SD-WAN vendor Silver Peak snags $90M in investment round

Silver Peak plans to expand its sales force following the latest investment round. (Pixabay)

Silver Peak announced a $90 million round of investment today, which exceeded the total amount it has raised over the past 15 years of its existence.

Santa Clara, California-based Silver Peak, which is one of the leading vendors in the software-defined wide area network (SD-WAN) space, had raised a total of $80 million prior to today's announcement of the $90 million investment by TCV.

Silver Peak Founder and CEO David Hughes said in an interview with FierceTelecom that TCV's investment was further validation of not just the SD-WAN market in general, but also of Silver Peak's status as a leading independent vendor. TCV's technology investments include Airbnb, Genesys, Netflix, Redback Networks, Splunk, Spotify, and Zillow. The investment landed TCV general partner Tim McAdam a seat on Silver Peak's board of directors. 

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"We see the market moving pretty rapidly from early adopters to early mainstream," Hughes said. "Our aspiration is to be the leading independent company in this space. We want to be able to scale to meet the demand we're seeing.

"We want to be able to expand our sales force to be able to increase our support organization as we grow our customer base and of course invest more generally in research and development and our operations back here at headquarters."

In an SD-WAN report earlier this month by IHS Markit, Silver Peak was third in first quarter revenue behind first-place VM Ware/VeloCloud and Aryaka. Silver Peak raked in $20.2 million in the first quarter, which accounted for 15% of first quarter revenues, VMware/VeloCloud totaled $31.6 million while Aryaka had $23.4 million. Overall, IHS Markit said that SD-WAN would reach $861 million in revenue worldwide this year.

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

According to Futuriom's "2018 Growth SD-WAN Outlook" report that came out last week, at least three SD-WAN and network as a service vendors could exceed $100 million in annual revenue this year. The vendors with the best chance to reach that amount are VMware/VeloCloud, Aryaka and Silver Peak. Last year VMware bought VeloCloud for an undisclosed sum while Cisco paid $610 million for Viptela.

“Silver Peak is one of fastest growing category killers in the emerging SD-WAN space and they are in a good position as a leading independent after the acquisitions of Viptela and VeloCloud," wrote Futuriom's Scott Raynovich, founder and principal analyst, in an email to FierceTelecom.

Silver Peak's global aspirations

Hughes said the sweet spot for Silver Peak is medium to large enterprises, which it plans on targeting globally with its latest investment round. While the majority of Silver Peak's 800 customers are in North America, deals with multinational companies have given it a global flavor.  

"We're in the process of expanding our presence in Europe and we'll also be expanding in APAC as well, but what is interesting is when you drill down one level," Hughes said. "Even though the majority of our businesses are in North America, a lot of those businesses are large multinational companies so the deployments aren't just confined to North America. They're often deployed globally and it's just that the decision-making is based here in North America.

"We're present in more than 80 countries around the globe. Obviously, we expect that to continue to grow and in order to take advantage of those opportunities we need to scale up globally to support these multinational deployments. It's about across the boarding investing by going big and really capturing what we see as a massive opportunity in what has been a relatively stagnant area in the last couple of decades."

Cloud key to SD-WAN's growth

Hughes said moving applications—such as software as a service— from data centers to Amazon Web Services, Google Cloud and Microsoft Azure were driving WAN optimization. Instead of configuring device-by-device in an enterprise branch, enterprises can instead tap into automation and machine learning in SD-WAN at a network level to configure them all at once.

SD-WAN allows enterprises to replace or consolidate routers from hardware vendors, which in turn lowers opex and reduces the need for someone to manage and monitor all of those routers.

Hughes said that traditional routers have numerous features that aren’t currently needed while also lacking new features that are needed. Silver Peak's SD-WAN device was built with today's enterprise networking needs in mind.

"The movement to the cloud encourages enterprises to say 'Wow, do I really need routers in this new environment?'" Hughes said. "The more sites you have the more headaches you have with the current way of managing WAN. Managing four routers is tough, managing 40 is bad, managing 400 is terrible and managing 4,000 is a nightmare.

"What you need in remote locations at the WAN edge is to be able to have a really functional, agile-enabled workforce. I think people are realizing that the answer for that is not your classic router."

SD-WAN services can be delivered through a network-based solution or a premise-based model. With SD-WAN, customers can either use private MPLS circuits for their mission critical traffic, or the public internet for less sensitive material. Several years ago, the thought was that SD-WAN would cut down on the need for the more expensive MPLS circuits, but that has largely proved not to be the case as bandwidth demands continually increase.

"It's not just a question of whether MPLS is less expensive than internet, it's why are you back hauling traffic when you don't need to?" Hughes said. "Not only do you save cost but you'll often get a better experience by being able to bring it direct to net."

Currently, enterprise networks bring cloud applications, such as Salesforce or Microsoft Office 365, back to the MPLS network before sending them out on the internet, according to Hughes.

"It would be far more efficient if you could bring that traffic direct to net and avoid having to backhaul it," Hughes said. "We let customers make the decision of doing backhaul or going direct to net over cloud-based firewalls on an application by application basis.

"There's also the cost of managing a WAN. Our vision at Silver Peak is to move from a software-defined WAN to what I call a self-driving WAN, which is a WAN that by and large looks after itself.  It's a journey and we're only part way there, but those kind of simplicities and ease of use drive those opex savings regardless of what the bandwidth differentials are."

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