VMware, building on the strength of its NSX network virtualization technology, is buying VeloCloud Networks as it extends its ongoing networking competition with Cisco Systems into the fast-growing software-defined WAN market.
VMware officials announced the deal Nov. 2, saying it will enable the company to build out its network virtualization portfolio and add branch networking to give it a more complete presence from core data centers to the network edge and out to the cloud. No financial details were released. The deal is expected to close within the next few months.
Software-defined WAN (SD-WAN) is the fastest growing segment of the larger network virtualization space, which also includes such technologies as software-defined networking (SDN) and network-functions virtualization (NFV).
Branch offices for years have relied on such transport modes as multiprotocol label switching (MPLS) to run data to and from the data center. However, in a more mobile and cloud-centric world, applications and data can be accessed via the cloud onto a broad array of devices, and businesses are looking for less expensive options like broadband and WiFi that are more internet-friendly. SD-WAN solutions not only give businesses flexibility but also can automatically choose the best mode for the workload.
IDC analysts in August said they expect the SD-WAN market to grow almost 70 percent a year for the next few years, reaching $8.05 billion in 2021. The key driver is the ongoing digital transformation in businesses that are deploying such fast-growing platforms as mobile, social networks, analytics and the cloud, they said.
The market not only has drawn established networking vendors like Cisco and Juniper Networks, but also gave rise to an array of startups, including VeloCloud. However, some of those established companies are acquiring smaller players, such as Cisco earlier this year buying Viptela for $610 million. VMware, which is mostly owned by Dell Technologies, entered the SDN market in 2012 when it bought Nicira for $1.26 billion, putting it into direct competition with Cisco, and now is using VeloCloud to give it a stronger foothold in SD-WAN.
VeloCloud’s cloud-based platform, which the company sells directly to enterprises and telecommunications companies, will help build the NSX platform that was born out of the Nicira deal, according to Shekar Ayyar, executive vice president of strategy and corporate development and general manager of the Telco NFV Group at VMware.
“At the heart of VMware’s strategy for networking is the belief in delivering pervasive connectivity with embedded security that connects users to applications wherever they may be,” Ayyar wrote in a post on the company blog. “VeloCloud SD-WAN technology enables enterprises to securely support application growth, network agility, and simplified branch and end-point implementations while delivering high-performance, reliable access to cloud services, private data centers and SaaS-based enterprise applications.”
VeloCloud has more than 1,000 customers, from telcos like AT&T, Deutsche Telekom, Sprint and Vonage to enterprises like Brooks Brothers, NCR, Saber Healthcare Group and Bay Club. The vendor uses x86-based edge devices to aggregate multiple broadband links at branch sites and through orchestration technology to data centers and clouds.
The SD-WAN market has seen some consolidation over the past couple of years, with Riverbed Technology growing its capabilities through acquisitions of Oceda in 2016 and Xirrus earlier this year. Telcos also have been growing their SD-WAN capabilities through partnerships with vendors. VeloCloud over the past couple of years has partnered with such companies as AT&T, Sprint, Mitel and EarthLink. In addition, Cisco invested in VeloCloud during a round of fundraising early last year.
Comcast in September launched its own SD-WAN service for enterprises.