium wine and spirits, has 58 remote locations spread across the U.S. supporting 8,000 employees. The firm had relied on MPLS, broadband internet and satellite links to send information.

In 2015, the business looked for an SD-WAN offering and began deploying Silver Peak's SD-WAN product in early 2016. "We expect that the SD-WAN will reduce our networking expenses by $1.4 million annually," stated Roderick Bethly, network architect at Republic National Distributing Company.

Management is another area where the emerging approach offers potential benefits. "WANs often can be hard to monitor," noted Rohit Mehra, vice president, network infrastructure at IDC. Enterprises desire more visibility into their communication lines that have multiple pieces. SD-WANs have a modern design and a software foundation, so they deliver more sophisticated management functions than past approaches.

Mark Campbell, vice president of research, Trace3Mark Campbell

SD-WANs also are more intelligent and feature more automated functions than their forebears, which speeds up deployment. "Businesses usually have to wait weeks for a carrier to deploy a WAN link," said Mark Campbell, vice president of research for Trace3, a systems integrator with 320 employees and $500 million in revenue. "With SD-WANs, connections can be made instantly."

Yet currently, Republic National Distributing is an anomaly. Gartner stated that less than 1% of businesses have installed SD-WANs. Dramatic change looms: at the end of 2019, 30% of enterprises will use the technology in all their branches.

The high growth attracted a cornucopia of suppliers. Established firms such as Citrix, Cisco, FatPipe Networks Inc., Nokia, Riverbed Technology Inc. and Silver Peak are being joined in the market race by startups like Bigleaf, CloudGenix, Talari Networks, VeloCloud, Versa Networks and Viptela.

Yet challenges remain in cracking this market open. The technology is nascent and product feature sets often have holes. Gartner noted that routing support is highly inconsistent, with some vendors supporting both LAN- and WAN-side dynamic routing and virtual routing and forwarding; other suppliers offering it only on the WAN side and some delivering only static routing. A few suppliers deliver no routing support at all. In addition, automated IP address discovery and address table creation are supported by less than half the vendors. Finally, only a few suppliers' devices work with legacy WAN interfaces, such as T1/E1.

Would-be SD-WAN providers need new skills

Jon Kim, director, NextGen Networking, Force3Jon Kim

As channel partners try to wedge themselves into this space, they need to develop new skill sets to become SD-WAN providers. "Selling an SD-WAN is different from other WAN solutions," Force3's Kim said. The former is software-based and requires that employees learn new skill sets. Two years ago, Force3 formed a group to spread SDN technologies throughout the organization, and the group is now focused on helping the company develop SD-WAN expertise.

The sales channel is also a bit murky. In North America, vendors often work directly with businesses in the installation and maintenance of their WAN equipment, according to Gartner's Lerner.

As a result, channel partners may opt to work with managed service providers (MSPs), some of which are positioning themselves as SD-WAN providers. Those MSPs are adding SD-WAN features to their services, both as a stand-alone offering and as part of other bundled services.

Ripe for consolidation?

Finally, a fast-growing market with many players is often prone to consolidation. The SD-WAN market may move in that direction. In January, Riverbed purchased Ocedo, a German startup founded in 2013. Resellers need to be careful in picking their partners because the market may quickly shift.

The SD-WAN opportunity is quickly emerging, and the potential windfall is high. Partners need to determine their best opportunities and train their employees in order to take advantage of the change.

Next Steps

Learn more about Silver Peak's channel initiative

Find out about Viptela's partner program

Read about top SD-WAN vendors' partnering efforts

This was last published in November 2016

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