A Huge New Wave of Growth Ahead for Carrier SDN

The market for software-defined networking (SDN) systems is, unsurprisingly, on an upward growth trend, as is its close counterpart network functions virtualization (NFV). A new report from IHS Technology shows just how rapidly upward the SDN market—particularly the carrier SDN market—is poised to rise in the next few years, as it projects a compound annual growth rate of 98 percent from 2015 to 2020.

The report illustrates the growth patterns afoot, breaking down the regional issues and other trends behind the impressive growth projection. Growth has been limited so far, as progress has been limited to use cases, proof-of-concept, and a handful of commercial deployments. That latter point is what's going to really drive growth in the coming years, especially as we're coming out of the very earliest years of what will likely be a major market.

Japan was the leader in SDN, as it started deployments in major firms like NEC and NTT, taking those successful examples to work outward from there. Gaining fast in the field are places like China, who saw several major new gains in 2015 that carried on into 2016, and both North America and Europe are actively working to put more SDN to work directly, sufficiently so that the duo will account for about 13 percent of all revenue between 2015 and 2020. The total market will go from $289 million in 2015 to a whopping $8.7 billion in 2020, achieving that fantastic 98 percent CAGR for the interval.

Software will account for nearly half of all revenues in the period at 46 percent, with orchestration and controller software poised to clear $1.8 billion in 2020. However, SDN apps will gain ground much more rapidly, and by 2020, will account for even more value than orchestration and control as SDN apps will be value-priced to reflect rapid growth in competition.

As companies look for more and better ways to operate, be more nimble and able to respond to changes in the field, and perform a variety of other functions, hardware is looking less like the weapon of choice and more like a massive expense. While this may be short-sighted on some levels—what happens to a cloud-based anything when the Internet goes down?—it's been proven in too many cases that, as long as the infrastructure holds, cloud-based systems and other software-based systems are delivering value routinely. It's hard to convince a business that it should be using a hardware-based approach in case of wide-scale Internet failure, and as such, software-based systems are gaining in popularity, which we're seeing clearly in studies like IHS'.

It's big gains ahead for SDN, and other such systems, and though it may not be the best solution, it's certainly offering some impressive value all around and making itself indispensable.

Edited by Stefania Viscusi