The latest research from IHS Markit found that SD-WAN revenue reached $284 million during the third quarter of 2018, a 23 percent increase from the previous quarter. As SD-WAN grows, a number of collaborations between cloud service providers and vendors, as well as overall consolidation of providers, are moving the market forward.

According to the research firm’s quarterly Data Center Network Equipment Tracker — which tracks SD-WAN appliances as well as SD-WAN control and management software — VMware led the overall SD-WAN market with 19 percent revenue share in the quarter. Cisco trailed the vendor with 13 percent share, and Aryaka followed closely behind.

[caption id="attachment_74459" align="aligncenter" width="576"] SD-WAN Revenues. Source: IHS Markit[/caption]

Cloud service providers have begun to understand the importance of SD-WAN and are offering it as part of a cloud service, according to Cliff Grossner, senior research director and advisor for cloud and data center at IHS Markit. During the third quarter of 2018, VMware and Microsoft Azure announced a new SD-WAN-driven partnership, which he sees as largely significant.

Under the partnership, Azure will offer backbone connectivity in its cloud service so customers can exit to the internet at different points of presence (PoPs). Customers can then run VMware in their on-premises data centers and use VMware SD-WAN and gateways installed on Azure PoPs to leverage the global backbone of Azure.

Citrix, Versa Networks, and Riverbed have all also begun offering their SD-WAN via Azure and Amazon Web Services (AWS).

“The collaboration between SD-WAN vendors with cloud service providers, in general, will accelerate the SD-WAN market, as key requirements for enterprises connecting to the cloud is high-quality application (voice and data) performance,” said Grossner. He noted that particularly, Azure and VMware will “have broad impact as an accelerant,” since they both are market share leaders.

Going forward, he expects that cloud service providers will continue to add services, such as analytics or compliance monitoring, to boost SD-WAN offerings.

Another trend occurring in the SD-WAN market is consolidation. Oracle, announced in November its intent to acquire Talari Networks. The cloud provider has also integrated Aryaka SD-WAN into Oracle Cloud.

The SD-WAN market remains largely fragmented and full of small players. “This can be harmful when there are too many competing alternatives that enterprises feel compelled to evaluate. Many will wait until there are clear winners as they do not want to choose a vendor that might not be around long term,” Grossner said. This also adds a layer of complexity to integration and a lack of interoperability with carrier APIs, which consolidation will help to eliminate.

Cisco has been climbing the ranks in terms of market share. In the first quarter of this year it held the fifth position in the IHS tracker. According to Grossner a number of factors have contributed to this growth. In the most recent quarter, Cisco upgraded its installed base of Cisco routers with its Viptela technology, which enabled customers to activate SD-WAN without changing hardware. In addition, Cisco rolled SD-WAN capabilities into its Meraki MX appliances, reaching the Meraki client base, and it began training its enterprise channel to sell the technology.