SD-WANs And The Republican Primary

The SD-WAN market reminds me of the current Republican primary. Not because SD-WANs have an ideology, but because unique forces are sustaining the political and technological battles for mind share and market share.

An extraordinary number of Republican contenders are contesting the party’s nomination. But the traditional forces that would winnow the candidates no longer seem to apply.

Thanks to recent changes in election law, political action committees and a handful of wealthy donors can sustain candidates who otherwise fail to draw popular support (and sufficient donations to run a campaign).

The result is that instead of a field that gets more narrow as time goes by, we’ve entered into a kind of steady state, with front runners and dark horses alike stalking debate stages and Iowa diners, waiting for someone else to make a campaign-ending mistake.

The SD-WAN market is experiencing a similar phenomenon.

Case in point, SD-WANs took over the ONUG Fall 2015 conference earlier this month. By my count, 12 companies were on site that are either pure-play SD-WAN vendors, or have an SD-WAN offering as part of a larger product portfolio.

It’s no surprise they were at ONUG in force; the conference draws IT leaders from the financial services sector, which is a key market for this technology.

These 12 are part of a larger SD-WAN market; Packet Pushers has identified 19 SD-WAN offerings available today.

And while each vendor will take pains to explain its unique value proposition, all these products do essentially the same thing: combine multiple branch links, including MPLS, broadband, and LTE, and then send traffic over the link that meets predefined performance criteria.

If you see 19 companies with similar products all attacking the same space, it’s time to start the consolidation countdown.

One or two of these companies will grab substantial market share, and another two or three will carve out sustainable niches. You might have another two or three that eek out an existence in the margins. Everyone else will get acquired or close up shop.

But I think this consolidation is going to take a long time; much longer than it might in other circumstance.

One reason is because the potential customer market is enormous; thousands of companies in retail, financial services, healthcare, government and other sectors are eager to cut WAN costs.

Second, while the SD-WAN market isn’t quite a greenfield opportunity, it’s pretty close. Most vendors will work in conjunction with existing routers, and some can replace the router entirely. In short, this isn’t a purchase that causes major internal disruption; you ship a box, run through some simple configuration options, and you’re up and running.

Those are excellent conditions for startups, all of which can snatch up a handful of customers. Those customers provide a bit of income, but also validation of the technology, which can then be used to raise additional VC investment. This creates a virtuous circle of sustenance.

Meanwhile, established vendors that are adding SD-WAN to their portfolio can leverage existing customers and established sales channels to get on short lists and win deals. And because they have a portfolio of products, they don’t have to stay afloat solely on SD-WAN revenues and the good graces of fickle investors.

While SD-WANs are not political entities, and the stakes in a product purchase aren’t as high as a national election, a set of unique conditions means a surprising number of vendors will be able to weather a protracted fight for market share.

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