VeloCloud acquisition gives VMware SD-WAN market traction

Network design changes

With the recent movement to the cloud, enterprise network design has changed. Traffic is moving out of the data center and into a series of dispersed cloud connections. Traffic volumes have risen as organizations have deployed social media and video applications, which means they use more bandwidth than they did previously. Finally, rising interest in IoT devices and edge networking changed traffic flow. Consequently, organizations needed a new networking approach.

SD-WANs emerged to fill that void. They work with internet bandwidth and feature virtualization technology, which separates routing software from hardware.

SD-WAN design makes managing a network much easier than in the past.

Traditionally, IT personnel spent a lot of time configuring network devices, and such personnel costs were higher than the system costs.

"SD-WAN design makes managing a network much easier than in the past," Garson said. They support modern architectures and include high levels of automation. As a result, organizations utilizing SD-WANs are reducing their network personnel requirements and costs, sometimes quite dramatically.

VMware makes a bold move

Aware of the market changes, VMware acquired VeloCloud SD-WAN in December 2017 for $449 million. The startup, which was one of the early SD-WAN market leaders, fit with VMware's plans to develop a system and management framework to support private, hybrid and multi-cloud environments.

The assimilation of the new tool moved along steadily. VMware gradually integrated VeloCloud SD-WAN into its product suite. VMware focused on tying the network technology to vRealize, its management suite, to support its backup capabilities and to add telco-specific features -- one of VeloCloud's leading customer segments. That strategy worked.

"VeloCloud was growing at a good clip, and VMware did not want to inhibit its sales momentum, which was a smart move," said Brad Casemore, research director of data center networks at IDC.

In 2017, VMware's SD-WAN revenue grew 144%, reaching $86.6 million, according to IDC. The growth puts VMware in second place in the SD-WAN market with 10.5%. Cisco is the leader in the SD-WAN market, with $410.5 million and 49.3% market share, according to IDC.

A noteworthy to-do list

While VMware has made progress, it still has work to do.

"IT cannot tell developers that they have to wait three months for the network connections to be put in place," Casemore said. "VMware and other network equipment vendors need to simplify their products' day-to-day management."

With businesses embracing software-defined data centers, VMware needs additional integration.

"Corporate customers would like to have a consistent application policy management model," Casemore said.

To deliver such features, VeloCloud SD-WAN must tightly integrate NSX, VMware's software-defined networking application. Such work is on the drawing board, but it's exceedingly complex. Those capabilities might start to appear in 2019.

Taking the right steps

With network usage shifting, many VMware customers are considering SD-WANs. When examining that option, companies must carefully evaluate the costs and make sure they have a sound financial forecast that supports the change.

While internet bandwidth is plentiful, ordering and deploying it takes time.

"Sometimes, getting circuits installed takes longer than corporations think, so it behooves them to order the lines well in advance of a planned deployment," Garson said.

Hackers typically enter through the network, so IT should include the chief security officer in an SD-WAN evaluation and deployment processes.

The cloud changes enterprise network needs. WANs have long relied on MPLS lines to support remote connections, but they are now moving toward internet bandwidth. VMware is emerging as a leader in the transition, but it must do further integration work to fully meet customer demands in the SD-WAN market.