Top 10 SDN Market Leaders In The Data Center And Enterprise In 2016
Leaders Set To Capitalize On $12.5 Billion Opportunity
Vendors are fighting for market share in the fast-growing software-defined networking (SDN) space as the market is set to top $12.5 billion by 2020, according to recent reports from market research firm IDC.
"SDN in the data center and enterprise LAN is going to go mainstream in late 2016, early 2017," said Cliff Grossner, research director for data center, cloud and SDN at Englewood, Colo.-based IHS, in an interview with CRN. "We're seeing significant customer deployment. Cisco's got over 1,000 deployed customers for their SDN solution. VMware is around the same number, even though revenue might be higher on the VMware side. NEC has over 250 scaled deployment customers."
Grossner broke down the top 10 vendors in the market based on a number of segments -- including Ethernet switch, Ethernet switch silicon, Ethernet switch operating system and SDN control. In making its selection, IHS also examined vendors' approaches and overall activities in the SDN market to gauge the 10 companies most likely to win share as the market matures.
SDN Market Overview
The SDN market is made up of physical network infrastructure, virtualization and controller software, SDN applications and professional services. IDC predicts a massive compound annual growth rate (CAGR) of 54 percent over the next four years.
Although the physical network that encompasses data center switches will still account for the largest SDN segment in 2020, IDC said the fastest growth will be found in two software categories: the virtualization and/or control layer, and SDN applications -- which together are expected to be worth about $5.9 billion.
Grossner said the leaders in the data center and enterprise SDN market are emerging for physical network equipment and network virtualization overlay, but there's still room to steal market share. Areas of the market such as SDN controllers, orchestration and applications are still "wide open," said Grossner.
Key SDN Trend: White-Box, Bare-Metal Switching
One of the biggest trends in SDN is the increasing adoption of white-box, bare-metal switches. Grossner said these switches will represent about 25 percent of the data center ports shipped by 2019, up from just 11 percent in 2014.
"The vast majority of those switches are being used for SDN -- more than 80 percent. That is the biggest use case today for SDN," said Grossner.
Vendors on this list including Hewlett Packard Enterprise and Broadcom are deploying white-box SDN solutions.
San Jose, Calif.-based networking giant Cisco is the No. 1 data center vendor and is leveraging its experience with silicon to drive innovation in the SDN market, with custom chips that gather application traffic flow data. "They have the largest market share by ports shipped and by revenue in the data center," said Grossner.
"They've taken a very important position around the SDN underlays and bringing innovation there -- combining innovation in silicon and software," he said. "The pendulum [has] swung far toward software innovation, which is required, but there's still room for good hardware innovation. … Cisco continues to work to differentiate themselves with the Nexus 9000, having specialized silicon for gathering network telemetry information that will allow them to build some interesting SDN applications around analytics [of] applications and network traffic."
Cisco's Application Centric Infrastructure (ACI) SDN solution hit its 1,000-customer mark in September, and the company recently reported that it now has more than 5,000 Nexus 9000 "ACI-ready" customers.
The Cisco Challenge: White-Box
Cisco is facing the alternative network outcome of white-box, bare-metal switches.
" The IT folks and the Dev Ops teams are adopting the bare metal, white-box or open-compute type environments. That cuts down Cisco's addressable market," said Grossner. "At some point they will potentially need to consider a strategy around that to defend against that threat."
Palo Alto, Calif.-based VMware witnessed 100 percent year-over-year growth in its SDN NSX business in fiscal year 2015, with NSX bookings doubling in the second half of 2015, compared with the first half. The company recently boasted it has more than 1,200 paying NSX customers.
"VMware is the market leader by revenue for SDN overlays," said Grossner. "They really gave credibility to the SDN network virtualization overlay by buying Nicira [in 2012] and commercializing it. They have significant traction."
Grossner said the software company is still driving the market transformation when it comes to looking at the abstracted network and control plane.
"They bring computer science techniques of hardware abstraction that have been applied on servers, to the network -- creating a fully abstracted network sitting on top of a physical infrastructure. That's what they've shown the marketplace how to do, and it's a very important positioning for them," he said.
T he VMware Challenge: Physical Network
The fact that the physical network in the data center is still important remains the biggest hurdle for VMware.
"VMware will face competition from established network vendors so it still remains to be seen how they're going to leverage their existing server virtualization footprint and continue to be an SDN market leader," said Grossner.
Shenzhen, China-based Huawei has been innovating SDN for years both in hardware and software, said Grossner. The vendor provides a broad SDN portfolio, which allows the use of third-party components and is bringing advances in software and silicon programmability.
"They launched a programmable switch, which has a programmable control plane in silicon. They are on top of the SDN-type software to make it programmable," said Grossner. "Any element of software, orchestration, virtualization of servers and storage -- pretty much all the hardware you would want to do most networking on, Huawei can supply it."
The company invests "a very large amount" of research and development into its SDN business that makes it "a force to be contended with," said Grossner. In July, Huawei acquired Dublin-based SDN software specialist Amartus to accelerate its SDN road map, solutions and services.
The Huawei Challenge: North America
Like in many market segments, the main obstacle for Huawei is expanding into North America.
"The challenge for them remains geographical. They're very successful in China and made great strides in areas that have been under-served by the other vendors," said Grossner. "Ultimately, they will have to find a way to break into the North American market, which today represents about 40 [percent] to 50 percent of the market, although China itself is such a growing economy that it will start to eclipse North America at some point."
Hewlett Packard Enterprise
Palo Alto, Calif.-based Hewlett Packard Enterprise has seeded the market with more than 30 million OpenFlow-capable switch ports and branded bare-metal switches.
"They continued to be very innovative, launching the first SDN 'App Store.' Then they jumped into open networking, offering branded bare metal switches with the choice of Cumulus [Networks], Pica8 or others right now coming down the pipe," said Grossner. "They saw it as a way for them to change the game and grab market share and move their position forward in the market."
HPE touts 6,000 downloads of its VAN SDN controller as well as an SDN Open Ecosystem that enables customers to develop enterprise-ready networking applications.
The HPE Challenge: Tactical
Grossner said HPE has the opportunity to become a market leader, but its challenge "is tactical."
"They have to turn innovation and thought leadership into revenue, and hopefully all of the executive turmoil is behind them and now they can get some stability and push forward in the marketplace," said Grossner.
Hewlett-Packard officially split into two separate organizations last year: Hewlett Packard Enterprise, a $53 billion company focused on enterprise computing, and HP Inc., a $55 billion company targeting the printing and personal computer market.
Sunnyvale, Calif.-based networking company Juniper Networks was one of the first vendors to open source its SDN controller and disaggregate its switch OS and hardware.
"They continue to bring innovation both in silicon and software to the data center network and SDN," said Grossner. "They made a bold move to bet on SDN as an overlay and the open-source model for software. Then they complemented that with an enhanced fabric that does multi-path. They also recently jumped into the bare-metal switching market with the QFX 5200, which has a very unique flavor of disaggregation that not only disaggregates the switch from the software, but within the software itself, providing an open development environment."
Juniper made its push in the SDN market in 2012 with the $175 million acquisition of SDN startup Contrail.
The Juniper Networks Challenge: Enterprise
Juniper's heritage on the service provider side makes it harder for it to enter the enterprise SDN market.
"They need to make more inroads in the large and midsize enterprise that maybe don't require the tremendous scale they're capable of providing in the service provider world," said Grossner.
One of the strongest disruptors in the SDN market is Mountain View, Calif.-based Cumulus Networks, which made it to CRN's list of 10 Coolest Networking Startups Of 2015. The company was first to market with a Linux operating system for Ethernet switches.
"They're very much working with the Dev Ops, IT folks, providing a switch OS that's familiar to many Linux developers that is really helping push forward the marketplace around disaggregated switches," said Grossner. "They're very well-positioned to be part of the transformation that SDN represents to disaggregated switching."
Cumulus CEO JR Rivers told CRN recently that its open SDN solutions based on Linux and bare metal switching allow customers to leverage data center technology with a choice of hardware and software elements, automation and scalability, as well as enabling them to innovate quickly.
The Cumulus Networks Challenge: Staying Relevant
Cumulus' challenge is remaining relevant as alternative switch operating systems become more available.
"We recently saw two open-source projects: the Open Network Linux for [open-compute switch hardware] and also the Open Switch Initiatives from other vendors. So Cumulus will need to stay ahead of that competitive wave that's being put into the marketplace," said Grossner.
Tokyo-based NEC was an SDN market pioneer that has proven large-scale deployments and an open solution that doesn't lock in customers.
"They were one of the very early entrants in the SDN arena with their ProgrammableFlow controller and OpenFlow control switches," said Grossner. "They have some very interesting use cases of large-scale deployments in hospitals, transportation and rail stations that we don't see with all the other vendors. They have traction in the enterprise LAN as well as the data center."
NEC says its ProgrammableFlow SDN automates and simplifies network administration for greater agility, while providing a network-wide programmable interface for unifying the deployment and management of network services with any infrastructure.
The NEC Challenge: Growth Outside Asia
The challenge for NEC is similar to many other Asia-based IT companies: getting traction outside the Asia/PAC region.
"They need to grow their business outside of Asia, where most of it is now, and crack the North American market … making the right investments and having a brand better associated with SDN," said Grossner.
Nuage Networks, a Mountain View, Calif.-based division of Nokia, provides a Border Gateway Protocol-based SDN network virtualization overlay along with a SD wide area network (WAN) solution.
"Alcatel-Lucent [part of Nokia] was one of the first large traditional telco vendors to really jump in SDN and launch a Nuage product line by leveraging their very strong heritage in the router market," said Grossner. "They took elements from their router code and created the SDN controllers and the policy infrastructure that is core of the Nuage offering."
The company also recognized early that SDN would go into the data center, carrier networks and enterprise WANs. "They're really positioned themselves to be that SDN controller that can be pervasive across multiple domains and types of networks," said Grossner.
Nuage says its Virtualized Services Platform offers SDN solutions for clouds of all sizes and makes the network readily consumable as compute resources. The platform is included in HPE's Helion OpenStack 2.0.
The Nuage Networks Challenge: Midsize Market
With Nuage's focus on some of the largest enterprises and service providers, the company might have trouble winning midsize enterprise customers.
"If they want to move more to the midsize enterprise, basing their controller on boarder gateway protocol [BGP] may not speak so much to the traditional IT folk in the mid- to large enterprises," said Grossner. "That will be a challenge for them if they wanted to penetrate deeper into the enterprise."
San Jose, Calif.-based networking vendor Brocade Communications offers an open-source SDN controller distribution along with a strong data center fabric.
"They've leveraged their strong footprint in the data center to build one of the early data center fabrics …. that supported multi-path. So they recently made a very important leap in the software world by providing a commercial distribution of OpenDaylight, which now makes them smack in the middle of a leadership position in SDN," said Grossner.
Grossner said Brocade made the correct tactical move as a company in recent years to reposition themselves around software. In a recent interview with CRN, Brocade CTO Ken Cheng also spoke about the company's new push in the hyper-converged market.
The Brocade Challenge: Sustainable Ecosystem
A key challenge for the networking vendor will be building a sustainable developer ecosystem.
"It may be forced to commercialize an open source vSwitch distribution or develop its own to be relevant with IT server teams," said Grossner.
Broadcom is the merchant silicon market pioneer providing SDN-focused switching chips and developer tools.
"Without them jumping in to merchant silicon, much of the ASIC that the open networking or bare metal switches are based on wouldn't be there," said Grossner. "They're definitely churning new generations of silicon and they're also working to provide the tools developers need to develop their platform."
Broadcom's BroadView software suite targets new opportunities offered by SDN including network programmability, automation and optimization. Its co-headquarters are in San Jose, Calif., and Singapore.
The Broadcom Challenge: Disrupters
Broadcom needs to keep a keen eye on Disrupters offering low-cost SDN solutions.
"They have competition from Cavium and some of the others maybe perhaps on the lower end of the market. They need to keep ahead of that disruptive wave and watch out for those disrupters," said Grossner.