Yesterday, Cisco said it intends to purchase software-defined wide area networking (SD-WAN) vendor Viptela for $610 million in cash — further proving the networking giant’s transition to software-based revenues.

Cliff Grossner, a senior analyst at IHS Markit, said the total SD-WAN market in 2016 was worth $87 million in revenue among companies such as Viptela, VeloCloud, Cisco, CloudGenix, Silver Peak, Talari, Riverbed, Versa Networks, and FatPipe Networks. Of that $87 million in revenues, Viptela had about $20 million, making it the market leader, Grossner said.

“My forecast for the SD-WAN market is $2.9 billion by 2021, so by buying someone that has over 20 percent market share and a market leader, Cisco is well-positioned to capitalize on SD-WAN and open the door for a lot of future revenue,” Grossner said.

In January 2016, SD-WAN vendor VeloCloud announced a $27 million Series C led by Cisco Investments, among others, demonstrating the company’s interest in the technology. But apparently it found Viptela to be a better fit.

According to an article from the Erin Griffith Term Sheet, Fortune’s newsletter, Rob Salvagno, head of corporate development at Cisco said, “The reason we liked Viptela versus other choices is the cloud-first approach they have taken, which also happens to be very software-centric. It’s a model that embraces this cloud-first and software-centric recurring revenue model — so that’s where we are trying to go as a company."

Cisco said that it will combine Viptela’s cloud-first network management, orchestration, and overlay technologies with its own routing platforms and SD-WAN capabilities via IWAN.

Grossner said one of the things about Cisco’s IWAN is that it doesn't have integrated control and management capabilities, it isn’t cloud-delivered, and it only is able to run on Cisco’s routers.

The Viptela purchase will also strengthen Cisco’s presence in the Internet of Things (IoT) as customers turn to SD-WAN to improve their cloud and corporate network, wrote Analyst Mitch Steves of RBC Capital Markets, in a research note.

“We think this is another solid acquisition for the company given that it remains consistent with their strategy to generate more software/security/recurring revenue,” Steves wrote. "With Cisco’s large sales force, we think this will help the Viptela product accelerate its penetration rate into larger customers."

In addition to enhancing Cisco’s software portfolio, the deal will also give the company expertise in software sales. “Cisco’s sales team only knows how to sell hardware and boxes, and it’s hard to transform to software sales,” said Ed Sim, founding partner of Boldstart Ventures. “Viptela gives [Cisco] a cloud-native understanding and shows that they’re willing to re-engineer their business.”

Cisco’s recent $3.7 billion acquisition of AppDynamics is another demonstration of the company’s drive into a more software-centric model, while giving it a strong hold in the performance monitoring space.

Last time SDxCentral spoke with Grossner, he said that SD-WAN consolidation might not happen for a little while. “I imagined that Viptela would’ve held out for a little longer so they could’ve sold for a higher price, but the last thing you want to do as a startup is pass up a good deal and be left with nothing,” he said.