he software-defined wide-area networking (SD-WAN) market, which revolutionized the way enterprise branches were connected to a growing variety of data centers and clouds, including cloud software as a service (SaaS), is a stepping-stone technology. This successful niche enterprise networking technology has now paved the way for much bigger markets in the future of cloud networking – what I am calling the Third Wave of Cloud Networks.
This Third Wave will take the approach of SD-WAN – software-driven management and control of networks – and inject it throughout the cloud, enabling any cloud service to securely connect to any network, dynamically and quickly, without the need for manual hardware configuration. We’re now about to enter the Third Wave. This includes secure access service edge (SASE), Network as a Service (NaaS), and Multicloud Networking (MCN).
The first wave came in data center virtualization, a market dominated by the likes of Cisco Systems and Arista Networks (widely regarded as #1 and #2 in the market, respectively), who evolved their software strategies to sell more scalable systems for both private and public cloud.
The next wave of networking virtualization came at the enterprise branch, where SD-WAN was adopted to enable better software control for WAN access as well as automating deployment of WAN branches using software. The SD-WAN view is branch-centric – it helps branches get to the cloud faster, but it is not concerned with what’s happening inside the cloud.
The next wave of MCN and NaaS technologies show even more promise with even larger addressable markets than SD-WAN. Like SD-WAN, the Third Wave will start with a simple concept: Separate software control of networks from networking hardware and make them easier to scale, manage, and automate. This market is ready to explode, based on our research with end users.
Demand Drivers for the Third Wave
The Third Wave of Cloud Networks has massive demand drivers. The main driver is the mass migration of enterprise technology toward multicloud and hybrid cloud architectures. The cloud delivers innovation at scale, which is what organizations would like to harvest. But as they adopt a multicloud and hybrid cloud approach, they have many technology obstacles. One of the major needs is a new networking infrastructure that can easily connect to a variety of cloud infrastructures, on demand, using software control. The network has become a bottleneck.
According to our end-user research, based on a survey of cloud networking practitioners with director-level and above positions, they are starting to deploy MCN technology in earnest.
Of those surveyed, 87% expect that MCN will help improve overall security, visibility, and governance. A full 71% of those surveyed expect to invest modestly or substantially in MCN technology. In addition, 83% said they were examining MCN solutions to help manage and integrate connectivity among public cloud and private networks.
Why the Third Wave is Needed
Why do we need the Third Wave of Cloud Networks? While data-center virtualization and SD-WAN are useful technology innovations, they only address specific areas: data centers, public cloud data centers, and branches. They don’t address connectivity both across and inside multiple clouds. MCN and NaaS can be used to build a global abstracted network to connect all of these resources, including simultaneously connecting networks both inside and outside of clouds. Futuriom believes this next wave could be even bigger than the prior two, given the scale of public cloud.
This should also have economic benefits of replacing more expensive legacy technology and reducing hardware costs. End users backed this up in our survey. When asked if MCN could potentially reduce or replace existing legacy networking infrastructure over time, 81% of those surveyed said yes.
As public cloud infrastructure expands to provide trillions of dollars of resources and services to enterprise end users, organizations have become more conﬁdent in moving large portions of their IT infrastructure to the cloud, which has become a more complex environment for distributed applications that can run in private clouds, public clouds, and hybrid clouds.
While it’s clear that organizations are moving to adopt a multicloud and hybrid cloud approach, they have many technology obstacles.
Companies to Watch
There are a wide variety of players that will drive the MCN and NaaS market. As the SD-WAN market proved, it’s likely to be driven by innovation in the startup and cloud software markets. These companies will be highly coveted and M&A activity will ensue. In fact, it has already started, as several of the startups we identified last year have already been acquired. MCN pioneer Volterra, which has an innovative approach to network cloud applications at Layer 4-7, was acquired by F5 Networks for $550 million.
MCN startups such as Alkira and Aviatrix are the most discussed MCN startups that remain private, each with distinct but aggressive approaches. Aviatrix recently raised $200 million at a $2 billion valuation and is led by industry veteran Steve Mullaney, who has a track record of executing on the sales and product level. Alkira, which takes a full NaaS approach to delivering networking in the cloud, is led by Amir Khan, a former cofounder of SD-WAN player Viptela, which was sold to Cisco in 2017 for $610 million as part of the first wave. Both of these companies are likely to be a big part of the Third Wave. Another interesting startup in the NaaS market, PacketFabric, is led by Cisco veteran Dave Ward.
Networking can also be delivered with cloud-native functionality, Kubernetes, and the important security concept known as Zero Trust Network Access (ZTNA), securing access at the Layer 4-7 level. Volterra took this approach, and NetFoundry has also been a proponent of this approach. Another upcoming MCN startup, Prosimo, is also focused on the Layer 4-7 approach to deliver ZTNA, secure segmentation, high-capacity cloud transit gateway connectivity, app peering, and edge networking. (For more detailed analysis of SASE and ZTNA markets, please see this column.)
Beyond the startups, there are plenty of other companies developing in the MCN and NaaS ecosystem. The major cloud providers, including Amazon, Google, Microsoft, and Oracle, have been beefing up software networking technologies to make it easier to connect to other networks and clouds. They could be acquirers of MCN and NaaS technology to make their cloud networking offerings more competitive. Data center and colocation providers such as Equinix and Digital Realty are building out their cloud networking capabilities and are in a natural position to help provide MCN services and products. Last year Digital Realty acquired PurePort’s multicloud routing and networking technology.
At the same time, the SD-WAN players are expanding feature sets to make them more suitable to MCN connectivity. In addition to the examples of Aviatrix and Cloudflare providing Cloud WAN products, the SD-WAN players are moving into MCN. For example, Aryaka has added private direct connections from its PoPs into the major public cloud services. VMware is positioning its VeloCloud SD-WAN gateways as onramps to major IaaS and SaaS cloud providers. Cato Networks, a cloud provider focused on security and secure access service edge (SASE) capabilities, has built its own cloud-delivered NaaS with full routing and security features, which can connect to major cloud infrastructure at its PoPs.
Telcos also see the opportunity for MCN and hybrid cloud services, and once again they are trying not to be relegated to “dumb pipe” designation. Their opportunity lies in taking their global networking resources and integrating with cloud services and next-generation MCN provisioning tools to make it easier for customers to leverage cloud networks. One of the more forward-looking players here is Tata Communications, which has built its IZO Cloud Command product to help organizations integrate connectivity to multiple clouds over a single, secure private network with Service Level Agreements (SLAs).
In the past few months, the research we have conducted indicates that the Third Wave of Cloud Networks is well underway. Networking, IT, and cloud professionals have seen the impact that virtualization has had on the data center and the enterprise branch, and they are now interested in using software-based networking tools to tie these virtualized networking resources together.