The software-defined wide area network (SD-WAN) market is predicted to grow at a compound annual growth rate (CAGR) of 33 percent over the next five years with sales to enterprises accounting for the majority of the revenue, according to a report from research firm Dell’Oro Group.

The report said in 2016 the total SD-WAN market’s revenue was around $300 million, and it is expected to reach $1.3 billion by 2021.

Last year, 80 percent of SD-WAN technology was sold directly to enterprises and 20 percent was sold to service providers to be offered as a managed service or over-the-top offering. However, by 2021, the percent of SD-WAN technology sold to service providers is expected to increase to 30 percent and decrease to 70 percent for the enterprise, said Shin Umeda, vice president of Dell’Oro Group.

SD-WAN is giving service providers the opportunity to add new revenue streams by offering more connectivity options and being able to offer SD-WAN as a managed service, Umeda said.

“SD-WAN gives them [service providers] the opportunity to charge for the function of the device and whatever else they might add to it,” he added. “Before, this wasn’t a differentiator because there was no value add, but now they can customize the service.”

The main driver behind the overall SD-WAN adoption has been the shift to cloud services, which the traditional WAN architecture wasn’t designed for. The move to SD-WAN also reflects how companies are connecting not only to their own data centers, but how they’re connecting to cloud services.

The SD-WAN market is still relatively young and hasn’t been adopted by many of the legacy networking companies. “Interestingly, we haven’t seen many of the access router vendors taking a very aggressive approach,” Umeda explained. “We have the 800-pound gorilla Cisco who has had between 70 to 80 percent of this space for a long time.”

However, some of the smaller access routing vendors like OneAccess and Adtran have yet to enter the SD-WAN space.