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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: Key words 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.