Can SD-WAN startups survive a shakeout?
Despite the benefits of SD-WAN, Shaffer says that he still worries about the viability of startups such as Viptela in such an immature market: "I'm relying on something they have and what happens if they go away or get acquired and some company buries their product?" Shaffer says. "You may have time to get out, but you've invested the time and it's not what you wanted."
While there is no crystal ball to help Shaffer see whether Cisco Systems or some other player decides to gobble Viptela, Shaffer says he believes the company is well-positioned for growth based on its funding and commercial track record. Viptela in 2014 raised $33.5 million from Sequoia Capital and counts Gap as one of its customers. Last month Verizon began selling a hosted SD-WAN service powered by Viptela.
Ramesh Prabagaran, Viptela's vice president of product management and marketing, says 25 of the Fortune 500 are using Viptela.
Even so, Shaffer says he sees Viptela as primarily a back-up solution to his MPLS connectivity, with plans to reduce his reliance on those circuits over time. "[SD-WAN] technology is still sort of new," Shaffer says. "Before I go fully in and start dumping things I want a bit of a track record."
IDC’s Chander says Shaffer's concerns are valid. The nascent SD-WAN market is unpredictable, with a shakeout of mergers and acquisitions likely as rivals jockey for competitive position. He also says it's unclear whether startups will have the capabilities to scale in order to accommodate customers' preferences to connect to various cloud services. "I don't know whether SDN-WAN startups can provide robust cloud connectivity to SaaS providers," Chander says.
However, there’s little doubt that future of the technology is bright. IDC predicts that the SD-WAN industry (worth $225 million last year) will grow at a more than 90 percent compound annual growth rate for the next five years to become a $6 billion industry by 2020.
Viptela is among the most mature startups selling SD-WAN in a market that includes Cisco Systems, Riverbed Technologies, and Citrix Systems, as well as startups such as Velocloud, Nuage Networks and Cloudgenix, Chander says.
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