Roy and I are frequently asked — What is the SDN Market Size? and What does it mean to my business? — so much so, that as of April 2013, 6 of the top 10 networking and virtualization vendors have trusted us to create custom SDN market size forecasts for strategic planning purposes.
So when Mike Bushong, VP of Marketing at Plexxi (check out Mike’s analysis on the results here) asked if we’d be game to work with him and Chris Schaepe, Managing Director at Lightspeed Venture Partners to develop a SDN market size forecast to be shared publicly, we jumped at the opportunity.
The result is that the SDN market size is going to have a much larger impact on network spend and in much shorter time than anyone has predicted publicly. We expect that between 30 and 40% of total networking spend could be influenced by SDN over the next six years, which means the total SDN market could reach $35B by 2018.
As we were analyzing the data there were a number of key takeaways for me:
- The software-defined networking SDN market is expected to surpass $35 billion in the next five years, far higher than previously reported. Almost by an order of magnitude
- Adoption of SDN technology has accelerated in recent years from sales of $10 million in 2007 to $252 million last year. Companies are turning to new software-centric approaches to control their computer networks as they move beyond traditional network infrastructure that wasn’t designed for today’s cloud computing.
- The emergence of the software-defined networking market is supported by growth in venture capital investment in SDN-focused companies. Venture capital funding of SDN-related companies rose from $10 million in 2007 to $454 million in 2012.
What does this mean?
We fully expect different people to take away different things from this data, though some major implications that went through my mind include:
- Customers: Customer buying behaviors are changing today — specifically, we see customers requiring that network gear purchased today be ‘SDN compatible’ or upgradeable. True, this contributes to SDN-washing; though our experience working with real customers with real budgets is they are demanding credible SDN roadmaps, today. This means that the business impact of SDN is being felt in today’s purchase decisions, long before most companies ‘true’ SDN products are shipping.
- Market Segments: SDN is going to impact every customer segment and use case of the networking market – meaning no customer or vendor is going to be immune to SDN driven change. For customers – this means you need to start investigating how and where you would leverage SDN in 2013. For vendors — your advanced customers are already expecting a roadmap to SDN — make sure you have a clear story and plan.
- Hardware: There’s going to be a ton of hardware in a software-defined networking world — we will still need tcams, data path forwarding, etc at high performance and scale — meaning SDN is NOT the death of networking hardware and nor does it mean we can all use commodity switches. Conversely, based on our experience with new use cases for cloud and mobile infrastructure we see SDN driving the need for new approaches to networking hardware. Ironically, we see that incumbents will need to either build new types of hardware to address a number of SDN use cases or acquire another company to gain the relevant hardware capabilities to differentiate in an SDN world.
- Existing Startups: Keywords are: targeting, targeting, and targeting. While the SDN market is massive – to survive (i.e win paying customers) you need target and focus your efforts on a specific use cases for a specific class of customer.
- Aspiring Startups: If are you as SDN Start-up — you now have market numbers vetted by one of the leading networking VC’s to use to start to size your market opportunity.
Read the complete press release below.
Software-Defined Networking Market Expected to Reach $35 Billion by 2018
New Research by Plexxi, SDxCentral and Lightspeed Venture Partners predicts the #SDN market will grow dramatically faster than previously thought
Cambridge, Mass. – April 24, 2013 – The software-defined networking SDN market is expected to surpass $35 billion in the next five years, far higher than previously reported, according to new research by Plexxi, SDxCentral and Lightspeed Venture Partners.
Adoption of SDN technology has accelerated in recent years from vendor sales of $10 million in 2007 to $252 million last year. Companies are turning to software-centric approaches to control their computer networks as they move beyond decades-old infrastructure that wasn’t designed for today’s cloud computing.
“The market for software-defined networking is growing faster than just about anyone predicted,” said Matthew Palmer (@MatthewPalmer), partner at SDxCentral. “While past efforts to measure the size of the SDN market focused on existing deployments, a more accurate analysis of companies that are factoring SDN compatibility into their current buying decisions shows that the shift toward software-defined networking is already having a massive impact on businesses.”
The emergence of the software-defined networking market is supported by growth in venture capital investment in SDN-focused companies. Venture capital funding of SDN-related companies rose from $10 million in 2007 to $454 million in 2012, the research found.
“Venture capitalists are focused on the disruptive potential of software-defined networking and its relationship to the software-defined data center as a whole,” said Chris Schaepe (@ChrisSchaepe), co-founder and partner of Lightspeed Venture Partners. “We are seeing strong technical teams leaving incumbent vendors to implement the next wave of innovation throughout the network ecosystem, including network services and security.”
The research, compiled from publicly available market data and SDxCentral’s proprietary market-sizing models, also found:
- The percentage of expenditures on SDN-enabled network equipment is expected to rise from 2 percent this year to 40 percent in 2018.
- The network virtualization software market will reach $1.2 billion by 2018, up from $10 million this year.
Despite the shift to software-defined networking, hardware will continue to play a significant role in the network infrastructure, the research found. By 2018, 46 percent of overall datacenter network spending will be on SDN-enabled optical, switching and routing hardware while a slightly higher number – 49 percent – will be spent on non-SDN-enabled datacenter optical switching and routing.
“The rapid growth of software-defined networking will have far-reaching impacts beyond the network,” said Michael Bushong (@mbushong), vice president of technical marketing at Plexxi. “This new research shows that companies are already making buying decisions based on transitioning their networks to SDN. The momentum in the SDN market will accelerate in the next five years.”
For more detail and analysis, the “SDN Market Sizing Report” by Plexxi, SDxCentral and Lightspeed Venture Partners is available here.
How the research was conducted
This research on the software-defined networking market was carried out using SDxCentral’s proprietary market-sizing models that are used by some of the world’s largest networking companies. It is based on publicly available data from 2009 to 2013 in the areas of optical networking, storage area networking, networking (switching and rounding), application networking and network security. The research estimates the growth of the software-defined networking market by looking beyond deployed boxes, ports and software instances to focus on sales opportunities where SDN capabilities are required for a customer to make a purchase decision. The research was conducted by a partnership among SDxCentral, Plexxi and Lightspeed Venture Partners.
About Plexxi, Inc.
Plexxi is the creator of the industry’s first affinity-driven networking solution. Plexxi’s products – Plexxi Control and the Plexxi Switch – create an optimized network that dynamically helps applications perform better. The company has raised $48+ million in venture financing from Lightspeed Venture Partners, Matrix Partners and Northbridge Venture Partners. Headquartered in Cambridge, Mass., Plexxi also has offices in Nashua, N.H. and San Francisco. For more information, visit www.plexxi.com or follow us on Twitter at @PlexxiInc.
SDxCentral is an independent community for software‐defined networking (SDN) and network function virtualization (NFV). Our mission is to connect people, share information, and provide education and training for everyone interested in next generation networking. SDxCentral offers events and webinars, education, consulting, news, jobs exchange and referral services for connecting users and technology providers. SDxCentral is located at https://www.sdxcentral.com and on Twitter at @sdn_news and @sdn_tech.
About Lightspeed Venture Partners
Lightspeed Venture Partners is a leading venture capital firm with over $2 billion of committed capital under management and investment professionals and advisors in Silicon Valley, India, Israel and China with Lightspeed China Partners. Over the past two decades, Lightspeed partners have backed more than 200 companies, many of which have become leaders in their respective markets, including Blue Nile, Brocade, Ciena, DoubleClick, eHealth, Fusion-io, Informatica, Kosmix, LivingSocial, Nicira, Playdom, Pliant Technology, Provigent, Riverbed Technology, Solazyme, TutorVista, Virsa Systems, Waveset, and XtremIO. www.lsvp.com
Kristin Parran Faulder