In-use data center (DC) and enterprise software-defined networking (SDN) market revenue increased by 34 percent in second half of 2018 compared to the first half and is expected to continue to rise to reach $20 billion by the end of 2023, up from $7 billion in 2018.

Highlights

In-use data center (DC) and enterprise software-defined networking (SDN) market revenue increased by 34 percent in second half of 2018 compared to the first half and is expected to continue to rise to reach $20 billion by the end of 2023, up from $7 billion in 2018.

The DC and enterprise SDN segment includes SDN in-use Ethernet switches, SDN controllers, SD-WAN appliances and SD-WAN control and management software.

“From the edge, to the on-premises data center, to the off-premises cloud, enterprises are continuing their march toward running applications in distributed IT environments,” said Josh Bancroft, senior research analyst at IHS Markit. “This transition is important for DC SDN adoption, and enterprises are going full steam ahead to get their SDN lab and production trials completed.”

As a result, vendors such as Cisco with ACI, and VMware with NSX will go head-to-head in the market with their cloud, data-center and edge product positioning. In January, Cisco launched its ACI anywhere vision and VMware responded with NSX-T. Both have been rewarded with an increase of production trials and live deployments at new enterprise customers.

“In the second half of 2018, we saw verticals such as healthcare, education and government being most prevalent with completing their production trials with DC SDN,” Bancroft said. “These enterprises are focusing on rearchitecting their networking infrastructure to achieve greater network security, automation, and application performance.”

In the previous IHS Markit Data Center and Enterprise SDN Hardware and Software report, IHS Markit noted how the open-switch operating system (OS) had not reached the maturity desired for wide-scale bare-metal switch adoption. Since then, efforts have been made not only to advance the maturity of the switch OS but also to enhance OSs with new networking and intent-based features. This is a good strategy, as 46 percent of respondents to the IHS Markit Data Center SDN Strategies Survey indicated adoption of intent-based networking was an important SDN deployment driver.

“If successful, vendors such as Arrcus, SnapRoute, Cumulus Networks and Pluribus Networks will all help fuel the adoption of bare-metal switches running on their OS,” Bancroft said.

More established SDN vendors are also focusing on intent-based networking to fuel SDN adoption. In the second half of 2018, Cisco enhanced its intent-based networking solution to have greater integration with ACI. At the Mobile World Congress in February, Huawei launched its intent-based network solution.

“The next big innovation in switching is the inclusion of special-purpose artificial-intelligence (AI) silicon within the switch,” Bancroft said. “Huawei leads the pack with its announcement of the Ascend 910, which is included in the new Cloud Engine 16800. We can expect the bare-metal switch vendors to follow, and this is also expected to fuel SDN bare-metal switch adoption”

Additional DC SDN market highlights include:

  • Taking a simplistic view based on in-use SDN revenue, IHS Markit ranks VMware in first place with 22 percent of in-use SDN revenue in the second half of 2018, Cisco at #2 with 19 percent, Arista at #3 with 15 percent, white-box vendors at #4 with 10 percent, and Huawei at #5 with 8 percent.
  • In-use vSwitch ports will account for 66 percent of SDN-capable ports shipped in 2023, while not-in-use vSwitch ports will account for 19 percent.
  • Revenue from in-use SDN controllers is expected to hit $3.8 billion by 2023.