… VMware in the emerging ‘edge computing’ space to leverage general purpose hardware network appliances on the customer premises using network function virtualization (NFV) as a platform,” Gintert said. “Of the potential companies we could contemplate picking up VeloCloud, VMware is up there as one of the most exciting for our business and the services we deliver for our clients.”
VMware’s SD-WAN deal creates another area where it directly competes with Cisco. Toth and other analysts agree that the purchase shares similarities with Cisco’s acquisition of Viptela. Toth says Viptela’s router-based system fit well with Cisco, whose IWAN offering was insufficient for SD-WAN. Viptela, just like VeloCloud, is a “pure-play” SD-WAN vendor based in California and founded in 2012. Marko notes that Cisco contributed to a $27 million investment in VeloCloud in 2016.
SD-WAN competitors had no choice but to take notice of the VMware-VeloCloud deal. Many analysts, like Marko, expect more M&A in the SD-WAN market. Toth agrees that many companies in the industry see acquisition as an attractive endgame.
“I truly do believe that a lot of these guys started this company with the idea that hopefully they could get bought by a company like Cisco for between $100 million and $1 billion,” Toth said.
But that’s not the mindset of every SD-WAN company.
“I do think there are others though that have been doing this a long time. You look at Talari [Networks], for example, which has been doing this for 10 years. You don’t necessarily look to them and think to yourself, ‘Oh, they’re looking for a strategy,'” Toth said. “I think there’s so much room for growth in that marketplace that there is enough room for the pure plays. On top of that, I actually believe that innovation is going to be hampered by the organizations that are doing the acquiring.”
Silver Peak, which has been around for 14 years, says it is pursuing an independent strategy. Hughes says he and his team are happy to see a larger company absorb their competitor, but that is a luxury Silver Peak can enjoy after growing its customer base for more than a decade.
“We are excited by this because it basically leaves us as the leading independent player in the space,” Hughes said. “On the other hand, for some smaller companies, I think it’s one less acquirer for them. I think as we move into the next phase of the market, if you haven’t already got scale, if you haven’t already got hundreds of customers and a growing business, it’s going to be really challenging.”
Hughes predicts six to 12 months of …