Report: Cisco, VMware are cashing in on their SD-WAN deals

VMware tops IHS Markit's rankings of SD-WAN vendors based on their second-quarter revenues. (IHS Markit)

Cisco and VMware are reaping the rewards from their deals last year to buy SD-WAN vendors Viptela and VeloCloud, respectively, according to a report.

VMware once again stood on top of IHS Markit's Data Center Network Equipment market tracker with second-quarter revenue of $40.1 million, which accounted for 18% of the overall SD-WAN revenue in that time frame. Aryaka, which has been nipping at Silver Peak's heels, came in second place with $32.6 billion and 15% revenue share.

Cisco broke into the top three of IHS Markit's rankings for the first time by posting $25.4 million in revenue with 12% market share. Silver Peak racked up $24.4 million in Q2 revenue, which placed it fourth overall.

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Last year, VMware bought VeloCloud for an undisclosed sum while Cisco paid $610 million for Viptela.

Last month, VMware made a point of talking up how it has integrated VeloCloud's technologies into its product lines during the VMworld conference in Las Vegas. Lee Doyle, principal analyst at Doyle Research, said VMware was making a concerted effort to include VeloCloud in its end-to-end portfolio because it banks a lot of revenue from service providers reselling VeloCloud products.

Also last month, Cisco announced it was continuing the integration of its Viptela acquisition by adding Viptela's SD-WAN technology to its enterprise routing platforms. Cisco plans to add more security features to its Viptela SD-WAN solution. In addition to Viptela, Cisco bought another SD-WAN vendor, Meraki, in 2012, for $1.2 billion. 

"The integration of Viptela is done and the Cisco sales force is trained," said IHS Markit's Cliff Grossner, senior research director, in an email to FierceTelecom Friday morning. "Also Meraki has added SD-WAN features to its security appliances and we will start including some Meraki revenue under SD-WAN."

RELATED: VMware tops Q1 SD-WAN revenues while Huawei tumbles

Overall, SD-WAN revenue, which includes appliance and control management software, reached $221 million in the most recent Q2, which was up 25% quarter-over-quarter and twice the amount recorded in Q2 of last year.

In June, Silver Peak announced a $90 million round of financing, part of which will be used to expand out of North America and into Europe and APAC.

“With SD-WAN deals becoming more competitive within the North American market, the race to expand into other regions is now well underway," Grossner said in a statement. "VNF certifications with EMEA and Asia Pacific based service providers are now in full swing where SD-WAN vendors are in the final stages of VNF certifications with BT, Telefonica, Vodafone and China Mobile.

“Countries top of the agenda for hiring and office expansions for SD-WAN vendors are the United Kingdom, Germany, Singapore, Japan and China where SD-WAN vendors indicate there is heavy SaaS and IaaS traffic between multiple on- and off-premises DCs.”

Other data center network market highlights from IHS Markit's report included the 2% decline of ADC (application delivery controller) revenue in Q2 from Q1 this year. The Q2 ADC revenues were also down 2% from the same quarter a year ago. Virtual ADC appliances accounted for 33% of the Q2 ADC revenue market.