Forecast Overview: SD-WAN Market set to Skyrocket

The WAN Edge market has matured and changed over the last couple years. Now, more widely adopted, SD-WAN and SASE technologies are enabling companies to transition away from traditional networks owned and operated by regional telecoms to software-defined networks that span geographies by abstracting the control and management of the network away from the underlying circuits that transmit the data.

SD-WAN Market Growth

Some key statistics driving the SD-WAN market growth:

1. Network costs are a significant driver of enterprise IT budgets, generating an average of 11% of IT budgets across all business categories.1

The percentage of IT budget that results from network costs ranges from a low of 8% in the Insurance sector to 12% in the Manufacturing, Energy, Transportation, Utilities, Healthcare, Consumer, and Chemical sectors and a high of 16% in Education. Clearly, reducing the cost of networks in these sectors by implementing technologies from the SD-WAN market will free up the budget to spend on other priorities.

In my opinion this is a no-brainer for organizations — a network is infrastructure plumbing and SD-WAN should be deployed everywhere possible and integrated with Layer 2 networks where needed. The built-in encryption, automated routing, and built-in failover to enable multi-path converged networks to make SD-WAN and time-saver and a cost-saver.

Network costs

2. Deploying IT spend to transform the business versus run the business.

Spending more on IT can be used to transform business operations, and result in higher overall business metrics and outcomes. Gartner’s research indicates that by tying IT spend to key business metrics such as Revenue per Employee and Operating Income per Employee, it’s possible to determine if the results of IT spend are actually having a positive effect on the business.2

Transformational IT projects should lead to new business process improvements that result in new revenue streams or higher profitability, for example. “Run the business” IT projects would be those that involve an upgraded data center, deploying virtualization technology, or other projects that transform the IT component of the business.

Across all industry sectors surveyed by Gartner, an average of 73% of IT spend was focused on Running the business, 17% on Growing the business (a balanced approach between run and transform), and 10% on transforming the business. By sector, transformational spend ranged from a low of 8% in construction, materials, and natural resources businesses to a high of 17% in Telecommunications businesses.

When businesses surveyed by Gartner did increase their spend on IT to focus and coupled it with transformational projects, there is a clear increase in business metrics and outcomes. With over 30% profitability for the top decile spenders on IT versus the database median of 7.7% and greater than $130,000 in operating income per employee compared to a median of just over $23,000, it’s clear that investing IT dollars in transformational projects pays off! It’s important to note that the top decile (based on business metrics) did spend more on IT per employee than the median, but that this was only by 17% and resulted in just over 22% higher profitability.

3. Transformational use of IT to focus on business strategic objectives.

Gartner surveyed over 2,500 organizations to determine their business aspirations. Top 5 results were:3

  1. Improve customer or constituent experience
  2. Improve workforce productivity
  3. Reduce security and privacy risk
  4. Improve operating margin or operational cost
  5. Improve existing revenue or mission delivery

Improve workforce productivity

To meet these business targets, network connectivity, reliability, cost, and cloud connectivity are considerations. While some may deploy full-stack solutions that include SD-WAN plus Security, IT teams should keep in mind the risk/reward of consolidating everything with a single vendor, and the potential costs of doing so (proprietary hardware, annual licensing and support costs, training costs, and eventual switching costs). For some organizations, especially service providers that are seeking to deploy an in-house, branded SD-WAN platform in the mid-market or support enterprise customers with established Security infrastructure, it may be best to consider SD-WAN as a standalone purchase with Security as a separate, but integrated, overlay.

Of these 5 business aspirations, SD-WAN can help improve them all:

1. Gartner, Inc. “IT Key Metrics Data 2022: Infrastructure Measure – Executive Summary.” December 2021.
2. Gartner Inc. “IT Key Metrics Data 2022: Industry Measures – Executive Summary.” December 2021.
3. Based on a survey of 651 organizations. Gartner Inc. “IT Key Metrics Data 2022: Industry Measures – Executive Summary.” December 2021.