Dell'Oro Group forecasts CNaaS surpassing 10 percent of Public Cloud-Managed LAN market by 2029

Dell'Oro Group Research Director Siân Morgan analyzes the trajectory of Cloud Network as a Service (NaaS) (CNaaS) in enterprise networks, highlighting its potential to represent over 10% of the Public Cloud-Managed Local Area Network (LAN) market by 2029. This metric is relevant for enterprise and technical decision-makers assessing shifts in LAN delivery and cost models.

Market Overview

Cloud Network-as-a-Service (CNaaS) represents a cloud-inspired model for LAN connectivity, transitioning from Capital Expenditure (CAPEX) to Operational Expenditure (OpEx) through subscription-based offerings. Although CNaaS is a subset of the Public Cloud-Managed LAN market, it features ongoing revenue recognition due to its service model, contrasting with traditional upfront hardware revenue recognition.

Vendors have developed CNaaS offers since 2015, with initial revenues recorded in 2018 and mainstream adoption starting around 2021. CNaaS supply models vary across categories, including turnkey solutions for large enterprises, enabler offerings for managed service providers (MSPs), and LAN-as-a-Utility hardware designed to automate network operations and provide ongoing monitoring.

Key Findings

The CNaaS market is expected to grow due to three accretive opportunities: increased spending on AI Operations (AIOps) software to automate network management, expansion of Managed Services Provider (MSP) revenues through workflow simplification enabled by CNaaS, and vertical-specific solutions that integrate multiple technologies for new enterprise use cases.

CNaaS adoption impacts vendor revenue profiles by decreasing early-year revenue recognition but increasing contract value over time, a dynamic modeled by Thomas Lah's “fish model.” This shift requires vendors to align sales compensation models and prioritize subscription renewals to maintain revenue stability.

Forecast and Analyst Outlook

The CNaaS market may reach over 10% of the Public Cloud-Managed LAN market by 2029, approximately 11 years after commercial availability. Enabler CNaaS is projected to remain the largest category due to broad MSP channel access, while LAN-as-a-Utility CNaaS is expected to have the fastest growth from new entrants scaling their offerings.

This growth trajectory, although gradual, indicates a steady shift from CAPEX to OpEx LAN delivery models, emphasizing recurring software revenue and deeper vendor-enterprise relationships.

The analysis advises CNaaS vendors to adjust sales incentives to the subscription model without inflating associated costs and to focus on maintaining subscription renewals to reduce customer churn.

Conclusion

CNaaS is positioned to alter LAN delivery and revenue recognition patterns by migrating enterprises toward subscription service models. The evolving CNaaS market may progressively increase its share within Public Cloud-Managed LAN offerings by 2029, shaping enterprise network spending habits. This analysis provides relevant insights for decision-makers managing network evolution strategies and vendor engagements. This Analyst Signals brief reflects a neutral, fact-based summary of the original research note.