Carrier-grade managed SD-WAN services in the U.S. picked up the pace in the second half of this year to the tune of more than $282 million in revenue in 2018.
Vertical Systems Group, which has tracked the Carrier Ethernet market for many years and ranked market share in its Leaderboards, is now tracking service migration, network connectivity and market sizing for managed SD-WAN services, which includes purchase drivers, customers, WAN access connections, site configuration profiles, pricing and revenue.
SD-WAN comes in various flavors from vendors that sell directly to businesses as well as service provider offerings that are sold to those same verticals. A managed SD-WAN service is defined as a carrier-grade network offering for enterprise and business customers, which is managed by a network operator, and delivered over a software-defined network (SDN) service architecture that has separate control (overlay) and data (underlay) planes.
Vertical Systems Group’s managed SD-WAN services definition is based on MEF’s LSO Reference Architecture for service provider SD-WAN services, and it played an advisory role in MEF's recently announced SD-WAN standards and certification efforts. MEF plans to release its 3.0 SD-WAN Service Attributes and Service Definition Standard in the first quarter of next year.
While MEF is setting standards for service providers' SD-WAN offerings, other SD-WAN vendors and even some service providers are going with their own implementations.
Vertical Systems Group's SD-WAN coverage doesn't include DIY (do-it-yourself) SD-WAN solutions that are bought directly from an SD-WAN technology supplier or a systems integrator.
“Carrier-grade Managed SD-WAN Services in the U.S. began to generate notable revenue in the second half of 2018. Prior to this, most providers supported customers with pilot SD-WAN services that were not substantively monetized,” said Rick Malone, principal of Vertical Systems Group, in a prepared statement. “For 2019, we expect a major boost in revenue with network operators fully ramped up to sell, deliver and support Managed SD-WAN Services. Moreover, a key driver for managed services is the growing appreciation that migration to SD-WAN is considerably more complex than the promise of ‘easily deployed’ plug-and-play DIY solutions.”
According to a fourth-quarter worldwide survey by Vertical Systems Group for MEF, 56% of the respondents have a managed SD-WAN service in place while 33% plan to do so.
"A key market trend is that the majority of Managed SD-WAN installs to date have been conversions by customers from site-to-site and MPLS VPN services supplied by traditional network operators," said Rosemary Cochran, principal, Vertical Systems Group, in an email to FierceTelecom. "SD-WAN is access agnostic, however providers that use their own network facilities for at least one WAN link have an advantage in customer retention and profit opportunity. In 2018, revenue for WAN access connectivity accounted for more than half of the $282 million U.S. market."
Cochran said the other major revenue source Vertical Systems Group tracks is SD-WAN service components, which includes SD-WAN controllers, software licenses, customer premises equipment, portals and management.
Service providers actively selling managed SD-WAN services in the U.S. include Aryaka, AT&T, CenturyLink, Cogent, Colt Technology Services, Comcast, Fusion Connect, GTT, Hughes, Masergy, MetTel, Sprint, Verizon, Windstream and Zayo. Other network operators, such as Colt Technology Services, throughout the world offer or plan to offer managed SD-WAN Services in the U.S. market.
Vertical Systems Group will release its first managed SD-WAN Services Leaderboard early next year. The Leaderboard benchmark will rank the top providers of managed SD-WAN Services based on U.S. market share results for year-end 2018.