SDN Revenues to Hit $3.7 Billion by 2016: IDC

SDNs are gaining momentum heading into 2013, and will be a key technology in data centers for enterprises and service providers, IDC analysts say.

Software-defined networking is having an increasing impact in the networking industry, as enterprise interest grows and vendors big and small continue to roll out solutions, according to analysts at market research firm IDC.

In a Dec. 19 report, IDC analysts said SDN revenues driven by sales to enterprises and cloud service providers will hit $360 million in 2013, and will grow to $3.7 billion by 2016. Those numbers includes sales of everything SDN-related, from the associated network infrastructure and applications to control plane solutions and professional services.

The forecast comes after a year that saw established networking vendors like Cisco Systems, Hewlett-Packard, Juniper Networks and Extreme Networks begin to embrace the SDN trend, and a host of startups bring their solutions to market. At the same time, there has been some consolidation in the industry as larger players—including some with little or no presence in the data center networking space—have bought smaller vendors to augment their SDN capabilities. Those include Big Switch Networks, Adara and Pica8.

For example, VMware this summer spent $1.26 billion for SDN startup Nicira, and a week later, Oracle bought Xsigo. In November, Brocade bolstered its SDN expertise by acquiring SDN startup Vyatta.

The draw of software-defined networking and virtualized networks is understandable. The data center—particularly servers and storage devices—has become more virtualized over the past several years, making the infrastructure more dynamic and flexible, easier to program and scale, and more cost-effective. However, within the data center, networks have become a bottleneck—while it can take minutes to spin out a virtual machine, it can take weeks to configure a traditional network to handle those VMs.

The promise of SDNs is easier and faster programming, greater scalability, easier management and greater cost efficiencies, according to Rohit Mehra, vice president of network infrastructure at IDC.

"SDN's ability to decouple network logic and policies from the underlying network equipment allows for a more programmable network," Mehra said in a statement. "Providing better alignment with the underlying applications, this programmability allows for greater levels of flexibility, innovation, and control in the network. Logic and policies that can be defined, changed and modified result in a more dynamic network, providing the scale network administrators so desperately crave."

A number of trends in the data center are helping drive the demand for SDNs, according to IDC analysts. Among those trends are the rise of cloud services and applications, a growing interest among enterprises and service providers in converged infrastructures—such as Cisco's Unified Computing System (UCS), which offers a tightly integrated solution that includes servers, storage and network technologies—and the software-defined data center, and the benefits derived from server virtualization.

In addition, organizations are growing increasingly frustrated with traditional networks and their inability to support virtualization, cloud computing and mobility, according to IDC analysts.

They also said that 2013 could be the year of opportunity for many of the smaller SDN startups, some of which have just recently come out of stealth mode, while there are still some that have yet to do so. IDC pulled out five startups that the analysts suggest could make significant strides in the new year.

At the top of the list is Big Switch Networks, a 2-year-old company that in November rolled out its first suite of SDN-based products—dubbed Open SDN—and a list of partners that includes Dell, Extreme, Juniper, Microsoft, Palo Alto Networks, Broadcom, Brocade and Citrix Systems.

"SDN is the most disruptive and transformative trend to hit the networking industry in over 20 years and Big Switch Networks Open SDN product suite delivers on the promise of the full potential that we envisioned when we started this company," Big Switch co-founder and CEO Guido Appenzeller said in a statement at the time the company announced Open SDN.

Also on the list are Embrane, whose heleos is a multi-service, distributed software architecture that delivers virtual Layer 3-7 network services to both traditional networks and SDNs, and Midokura, which offers Midonet, an SDN solution for cloud service providers. Plexxi this month unveiled the first two products—Plexxi Control and Plexxi Switch 1—in what officials said will be a complete SDN system. Vello Systems offers its Data Center Gateway, which enables on-demand, scalable networking for enterprises and data centers.