Software-Defined Wide Area Networks (SD-WANs) have catapulted to prominence in the enterprise networking world in the last 12 months, driven by the growth of demand for access to cloud applications, and businesses' desire to control WAN costs and complexity. SD-WAN may be a new "intermediary" layer in the network which has the potential to disrupt telcos' enterprise aspirations, particularly given that it is dominated by vendors and specialist providers rather than telcos. SD-WAN may reduce operators' MPLS and WAN services revenues and could potentially restrict future NFV/SDN opportunities. But SD-WAN also offers opportunities, where it is embraced - tactically - as part of operators' enterprise portfolios.
Rapid growth in SD-Wan networks
Software-defined Wide Area Networks (SD-WAN) have catapulted to prominence in the enterprise networking world in the last 12 months. They allow businesses to manage their connections between sites, data-centres, the Internet and external cloud services much more cost-effectively and flexibly than in the past.
Driven by the growth of enterprise demand for access to cloud applications, and businesses’ desire to control WAN costs, various start-ups and existing network-optimisation vendors have catalysed SD-WAN’s emergence. Its rapid growth as a new “intermediary” layer in the network has the potential to disrupt telcos’ enterprise aspirations, especially around NFV/SDN.
In essence, SD-WAN allows the creation of an “OTT intelligent network infrastructure”, as an overlay on top of one or more providers’ physical connections. SD-WANs allow combinations of multiple types of access network – and multiple network providers. This can improve QoS in certain areas, reliability and security of corporate networks, while simultaneously reducing costs. SD-WANs also enable greater flexibility and agility in allocating enterprise network resources.
Why SD-WAN is at least in in part a threat
However, SD-WAN potentially poses major risks to traditional telcos’ enterprise offerings. It allows enterprise customers to deploy least-cost-routing more easily, or highest-quality-routing, by arbitraging differences in price or performance between multiple providers. It enables high-margin MPLS connections to be (at least partly) replaced with commodity Internet connectivity. And it reduces loyalty / lock-in by establishing an “abstraction” layer above the network, controlled by in-house IT teams or competing managed service providers.
SD-WAN has another, medium-term, set of implications for telcos, when considered through the lens of the emerging world of NFV/SDN and “telco cloud” – a topic on which STL Partners has written widely. By disconnecting the physical provision of corporate networks and a business’s data/application assets or clouds, SD-WAN may make it harder for telcos to move up the value chain in serving enterprise customers. Capabilities such as security systems, or unified communications services, may become associated with the SD-WAN, rather than the underlying connection(s); and would thus be provisioned by the SD-WAN provider, rather than by the telco that is providing basic connectivity.
In other words, SD-WAN represents three distinct threats for telcos:
- Potential reduction in MPLS & other WAN services revenues
- Potential reduction in today’s enterprise solution value-adds such as UCaaS & managed security services
- Potential restriction of future telco enterprise SDN/NFV services opportunities to basic Network as a Service (NaaS) offers, with lower scope for upsell.
The current global market for WAN services is $60-100bn annually, depending on how it is defined; therefore, any risk of significant change is central to many operators’ strategic concerns.
Table of Contents
- Executive Summary
- Background: Enterprise WANs
- Shifting trends in WAN usage
- The rise of SD-WAN
- Overview – the holy grail of ‘good/fast/cheap’ in the WAN
- SD-WAN technology and use-cases
- SD-WAN vendors include start-ups and established enterprise market players
- The role of service providers in SD-WAN
- Bundling hosted voice/UCaaS and SD-WAN
- Telcos Should take a Proactive Approach to SD-WAN
- SD-WAN vs. SDN & NFV: Timing and Positioning
- Future of SD-WAN and Recommendations
- Figure 1: SD-WAN architecture example
- Figure 2: SD-WAN & NaaS may help telcos maintain revenues in enterprise WAN
- Figure 3: SD-WAN may reduce telco opportunities for SDN/NFV/cloud services
- Figure 4: Different paths for SD-WAN service offer provision & procurement