SD-WAN revenues received a tailwind push in the second quarter as corporations started to swap out their base of installed routers with SD-WAN-enabled gear.
According to a report by to IHS Markit, second quarter revenues were up 23% sequentially. Replacing routers with SD-WAN devices has been extensive, with some of the reaching as many as 5,000 sites for a single customer.
“In our discussions with vendors, it has become apparent that most recognize SD-WAN as a mainstream technology,” said Josh Bancroft, senior research analyst at IHS Markit, in a statement. “As a result, larger enterprises have begun to refresh their legacy, router-centric WANs with SD-WAN. Vendors are capitalizing on the refresh opportunities with customers that have large bases of aging router equipment.”
IHS Markit predicts that SD-WAN revenue will rise to $4.4 billion in 2023.
VMware/VeloCloud continued to lead the pack in the second quarter with the highest revenue share followed by Cisco/Viptela and Aryaka, respectively. Fortinet moved from seventh place in the first quarter of this year to fourth in the second. Fortinet, which replaced Silver Peak at fourth place, benefited from a large enterprise security appliance refresh that is underway, according to IHS Markit.
While Fortinet initially made its mark as a security vendor that worked with pure-play SD-WAN companies, last year it started offering its own flavor of SD-WAN backed by its security portfolio. That decision has made Fortinet both a friend of the SD-WAN companies that it partners with, and an enemy as it works to win its own SD-WAN business.
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Fortinet has announced customer wins this year with Comcast Business, Windstream Enterprise and Telenor Sweden, among others.
Going forward, IHS Markit said the rising number of remote and mobile workers would continue to be an important growth driver for SD-WAN appliances. While compact appliances are the most cost-effective solution for home-office based deployments, traditional SD-WAN appliances are still being installed in home offices. Up to 200 appliances were installed in radiologists’ homes in the North America in the second quarter, according to IHS Markit.
“In the future, we anticipate further deployments of SD-WAN appliances in the homes of remote employees, with either compact or more traditional appliance form factors being used,” Bancroft said. “Bonding LTE and broadband links ensure session failover for unified communications (UC) users. It also promotes the security of sensitive patient data through security policies that can be established at the device level by healthcare providers in orchestration portals.”
At last month's SD-WAN Summit 2019 in Paris, Bancroft said it was clear that SD-WAN vendors were continuing to invest in LTE appliances, performing constant traffic steering for applications delivered to mobile devices.
“During discussions and keynotes, vendors said they are already testing the performance of appliances bonding 4G LTE links from differing providers in vehicles,” Bancroft said. “A number of vendors are also in discussions with car manufacturers, preparing for autonomous vehicle deployments.”
In its most recent Data Center Network Equipment Market Tracker report, IHS Markit added coverage of the application-delivery as-a-service segment. Revenue for that segment expanded by 3% quarter-over-quarter (QoQ) to reach $24 million in the second quarter of 2019.
For application delivery controller vendors, hardware appliances decreased 2% quarter over quarter (QoQ), virtualized appliances grew 4% QoQ, and virtualized-software-only application delivery controllers (ADCs) increased by 23% QoQ.
