Arista Networks acquired Broadcom’s VeloCloud SD-WAN platform in a move set to boost Arista’s presence in the SD-WAN space and align with the vendor’s broader wireless LAN (WLAN) focus but also leaves questions as to what Arista might do next.

The VeloCloud deal was initially reported in mid-May, with an attached price tag of less than $1 billion. Neither firm released final financial details on the deal, but Arista did tout the combined benefits of the acquisition.

Arista CEO Jayshree Ullal in a blog post noted VeloCloud’s WAN portfolio would complement Arista’s data center and campus wired and wireless offerings.

“Our customers will now have rich configuration choices such as leafs/spokes for branch sites,” Ullal wrote. “This modern WAN architecture delivers multipathing, encryption, in-band network telemetry, segmentation, application identification, and traffic engineering into a single atomic identifier for WAN hub/spine and spoke/leaf applications.”

VeloCloud does bolster Arista’s moribund WAN efforts. The vendor did enter the WAN space through its CloudVision Pathfinder Service in early 2023, but has since shifted focus toward its AI networking efforts. Adding VeloCloud could reinvigorate that work.

VeloCloud had been lauded as one of the SD-WAN market’s leading providers. Broadcom executives have claimed more than 50,000 SD-WAN VeloCloud access points have been deployed. Gartner in a report last year added that the platform was serving approximately 21,000 enterprise customers, boosted by deep product capabilities, strong market share, and strong market understanding.

Mauricio Sanchez, senior director for enterprise security and networking research at Dell’Oro Group, noted that while VeloCloud does provide an opportunity for Arista, integration – as always – will be key. This could be helped by Arista taking on only part of VeloCloud’s operations, with a specific focus on the technology “that should make the integration a lot more straight forward.”

“It doesn’t necessarily mean that success is guaranteed,” Sanchez added. “I think it expands and continues the evolution that I think Arista perhaps knows it needs to continue to move on, which is the focus on the AI data center and all the trimmings of high-speed Ethernet networking. Diversification is key to long-term survival.”

That diversification can also bolster Arista’s stance against larger rivals. Arista was recently ranked by IDC as one of the bigger players in the Ethernet switch and data center space, though well behind market heavyweight Cisco.

"The combined portfolio will enable Arista customers to connect from data center to branch to campus to cloud across a single fabric, allowing it to compete more effectively within the enterprise against industry leader Cisco and its Meraki/Catalyst portfolios,” equity research firm William Blair noted in a report on the deal.

What is Arista getting?

The deal also unhinges VeloCloud from what had been a difficult existence under Broadcom’s umbrella.

VeloCloud was an early leader in the SD-WAN space, which attracted VMware to acquire the firm for $449 million in late 2017.

Some of that momentum slowed earlier this decade as SD-WAN vendors started to shift their focus toward secure service edge (SSE) integration and eventually toward single-vendor secure access service edge (SASE) platforms. Those markets have come to be dominated by larger players like Cisco and Palo Alto Networks, which have been aggressive in tying together SSE and SD-WAN to create SASE platforms.

VeloCloud was also hurt by Broadcom’s VMware acquisition, which put VeloCloud under the shadow of Broadcom’s own security focused networking systems and its more revenue generating focus on VMware’s private cloud and AI aspirations. Broadcom has done some work to bolster the VeloCloud product line, but most of that has been targeted at broader implications and some of that goodwill has been subsumed by Broadcom’s go-to-market changes for its VMware operations.

“Arista will have to rebuild some of the trust in the channel, with many of those relationships having frayed following Broadcom’s takeover,” the William Blair report noted.

Sanchez concurred, explaining that Arista will have its work cut out in terms of re-energizing momentum around VeloCloud.

“I haven't run into any channel partners that are necessarily happy with the relationship with Broadcom, especially on the VMware side,” Sanchez said. “Even though VeloCloud hadn't got sucked up into that completely … the tractor beam had been put there, but now the fact that VeloCloud is outside of that tractor beam is going to play into goodwill for people. They’re going to maybe say, ‘Arista is a networking company, and they clearly are very engineering driven there. They care about delivering good technology.’ So I think there's going to be a significant amount of goodwill or benefit of the doubt.”

Arista is already taking steps. Alongside announcing the official close of the VeloCloud deal, Arista unveiled a number of new WAN router and switch platforms that can integrate VeloCloud in support of broader enterprise deployments.

What’s next?

Sanchez noted that it’s now incumbent on Arista to follow through on the VeloCloud deal by further bolstering market opportunities in transitioning from legacy SD-WAN opportunities to growth potential in the SASE space.

“It gets Arista one foot into the enterprise WAN landscape but they need to quickly decide do they want to play with what they have and just extract as much value out of the current technology that they have or do they want to commit to continue to expand their SD-WAN [market opportunity] to the full SASE [market opportunity]," Sanchez said. "Because right now, they only cover, let's just say 30 percent to 40 percent of the SASE opportunity, which that 30 percent, 40 percent is net new for Arista, but that means that there's another 60 percent to 70 percent that is still there for them to take home.”

That decision could mean another potential Arista acquisition, this time focused on cybersecurity or SSE.

“They need to have the conversations about, ‘well, are we going to be happy with the returns on just the constrained part of the market that we're going to go be able to go attack,’ or do they have the desire to go capture the flag at top of the hill and go all in by acquiring an SSSE vendor,” Sanchez said. “I don't think there's necessarily, near term, an easy answer for that. I think they need to really analyze what their appetite for risk and the expansion is.”