Industry Voices—Raynovich: Volterra deal pumps up multi-cloud networking sector

F5 Networks' $500 million deal to buy Volterra is having a large impact on the multi-cloud networking community, and could lead to even bigger M&A deals. (Pixabay)

In a move that surprised many in the networking industry, F5 Networks stuck its neck out a week ago and announced it was paying up to $500 million for Volterra, a Silicon Valley startup that was merely two years out of stealth.

In just one short week, this deal has had quite an impact on the cloud-networking community. I can tell you, tongues have been wagging. I received several messages conveying surprise at the price F5 was willing to pay for such a young company. How did they pull it off?

RELATED: F5 buys Volterra for $500M, says it will free edge apps from ‘server cages’

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Volterra is part of an emerging group of companies in an area that is described as multi-cloud networking (MCN), solving the problems of linking networks and applications that connect across multiple or hybrid clouds. Volterra’s multi-cloud networking position was interesting and a great fit for F5. Rather than focusing on the lower layers of the networking stack, such as Layer 2 and Layer 3, Volterra emphasized its capability to go full stack—up to Layers 4-7—and focus on application performance. It’s the multi-cloud, cloud-native version of the applications delivery controller (ADC), a category that F5 pioneered. This is a quick way for F5 to push more networking functionality into the cloud. I think of it as the next generation version of Avi Networks, a load balancing company that was purchased by VMware in 2019 and has lots of traction.

The Volterra team is also stacked (pun intended) with vets that can help. Founder and CEO Ankur Singla has a great track record, having built Contrail, one of the pioneers in software-defined networking that was sold to Juniper Networks. Chief Marketing Officer Mark Weiner is a 30-year networking vendor who also serviced as Versa Networks’ first CMO. VP of Technology Nuno Ferrerira was the Multi-Cloud Chief Architect at Juniper.

Good for them! But what does it mean for multi-cloud?

Doubling down on multi-cloud

A few months ago, Futuriom identified Volterra as a leader in our recent Future of Multi-Cloud Networking Report, in which we delved into the trend. I think it’s going to be big—perhaps bigger than the software-defined wide-area networking (SD-WAN) market, which we have identified as approaching a run rate of $2 billion per year and growing at a CAGR of 34%.

I can’t remember a market that heated up this fast. MCN started percolating about 18 months ago and since then I have identified more than 20 startups with a lot of activity. Some of the leaders, such as Aviatrix, already claimed hundreds of customers. After we published our report, there was a lot of buzz. Volterra has already been acquired and I expect many more deals.

The reason that MCN is so hot is quite simple. With the explosion of cloud applications—only accelerated by the year 2020 in which remote work and virtual collaboration taxed the cloud like never before—there needs to be a more robust system for connecting clouds. Enterprises realized that if they are going to build high-performance, multi-cloud or hybrid cloud applications, they need more serious networking plumbing to connect these applications.

Legacy networking was built for a bygone era, when folks set up databases in closets and plugged them into the Local Area Network (LAN) with Ethernet cables. Those days are over. Networks now have to go to the cloud—and they have to be easily managed.

When you connect across multiple or hybrid clouds, managers want a single, logical view of how the network is connecting these applications. Having a single, abstracted MCN solves many operational challenges including network visibility, security, compliance, redundancy, and applications reliability. The chart below, from our 2020 MCN survey, shows the key requirements.

Hot startups to watch in MCN

Like I said – congrats to Volterra. That’s a nice chunk of change. But the Volterra deal is likely to set up a scramble for larger networking companies that need to beef up cloud-native MCN – and startups that will be willing to cash in.

I predict this will set up a series of acquisitions for the next big MCN company. The most important thing about the new crop of MCN companies is they all have a software-based, cloud-native engineering approach. They are thinking in terms of clouds, rather than boxes. Because many of the large, legacy networking companies are still stuck in the box mindset, they need better software capabilities to get them in the cloud.

As we identified in our report, there are at least 20 interesting startups in the MCN sector, all focused on the very complex and important challenges of connecting multiple and hybrid clouds with networks. While the ins and outs of MCN are complex, the leading startups are all pursuing similar key themes—delivering high-performance networking from the cloud, providing multi-cloud network visibility and control, and using software to deliver network-as-a-service (NaaS).

Here are just a few companies operating in the multi-cloud networking space that you need to watch now.

Alkira: Launching earlier this year, Alkira is one of the newer players in MCN. It was founded by the famous Khan brothers, Amir and Atif, who sold Viptela to Cisco in 2017 for $600 million. Alkira, which calls itself the “cloud network,” allows managers to create an instant, virtualized network backbone for multi-cloud connectivity. It’s a network-as-a-service product.

Arrcus: Founded by a cadre of industry vets including Devesh Garg (Broadcom, EZchip) and Keyur Patel (former distinguished engineer at Cisco), Arrcus has a high-performance cloud-based networking operating (NOS) with traction among a number of webscale companies and service providers, such as Verizon. Its big draw will be high-performance, cloud-based routing for the edge and MCN, which is likely to surge with the arrival of 5G and edge applications.

Aviatrix: Led by well-known CEO Steve Mullaney, who sold software-defined networking pioneer Nicira to VMware for $1.26 billion in 2021, Aviatrix was one of the first players in MCN. Aviatrix focuses on key use cases such as managing security and visibility of networks inside of multiple clouds such as AWS and Azure. It’s also made lives easier for managers by integrating with Hashicorp’s Terraform, a popular infrastructure configuration tool.

DriveNets: Israel-based DriveNets is led by CEO and Co-Founder Ido Susan, who sold Intucell to Cisco for $475 million when he was just in his 20s (read my interview with Susan here).  DriveNets is focused on delivering cloud-based routing infrastructure to service providers so that they can cost-effectively grow and scale on demand. It has a big customer win with AT&T.

PacketFabric: PacketFabric was founded by two cloud engineering veterans from Akamai and AboveNet, Jezzibell Gilmore and Anna Claiborne, and it is led by CEO Dave Ward, who was head of Cisco’s Chief Technology and Architecture office. PacketFabric has built a leading NaaS infrastructure that can connect branches, clouds, and data center PoPs in minutes using software.

Pureport: Pureport is led by CEO Rich Lee, who Co-Founded Hosted Solutions, a company that was sold to Windstream for $310 million in 2010, and Chief Technology Officer Peter Sprygada, a former Distinguished Engineer at Red Hat and Chief Architect at Ansible. Pureport has a powerful NaaS platform that can build a cloud-based, fully routed MCN fabric that connects with the major cloud providers.

Volta Networks: Volta is led by CEO and Co-Founder Dean Bogdanovic, a long time networking veteran and former Distinguished Engineer at Juniper Networks. Like Arrcus and DriveNets, Volta is focused on a next-generation cloud-based router called the Volta Elastic Virtual Routing (VEVR) Engine, which can run on any public, private, or hybrid cloud and works with a broad range of open networking devices such as white box switches.

What’s amazing to me is that many of these companies are known to have more revenue and are more mature than Volterra. Many of them are riding most of the key themes; high-performance cloud, network visibility, and NaaS. These themes aren’t going away soon.

I’ll make a wager right now: At least three of these companies will be bought in the next 12-24 months. And at least one of them will go for more than Volterra’s price of $500 million.

R. Scott Raynovich is the founder and chief analyst of Futuriom. For two decades, he has been covering a wide range of technology as an editor, analyst, and publisher. Most recently, he was VP of research at SDxCentral.com, which acquired his previous technology website, Rayno Report, in 2015. Prior to that, he was the editor in chief of Light Reading, where he worked for nine years. Raynovich has also served as investment editor at Red Herring, where he started the New York bureau and helped build the original Redherring.com website. He has won several industry awards, including an Editor & Publisher award for Best Business Blog, and his analysis has been featured by prominent media outlets including NPR, CNBC, The Wall Street Journal, and the San Jose Mercury News. He can be reached at [email protected]; follow him @rayno.

Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceTelecom staff. They do not represent the opinions of FierceTelecom.