SDN market to reach $35B by 2018

I’ve opined in the past about the impacts of SDN on the networking market at large, covering topics like commoditization and pricing mix and suggesting that there would be increasing pressure to size the SDN market as companies jockey for position and investors and analysts look for a scoreboard they can use to assess progress.

As the old adage goes, if you want something done right, do it yourself. So Plexxi has joined up with the premier SDN online community SDNCentral and one of the top venture capital teams Lightspeed Ventures to size the SDN market.

The big punch line is that SDN is going to have a much larger impact on network spend and in much shorter time than other industry estimates have shown. We expect that between 30 and 40 percent 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.

We have published the full results as an infographic, and a report that outlines the measurements and assumptions can be found here.

As we were going through the data gathering and analysis, there were a few major takeaways for me:

  • The SDN market is growing much larger and much faster than anyone had anticipated. I think the numbers most cited by folks show the SDN market at something like $3.5B in 2015. We concluded that the market will grow to nearly 3x that size by 2015 and to a full 10x that size by 2018.
  • The number of SDN companies is a lot higher than I had thought. SDNCentral has some 225 companies registered as SDN companies. Even though some of these are certainly SDN-washing, it still means that we have seen an industry with near 0 SDN companies in 2009 climb to over 200 in just 3 years.
  • The amount of VC money being poured into this space is massive. Would you believe that the total VC investment has increased 50x over 3 years? Sure, some of this might be dumb money, but it means that a lot of people are betting a lot of money on the growth of this space.

This last point is particularly interesting to me. My personal conclusion here is that the competitive landscape is shifting in the kind of way that we only see maybe once in a generation. What has been a virtual monopoly for a couple of decades is quickly becoming a hotly contested space. The new technology has brought with it an influx of new money and new people, which will ultimately deliver new solutions based on new ideas. We haven’t seen this competition perhaps ever, and it should serve both customers and investors well. The new companies will loosen the stranglehold that years of a dominant incumbent have brought to networking. That will force everyone – including Cisco – to return to innovation and value as a means of competing. This can only spell goodness for consumers.

And the fact that SDN is acting as a conduit for adjacent spaces to enter the networking foray could make things really interesting. Obviously EMC and VMWare have been on a collision course with Cisco since they acquired Nicira, but Oracle has been active in the SDN space of late. And companies like IBM might leverage their systems integration skills to also enter the space. We could see a colossal clash of the titans before much longer, which would alter even more this rapidly changing space.

And then juxtapose this upon changes that are already happening within the IT space more broadly. The convergence of IT silos, the rise of software-defined everything, and the emergence of a DevOps population could add different twists to this story. For the first time that I remember in my dozen years in the industry, we will see real strategic work at play. No more chasing the next MPLS or multicast feature; we should see real product moves shaping the industry.

Oddly enough, this will actually make it harder for customers in the short run. Until the winners and losers are sorted out, customers will need to decipher the various SDN messages to determine what will ultimately emerge. But I feel confident in saying that whoever the winner, whatever the solutions, we will wind up in a dramatically different place than we started. And I for one cannot wait.