Is SDN a Market?

This is a Guest Blog from Joe Skorupa

A topic that comes up periodically from clients surrounds defining SDN (and NFV) as a market.  The conversation usually goes something like this:

“You guys wrote some of the first research on SDN and NFV and publish forecasts for everything IT. So, when will you publish a forecast on SDN and NFV?”

And another variation of this is

“When will you publish an SDN Magic Quadrant?”

The simple answer is: We won’t, because SDN and NFV aren’t markets.  They are an architectural approach and a deployment option, respectively. On a related note:  We’ve had similar questions regarding Big Data, which is described in Andrew White’s blog entry: The Elusive Magic Quadrant for Big Data – is Big Data a Market?

SDN is an architectural approach

We do realize that other firms have published reports on the 186 quadrillion bitcoin market for SDN and NFV. However, market forecasts predict the revenues generated by the sale of goods and services and SDN is an architectural approach. The capabilities to build a network based upon that architecture (such as OpenFlow) can appear in Ethernet switches, but that doesn’t make them part of the SDN market any more than VLAN tagging makes those switches part of the VLAN market. The market segment is Ethernet switches and they have features that may be included at no extra charge, or that may carry a premium, at least for a while. So, there is no SDN market, just products that can be used to deliver that architecture, and many of those products also support legacy network architectures.

NFV is a deployment option

NFV is a fancy TLA for a disaggregated network service (software separate from hardware) such as an application delivery controller, session border controller or firewall. When acquiring these services your only option used to be an integrated appliance – software bundled with hardware. Today, virtualization, containers, and performance improvements in x86 processors make other deployment models possible and even desirable. So, for example, we forecast and track the total market and may break out integrated appliances, perpetual license software purchase, yearly lease and monthly lease of software, be it bare metal, VM or container-based. At some point we might even track support-only revenues for open source offerings. But whatever the product category, NFV is simply a set of deployment options. NFV may have an impact on the market size because the hardware revenue often goes to a server vendor and is tracked as part of the server market and only the software revenues will appear in the network equipment market forecast and market share.

So, in the end, the adoption of SDN as an architecture may or may not increase revenues in multiple product categories just as the adoption of NFV may result in a decrease in the size of the ADC or SBC market. We will do our best to explain what is happening in each of the markets rather than publish eye-catching numbers that distort the picture of what is going on in the market.

For more info on our forecasting:  Forecast Analysis: Enterprise Network Equipment, Worldwide, 1Q15 Update

http://www.gartner.com/document/3070324

Summary: Enterprise network equipment spending will grow 3.2% in 2015 and 0.3% in 2016. However, spending will remain flat in 2017, largely due to a drop of 5.3% in Ethernet switches. This declining trend will continue in 2018 and 2019.

Joe Skorupa