When Will Managed SD-WAN Service Be a Significant Revenue Driver?
From a service provider perspective, It is hard to say when managed SD-WAN services will hit an important inflection point, and drive revenue, where early SD-WAN revenue has been based on hardware purchases by enterprises that deployed themselves.
It is not hard to see the attraction SD-WAN holds for enterprise buyers. Where an MPLS connection can cost hundreds of dollars a month per Mbps per month per location, an SD-WAN can run over an internet connection costing as little as $7 a month, per Mbps.
Among the issues: increased need to connect branch locations, and an increased reliance on cloud-based apps that run over the internet.
Currently, there are more than 2,000 commercial SD-WAN paying customers, according to IDC. More than 50,000 branches are deployed based on a single SD-WAN product.
Still, IDC has estimated that half of the estimated $130 million in sales during 2016 was booked by just two companies, both startups. Most of that revenue was likely generated by hardware sales, not recurring service provider revenue.
Gartner expects that by 2020, SD-WAN sales will be worth about $1.25 billion, representing a 15 percent compound annual growth rate.
At the same time, router sales are expected to drop by 23 percent, and branch office router sales by more than 60 percent by 2020, as 50 percent of all enterprise routers are replaced by SD-WAN.