Silver Peak CEO On VMware-VeloCloud 'Uncertainty,' Cisco-Viptela And SD-WAN Market Consolidation Ahead

David Hughes On The Record

Silver Peak founder and CEO David Hughes said there is uncertainty in the market regarding VMware's recent acquisition of software-defined WAN competitor VeloCloud, as well as the overall state of the SD-WAN market heading into 2018.

Hughes founded the Santa Clara, Calif.-based company in 2004 and has successfully transformed Silver Peak into one of the top SD-WAN players in the world. The vendor has been making headlines recently with the revamp of its flagship SD-WAN Unity EdgeConnect physical and virtual appliances, as well as teaming with China Telecom to provider global managed SD-WAN services.

Hughes expects Silver Peak to become the SD-WAN "leader" in a market that expecting to grow 70 percent annually for the next four years, reaching more than $8 billion in 2021, according to IDC.

What's your go-to-market strategy against the likes of the new VMware-VeloCloud?

There's a lot of uncertainty about what VMware is going to do with VeloCloud. It's a bit of wait and see to understand. Do they let VeloCloud run independently? Are they going to integrate it tightly with NSX, which means there's going to be a lot of changes? Are they going to support service providers or not? Are they going to attach the enterprise with it? There's a lot of questions there. So how we will react is, we're going to continue doing what we're doing, which is winning in the enterprise channel – working with enterprises to understand what it is they want to do with their WAN to address their cloud-first initiatives. So in pretty much every case, the overarching thing that's driving the business is people moving their applications to their cloud, either by adopting SaaS or moving custom apps into AWS or Azure. By working closely with enterprises and tailoring our solution to their needs, we plan to continue to be the leader in the enterprise.

How does Silver Peak stack up against Cisco-Viptela ?

In buying Viptela, Cisco bought the SD-WAN solution that was most like a legacy traditional router. For Cisco that was easier to integrate and easier for them to understand because it's similar technology to what they had already with iWAN. It's an incremental improvement for them. But relative to the other SD-WAN players, Viptela is most like a traditional router's CLI-based configuration. A lot of the other vendors, Silver Peak included, see that the orchestration and business-intent level orchestration is really a key ingredient to SD-WAN; that really wasn't Viptela's strong point.

What do you think of larger players like Cisco and VMware acquiring smaller SD-WAN players in 2017?

With Cisco buying Viptela, and now VMware buying VeloCloud, it's clear that both of these larger players have seen this market opportunity as being something they want to participate in and are willing to make a bet to have a stake in the market. That's great validation for the market. For us at Silver Peak, it leaves us as the clear independent leader in SD-WAN and that's a position that we are very comfortable with and really excited about executing on.

Will SD-WAN vendor consolidation continue?

What it means for smaller players is, if you haven't won hundreds of customers and you haven’t got a self-sustaining business – you're looking at: 'Do I sell, or do I go and raise more money to try to keep going?' For smaller players like that it's going to be challenging. So yes, for players that haven’t hit critical mass yet, there will be consolidation.

Will Silver Peak stay an independent SD-WAN company?

The SD-WAN market is going to be huge. So there's enough room for two or three or four very successful players. We're committed to an independent path. We think the opportunity is big and that we are in a great place to be able to be the leader. That's what we're focused on.

From an adoption point of view, we are moving from beyond the early adopters into the early mainstream. We're seeing a definite increase in the sizes of deployments we're doing and as we look forward, we expect to see many large enterprises deploy Silver Peak's SD-WAN in the coming 12 months.

What was VMware's need to acquire VeloCloud?

As far as VeloCloud and VMware go, lots of different things fall under the SD-WAN category. When you dissect it a little bit, each SD-WAN solution is actually quite different and often has a different set of use cases. In contrast to us, where we focus on the enterprise use case and router replacement use case, VeloCloud was more focused on service providers and had hub-based architecture where traffic is drawn in from a remote location to a hub. That's somewhat different from the other players. It let them get an early foothold in some service providers, especially carrying voice-over broadband for some voice-based service providers. It will be interesting to see where it leads now that they're acquired by VMware. VeloCloud has a stronger service provider go-to-market, VMware has a stronger enterprise go-to-market. How those two match up I'm not too sure.

What is Silver Peak's SD-WAN differentiator?

We've focused on the enterprise first. We've been out with EdgeConnect now for two years. In that time, we've won and deployed more than 500 enterprise customers. We've learned a lot about what they're looking for in SD-WAN solutions.

In terms of differentiation, we found that there's a few use cases – one is better performance and availability in the branch, and happier users because their applications stay up and perform well. That is an area where we have a lot of differentiation in terms of what we bring to bear in terms of our packet-by-packet bonding and quality of service.

What's your 'Thin Branch' SD-WAN strategy?

The thin branch strategy is important. People want to be able to do SD-WAN. They want elements of routing. They want to be able to have local breakouts with local firewalls. They want to be able to do WAN optimization on the traffic that needs it – those are all requirements for the branch. We are uniquely positioned in terms of having an integrated, comprehensive router replacement solution for the branch.

How are customers buying SD-WAN solutions? Is it different from a few years ago?

In the early adopters of SD-WAN, people wanted to do it themselves. They would precure the SD-WAN equipment, then install it themselves, get it configured themselves and up and running and managing themselves. What we've seen as the market matures is that customers have a variety of different appetites to do it themselves. Some people want that because it gives them the maximum control, and with SD-WAN simplified orchestration, it's something achievable relative to building and managing your traditional WAN. On the other end of the spectrum, there are people who want a fully managed service. They want everything handled for them, from the initial deployment to the ongoing break-fix, to management reporting and so on. Then between those two extremes – do it yourself and managed solutions – there are a lot of customers that pretty much want to run the network themselves once it's up and running, but they want some help with deployment or help with deployment and break-fix, but they want to manage it themselves.

So what role does Silver Peak's channel partners play in that buying pattern?

On the enterprise side, we do everything via the channel. We have a few hundred channel providers signed up and selling Silver Peak. They're finding more and more customers coming to them asking for an SD-WAN solution, and in many cases a Silver Peak SD-WAN solution.

So we're working with channel partners – enterprise channel partners through service providers through system integrators -- to bring Silver Peak technology to the customer wherever they stand on that spectrum. So whether they're looking at just buying Silver Peak and then doing everything themselves or looking for a fully managed solution or looking for something in-between – maybe a co-managed solution or deployment of systems -- we want to have the go-to-market that supports all of those enterprises. So in some cases, it's the traditional VAR or it may be a VAR that may be looking at adding a service component to their business. We have programs tailored for each of them.

What's one thing we can expect from Silver Peak in 2018?

Over the last two years, we've invested in building our relationships with service providers and system integrators. We've announced a few service provider deals, but you'll see in the coming months a lot more announcements from us around service providers partnerships. In many cases, these are driven by enterprises coming to the service provider asking for a Silver Peak solution. So our approach has been enterprise-led, but we do agree that the service provider market is going to be important.