Tag: network-as-a-service

Network-as-a-service: APIs, AI and the open cloud

NaaS is a cloud-native opportunity

Network virtualisation and disaggregation are creating opportunities that are broadly categorised as Network as a Service (NaaS). This concept has been around since the early 2010s, when the project to virtualise telecoms networks began. In other words, it is an idea that is native to telco cloud and a natural by-product of virtualising network functions. Some of the goals of network functions virtualisation implied NaaS. These were to enable networking capabilities to be:

  • Spun up and activated whenever required to meet user demand
  • Scaled up and out dynamically to provide greater capacity, bandwidth and reliability, along with lower latencies, whenever and wherever required
  • Programmable and instructible by operators, third parties such as application developers, and customers, including via APIs(see below)
  • Defined and managed centrally, through software, independently of the underlying network technologies and domains (for example, through software-defined networking [SDN], typically in SD-WANplatforms)
  • Made able – in the 5G era – to support multiple, parallel virtual networks running over the same physical core and access networks, for example in network slicing

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The role of network slicing relates to a distinction between the NaaS discussion at the present time and previous iterations of the idea in the earlier phases of the telco industry’s cloud evolution. Previously, NaaS referred to services that depended either on the enhanced scalability enabled by virtualised network functions or on SDN control over traffic flows. Earlier NaaS services included:

  • On-demand activation, or scaling up or down, of dedicated Ethernet links or broadband access
  • Flexible, rapid deployment of enterprise network services using Virtualised Network Functions (VNFs) hosted on vendor-neutral customer premises equipment (uCPE)
  • SD-WAN, involving on-demand creation and centralised, SDN-based management of WAN services, via a software overlay, across multiple physical network types and domains

Current thinking around NaaS is directed towards the opportunities resulting from enabling the largely virtualised functions of the telco network to be programmed and customised around the requirements of applications of different types, typically via APIs. This is an opportunity linked to other technology trends such as edge computing, IoT and the emergence of cloud-native networks and functions. Here, it is not just the standard attributes of rigid VNFs that can be scaled or controlled via the service, but the fundamental building blocks of the network – from core to access – that can be re-programmed, modified or swapped out altogether. The ultimate logic of this is to allow an almost indefinite number of virtual networks to be created and run across a single cloud-managed, physical network.

Many of the commercial and technological challenges and opportunities from network APIs were discussed in our recent report, Network APIs: Driving new revenue streams for telcos. Our research shows that APIs represent a substantial opportunity for telcos, with the revenue opportunity created by the top 11 mobile network APIs forecast to reach over $22 billion by 2028 (see graphic below).

Mobile network API revenue opportunity, 2022-2028, worldwide

Mobile-network-API-revenue-opportunity-2022-2028-worldwide-stl-partners

Source: STL Partners, TELUS

These APIs comprise network information APIs providing real-time information about the network (such as performance, hyper-precise location and device status) and network configuration APIs, which instruct the network (for example, quality-of-service on-demand, slice configuration and device onboarding).

NaaS is also an opportunity for non-telcos

Our forecast is, however, beset by a great deal of uncertainty. Firstly, this is because the business model for these sorts of network API is still highly unclear. For example, how much application developers will actually be prepared to pay for network access via this route. This depends on operators being able to establish a clear value proposition for their APIs, i.e. that they give access to capabilities that clearly enhance the functionality of applications or indeed are essential to their performance. And secondly, operators would need to assert themselves as the primary, even exclusive, providers of access to these capabilities.

Table of contents

  • Executive Summary
    • NaaS is a major opportunity for telcos and non-telcos alike
    • NaaS 2.0 will be delivered across an open telco cloud
    • Recommendation: NaaS 2.0 is a long-term but fast-evolving opportunity and telcos need to pick a strategy
    • Three NaaS business models: Co-creator, Distributor and Aggregator
  • NaaS is a cloud-native opportunity
  • NaaS is also an opportunity for non-telcos
  • AI-driven automation and cloud-native software could bypass telco APIs
    • Cloud-native and AI are made for each other
    • AI-based NaaS will enable a new breed of automation-enabling, edge compute applications
    • NaaS 2.0 threatens a “Wild West” of networking
    • NaaS will drive a restructuring of the telecoms industry as a whole: How should telcos play?
  • Three NaaS 2.0 business models for the telco: Co-creator, distributor and aggregator
    • Business model 1: Enabler and co-creator of NaaS 2.0 services
    • Business model 2: Physical distributor of NaaS 2.0 services
    • Business model 3: NaaS aggregator
  • Conclusion: NaaS is a significant opportunity — but not just for telcos

Related Research

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The new telcos: A field guide

Introduction

The traditional industry view is that “telcos” are a well-defined and fairly cohesive group. Industry associations like GSMA, ETNO, CTIA and others have typically been fairly homogeneous collections of fixed or mobile operators, only really varying in size. The third-ranked mobile operator in Bolivia has not really been that different from AT&T or Vodafone in terms of technology, business model or vendor relationships.

Our own company, STL Partners used to have the brand “Telco 2.0”. However, our main baseline assumption then was that the industry was mostly made up the same network operators, but using a new 2.0 set of business models.

This situation is now changing. Telecom service providers – telcos – are starting to emerge in a huge variety of new shapes, sizes and backgrounds. There is fragmentation in technology strategy, target audiences, go-to-market and regional/national/international scope.

This report is not a full explanation of all the different strategies, services and technological architecture. Instead of analysing all of the “metabolic” functions and “evolutionary mechanisms”, this is more of a field-guide to all the new species of telco that the industry is starting to see. More detail on the enablers – such as fibre, 5G and cloud-based infrastructure – and the demand-side (such as vertical industries’ communications needs and applications) can be found in our other output.

The report provides descriptions with broad contours of motivation, service-offerings and implications for incumbents. We are not “taking sides” here. If new telcos push out the older species, that’s just evolution of those “red in tooth and claw”. We’re taking the role of field zoologists, not conservationists.

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Field guides are collections/lists of natural & human phenomena

animal-species-telcos-stl-partners

Source: Amazon, respective publishers’ copyright

The historical landscape

The term “telco” is a little slippery to define, but most observers would likely agree that the “traditional” telecoms industry has mostly been made up of the following groups of CSPs:

  • MNOs: Countries usually have a few major mobile network operators (MNOs) that are typically national, or sometimes regional.
  • Fixed operators: Markets also have infrastructure-based fixed telcos, usually with one (or a small number) that were originally national state-owned monopolies, plus a select number of other licensed providers, often with greenfield FTTX fibre. Some countries have a vibrant array of smaller “AltNets”, or competitive carriers (originally known as CLECs in the US).
  • Converged operators: These combine fixed and mobile operations in the same business or group. Sometimes they are arms-length (or even in different countries), but many try to offer combined or converged service propositions.
  • Wholesale telcos: There is a tier of a few major international operators that provide interconnect services and other capabilities. Often these have been subsidiaries (or joint ventures) of national telcos.

In addition to these, the communications industry in each market has also often had an array of secondary connectivity or telecom service providers as a kind “supporting cast”, which generally have not been viewed as “telecom operators”. This is either because they fall into different regulatory buckets, only target niche markets, or tend to use different technologies. These have included:

  • MVNOs
  • Towercos
  • Internet Exchanges
  • (W)ISPs
  • Satellite operators

Some of these have had a strong overlap with telcos, or have been spun-out or acquired at various times, but they have broadly remained as independent organisations. Importantly, many of these now look much more like “proper telcos” than they did in the past.

Why are “new telcos” emerging now?

To some extent, many of the classes of new telco have been “hiding in plain sight” for some time. MVNOs, towercos and numerous other SPs have been “telcos in all but name”, even if the industry has often ignored them. There has sometimes been a divisive “them and us” categorisation, especially applied when comparing older operators with cloud-based communications companies, or what STL has previously referred to as “under the floor” infrastructure owners. This attitude has been fairly common within governments and regulators, as well as among operator executives and staff.

However, there are now two groups of trends which are leading to the blurring of lines between “proper telcos” and other players:

  • Supply-side trends: The growing availability of the key building blocks of telcos – core networks, spectrum, fibre, equipment, locations and so on – is leading to democratisation. Virtualisation and openness, as well as a push for vendor diversification, is helping make it easier for new entrants, or adjacent players, to build telecom-style networks
  • Demand-side trends: A far richer range of telecom use-cases and customer types is pulling through specialist network builders and operators. These can start with specific geographies, or industry verticals, and then expand from there to other domains. Private 4G/5G networks and remote/underserved locations are good examples which need customisation and specialisation, but there are numerous other demand drivers for new types of service (and service provider), as well as alternative business models.

Taken together, the supply and demand factors are leading to the creation of new types of telcos (sometimes from established SPs, and sometimes greenfield) which are often competing with the incumbents.

While there is a stereotypical lobbying complaint about “level playing fields”, the reality is that there are now a whole range of different telecom “sports” emerging, with competitors arranged on courses, tracks, fields and hills, many of which are inherently not “level”. It’s down to the participants – whether old or new – to train appropriately and use suitable gear for each contest.

Virtualisation & cloudification of networks helps newcomers as well as existing operators

virtualisation-cloudification-networks-STL-Partners

Source: STL Partners

Where are new telcos likeliest to emerge?

Most new telcos tend to focus initially on specific niche markets. Only a handful of recent entrants have raised enough capital to build out entire national networks, either with fixed or mobile networks. Jio, Rakuten Mobile and Dish are all exceptions – and ones which came with a significant industrial heritage and regulatory impetus that enabled them to scale broadly.

Instead, most new service providers have focused on specific domains, with some expanding more broadly at a later point. Examples of the geographic / customer niches for new operators include:

  • Enterprise private 4G/5G networks
  • Rural network services (or other isolated areas like mountains, offshore areas or islands)
  • Municipality / city-level services
  • National backbone fibre networks
  • Critical communications users (e.g. utilities)
  • Wholesale-only / shared infrastructure provision (e.g. neutral host)

This report sets out…

..to through each of the new “species” of telcos in turn. There is a certain level of overlap between the categories, as some organisations are developing networking offers in various domains in parallel (for instance, Cellnex offering towers, private networks, neutral host and RAN outsourcing).

The new telcos have been grouped into categories, based on some broad similarities:

  • “Evolved” traditional telcos: operators, or units of operators, that are recognisable from today’s companies and brands, or are new-entrant “peers” of these.
  • Adjacent wireless providers: these are service provider categories that have been established for many years, but which are now overlapping ever more closely with “traditional” telcos.
  • Enterprise and government telcos: these are other large organisations that are shifting from being “users” of telecoms, or building internal network assets, towards offering public telecom-type services.
  • Others: this is a catch-all category that spans various niche innovation models. One particular group here, decentralised/blockchain-based telcos, is analysed in more detail.

In each case, the category is examined briefly on the basis of:

  • Background and motivation of operators
  • Typical services and infrastructure being deployed
  • Examples (approx. 3-4 of each type)
  • Implications for mainstream telcos

Table of contents

  • Executive Summary
    • Overview
    • New telco categories and service areas
    • Recommendations for traditional fixed/mobile operators
    • Recommendations for vendors and suppliers
    • Recommendations for regulators, governments & advisors
  • Introduction
    • The historical landscape
    • Why are “new telcos” emerging now?
    • Where are new telcos likeliest to emerge?
    • Structure of this document
  • “Evolved” traditional telcos
    • Greenfield national networks
    • Telco systems integration units
    • “Crossover” Mobile, Fixed & cable operators
    • Extra-territorial telcos
  • Adjacent wireless providers
    • Neutral host network providers
    • TowerCos
    • FWA Fixed Wireless Access (WISPs)
    • Satellite players
  • Enterprise & government telcos
    • Industrial / vertical MNOs
    • Utility companies offering commercial telecom services
    • Enterprises’ corporate IT network service groups
    • Governments & public sector
  • New categories
    • Decentralised telcos (blockchain / cryptocurrency-based)
    • Other “new telco” categories
  • Conclusions

Related Research

 

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Are telcos smart enough to make money work?

Telco consumer financial services propositions

Telcos face a perplexing challenge in consumer markets. On the one hand, telcos’ standing with consumers has improved through the COVID-19 pandemic, and demand for connectivity is strong and continues to grow. On the other hand, most consumers are not spending more money with telcos because operators have yet to create compelling new propositions that they can charge more for. In the broadest sense, telcos need to (and can in our view) create more value for consumers and society more generally.

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As discussed in our previous research, we believe the world is now entering a “Coordination Age” in which multiple stakeholders will work together to maximize the potential of the planet’s natural and human resources. New technologies – 5G, analytics, AI, automation, cloud – are making it feasible to coordinate and optimise the allocation of resources in real-time. As providers of connectivity that generates vast amounts of relevant data, telcos can play an important role in enabling this coordination. Although some operators have found it difficult to expand beyond connectivity, the opportunity still exists and may actually be expanding.

In this report, we consider how telcos can support more efficient allocation of capital by playing in the financial services sector.  Financial services (banking) sits in a “sweet spot” for operators: economies of scale are available at a national level, connected technology can change the industry.

Financial Services in the Telecoms sweet spot

financial services

Source STL Partners

The financial services industry is undergoing major disruption brought about by a combination of digitisation and liberalisation – new legislation, such as the EU’s Payment Services Directive, is making it easier for new players to enter the banking market. And there is more disruption to come with the advent of digital currencies – China and the EU have both indicated that they will launch digital currencies, while the U.S. is mulling going down the same route.

A digital currency is intended to be a digital version of cash that is underpinned directly by the country’s central bank. Rather than owning notes or coins, you would own a deposit directly with the central bank. The idea is that a digital currency, in an increasingly cash-free society, would help ensure financial stability by enabling people to store at least some of their money with a trusted official platform, rather than a company or bank that might go bust. A digital currency could also make it easier to bring unbanked citizens (the majority of the world’s population) into the financial system, as central banks could issue digital currencies directly to individuals without them needing to have a commercial bank account. Telcos (and other online service providers) could help consumers to hold digital currency directly with a central bank.

Although the financial services industry has already experienced major upheaval, there is much more to come. “There’s no question that digital currencies and the underlying technology have the potential to drive the next wave in financial services,” Dan Schulman, the CEO of PayPal told investors in February 2021. “I think those technologies can help solve some of the fundamental problems of the system. The fact that there’s this huge prevalence and cost of cash, that there’s lack of access for so many parts of the population into the system, that there’s limited liquidity, there’s high friction in commerce and payments.”

In light of this ongoing disruption, this report reviews the efforts of various operators, such as Orange, Telefónica and Turkcell, to expand into consumer financial services, notably the provision of loans and insurance. A close analysis of their various initiatives offers pointers to the success criteria in this market, while also highlighting some of the potential pitfalls to avoid.

Table of contents

  • Executive Summary
  • Introduction
  • Potential business models
    • Who are you serving?
    • What are you doing for the people you serve?
    • M-Pesa – a springboard into an array of services
    • Docomo demonstrates what can be done
    • But the competition is fierce
  • Applying AI to lending and insurance
    • Analysing hundreds of data points
    • Upstart – one of the frontrunners in automated lending
    • Takeaways
  • From payments to financial portal
    • Takeaways
  • Turkcell goes broad and deep
    • Paycell has a foothold
    • Consumer finance takes a hit
    • Regulation moving in the right direction
    • Turkcell’s broader expansion plans
    • Takeaways
  • Telefónica targets quick loans
    • Growing competition
    • Elsewhere in Latin America
    • Takeaways
  • Momentum builds for Orange
    • The cost of Orange Bank
    • Takeaways
  • Conclusions and recommendations
  • Index

This report builds on earlier STL Partners research, including:

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Telco 2030: New purpose, strategy and business models for the Coordination Age

New age, new needs, new approaches

As the calendar turns to the second decade of the 21st century we outline a new purpose, strategy and business models for the telecoms industry. We first described ‘The Coordination Age’, our vision of the market context, in our report The Coordination Age: A third age of telecoms in 2018.

The Coordination Age arises from the convergence of:

  • Global and near universal demands from businesses, governments and consumers for greater resource efficiency, availability and conservation, and
  • Technological advances that will allow near their real-time management.

Figure 1: Needs for efficient use of resources are driving economic and digital transformation

Resource availability, Resource efficiency, Resource conservation: Issues for governments, enterprises and consumers. Solutions must come from all constituents.

Source: STL Partners

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A new purpose for a new age

This new report outlines how telcos can succeed in the Coordination Age, including what their new purpose should be, the strategies, business models and investment approaches needed to deliver it.

It argues that faster networks which can connect tens of billions of sensors coupled with advances in analytics and process digitisation and automation means that there are opportunities for telecoms players to offer more than connectivity.

It also shows how a successful telecoms operator in the Coordination Age will profitably contribute to improving society by enabling governments, enterprises and consumers to collaborate in such a way that precious resources – labour, knowledge, energy, power, products, housing, and so forth – are managed and allocated more efficiently and effectively than ever before. This should have major positive economic and social benefits.

Moreover, we believe that the new purpose and strategies will help all stakeholders, including investors and employees, realign to deliver a motivating and rewarding new model. This is a critical role – and challenge – for all leaders in telecoms, on which the CEO and C-suite must align.

To do this, telecoms operators will need to move beyond providing core communications services. If they don’t choose this path, they are likely to be left fighting for a share of a shrinking ‘telecoms pie’.

A little history 2.0

Back in 2006, STL Partners came up with a first bold new vision for the telecoms industry to use its communications, connectivity, and other capabilities (such as billing, identity, authentication, security, analytics) to build a two-sided platform that enables enterprises to interact with each other and consumers more effectively.

We dubbed this Telco 2.0 and the last version of the Telco 2.0 manifesto we published can be found here – we feel it was prescient and that many of the points we made still resonate today. Indeed, many telecoms operators have embraced the Telco 2.0 two-sided business model over the last ten years.

This latest report builds on much of what we have learned in the previous fourteen years. We hope it will help carry the industry forwards into the next decade with renewed energy and success.

Other recent reports on the Coordination Age:

Table of contents

  • Executive Summary
  • Introduction
  • Industry context: End of the last cycle
    • The telecoms industry is seeking growth
    • Society is facing some major social and economic challenges
    • Addressing society’s (and the telecoms industry’s) challenges
  • The Coordination Age
    • Right here, right now
    • How would the Coordination Age work in healthcare, for example?
  • New opportunities for telcos?
    • The telecoms industry’s new role in the Coordination Age
    • Telcos need an updated purpose
    • This will help to realign stakeholders
    • A new purpose can be the foundation of new strategy too
    • Investment priorities need to reflect the purpose
    • New operational models will also follow
  • Conclusions: What will Telco 2030 look like?

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$1.4tn of benefits in 2030: 5G’s impact on industry verticals

Understanding the 5G opportunity in other industries

The aim of this report is to highlight the impact that 5G will have on global GDP between 2020 and 2030. To do this, we have focused on eight industries where we feel 5G will have the largest impact. Often when 5G is discussed, the focus is on the impact it will have on the consumer market. Here, we argue that 5G will unlock significant new revenue opportunities in the enterprise space, enabling innovative use cases that are currently impossible to scale commercially (with existing technologies).

Insight from this report is explored further in the following publications:

The document was researched and written independently by STL Partners, supported by Huawei. STL’s conclusions are entirely independent and built on ongoing research into the future of telecoms. STL Partners has written widely on the topic of 5G, including a recent two-part series into the short- and long-term opportunities unlocked by 5G, and lessons that can be learnt from early movers.

Comparing apples with apples: How to compare nascent 5G with established 4G

If you compare the technological specifications for 3GPP release 14 and 3GPP release 15 (the first 5G release), you might be underwhelmed. Despite the hype that 5G will be transformative, it does not appear to be delivering much more than incremental increases in speed and reliability. But, of course, 4G is now a mature form of connectivity (having been in-life for 6+ years) whereas 5G is still nascent.

To compare apples with apples, it makes sense to compare 5G release 16, where capabilities such as ultra-reliable low-latency and network slicing are being added, with LTE today.

Mature 5G benchmarked against the capabilities of mature 4G

Mature 5G benchmarked against mature 4G

Source: ITU, Nokia, ublox, gps world

Of course, these figures represent a best-case scenario occurring in a laboratory environment. This is true for both the 4G and 5G numbers. It’s also true that, in reality, it will take time before we see commercialised rollout of enhanced mobile broadband (“pure 5G”) rather than enhanced mobile broadband with 4G fall-back alongside fixed wireless access. Despite this, these figures make clear that when 5G reaches maturity, it will far outstrip the capabilities of 4G, and unlock new use cases.

Our assumption is that by 2025 5G technology will be mature, enabling massive M2M / IoT use cases as well as those that require ultra-reliable low-latency communications. Several of the 5G use cases we’ll go on to explore in more detail are reliant on this technology, so it is important to acknowledge that their commercialisation is only likely to start from around 2023 and in many markets they still won’t be fully deployed in 2030.

It’s not all about LTE: 5G must be compared to all available technology

Mobile is not the only form of connectivity used by enterprises. Plenty of industries are also making use of Wi-Fi, LPWAN, Zigbee, Bluetooth and fixed connectivity as part of their overall connectivity solution. When 5G is rolled out, in some cases, it will need to integrate with these existing technologies rather than replace them. The table below summarises some of the key benefits and shortcomings of current technologies, including highlighting the sorts of situations in which industries are making use of them.

Current technologies will not be entirely replaced by 5G, but it can address some of they key shortcomings

current technologies will not be entirely replaced by 5G, but it can address some of their key shortcomings

There are clear scenarios where 5G will be superior to existing technologies and bring significant benefits to industrial users. Ultimately, in particular, 5G will enable:

  1. Low latency and high bandwidth requirements for wireless connectivity
  2. Massive IoT through ability to handle high cell density
  3. Ultra-reliable and secure connectivity.

Table of Contents

  • Preface
  • Executive Summary
    • 5G enabled solutions are estimated to add c.$1.4 trillion to global GDP in 2030
    • Operators must embrace new business models to unlock significant revenues with 5G
    • Recommendations for operators: how to capitalise on the 5G opportunity
  • Introduction
    • Background
    • Comparing apples with apples: how to compare nascent 5G with established 4G
    • It’s not all about LTE: 5G must be compared to all available technology
    • 5G deployment: 5G will mature over the next ten years
  • 5G will add more than $1.4 trillion to the global economy by 2030
  • Mobile network operator strategic options with 5G
    • 5G alone will not change the game for operators
    • Strategic options for operators to add more value with 5G
  • 5G-enabled digital transformation in healthcare
    • Example 5G use case: Remote patient monitoring
    • Implications for telcos
  • 5G-enabled digital transformation in manufacturing
    • 5G can create $740bn in additional GDP by 2030
    • Example 5G use case: Advanced predictive maintenance
    • Implications for telcos
  • Conclusions for operators: how to capitalise on the 5G opportunity

Table of Figures

  • Figure 1: Mature 5G benchmarked against the capabilities of mature 4G
  • Figure 2: Current technologies will not be entirely replaced by 5G, but it can address some of their key shortcomings
  • Figure 3: Forecast of 5G deployment in major regions
  • Figure 4: Responses from industry surveys
  • Figure 5: 5G will contribute ~$1.4 trillion to global GDP by 2030
  • Figure 6: Manufacturing, energy & extractives and media, sports & entertainment industries will see the largest upticks to their industry thanks to 5G use cases
  • Figure 7: In 2030, manufacturing and construction will be the largest industry sectors (in 2030)
  • Figure 8: High income countries will see almost 75% of the benefit of 5G in 2025, but the share is more even across all geographies by 2030
  • Figure 9: 4G rollout did not produce sustainable revenue increase
  • Figure 10: What should telcos’ role be in 5G B2B?
  • Figure 11: As telcos move beyond just connectivity, they can increase their share of the wallet
  • Figure 12: Telcos must focus efforts in specific verticals – some are already doing this
  • Figure 13: Global impact of 5G on healthcare across four key contact points
  • Figure 14: Remote patient monitoring enables wearables to send data about the patient to the hospital for monitoring
  • Figure 15: Estimated impact of 5G-enabled remote patient monitoring
  • Figure 16: The potential roles for telcos can within healthcare
  • Figure 17: The TELUS Health Exchange as a point of coordination
  • Figure 18: There is opportunity for telcos’ to play multiple roles higher up the value chain in healthcare
  • Figure 19: Estimated impact of 5G on manufacturing GDP (USD Billions) by use case
  • Figure 20: Advanced predictive maintenance enables many sensors to send data about machinery for monitoring and optimisation

Predicting the future: Where next for SD-WAN?

Introduction

This document is the third in a mini-series of three reports which seek to explore SD-WAN technology from an enterprise perspective, covering the challenges that SD-WAN is designed to address, the differing types of SD-WAN product on the market today, and how we envisage SD-WAN-type services evolving in future.

The first two reports in the series are:

Future evolution of SD-WAN

Any decision made about SD-WAN aspects or management must be taken not just in context of enterprises’ current networking challenges, but also in context of how those challenges, as well as networking technology, are likely to evolve. This report assesses where we expect the industry to go next.

At STL Partners, we believe that SD-WAN under its current definition is not an end in itself. All indications are that enterprises are becoming increasingly cloud-centric, and we see no sign of this trend reversing. SD-WAN will no doubt be a key component of the multicloud ecosystem – but it will require an evolution beyond the confines of what is currently being packaged and sold.

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In short, existing SD-WAN services are just the first step on a longer journey towards integrated, software-driven WAN operations and networking on a broader scale. Enterprises and vendors planning SD-WAN rollout would do well to consider how that evolution could unfold.

As with any new technology, there are multiple pathways that this evolution could follow – none of which are yet well-understood. STL Partners has identified three emerging evolution pathways, which we explain in detail below. The options are:

  1. SD-WAN used as the first step towards SD-Branch: SD-WAN is deployed as a stepping stone technology towards more advanced, integrated management of enterprises’ LANs and branches alongside the WAN.
  2. SD-WAN sold “as a Service”: SD-WAN starts to be offered as a more fully cloud-based software service, free from vendor or hardware-based constraints.
  3. SD-WAN used as an enabling component of edge/IoT platforms: SD-WAN features and infrastructure are integrated with service providers’ edge computing and Internet of Things (IoT) platforms, with sales focus on enterprise automation and process optimisation, rather than the SD-WAN component itself.

These options are of course not mutually exclusive and are likely in practice to be adopted in some combination of the different elements. It is quite feasible, for example, that some service providers will start to “upsell” their existing SD-WAN customers onto a more integrated “SD-Branch” offering (#1) – and to sell a flavour of this same offering as a cloud-based software option (#2). Indeed, we have already seen this happening in the marketplace.

In addition, all three options share two things in common:

  • A move towards cloud-centricity: Their focus is on the LAN and branch, WAN (delivered in an even more flexible, cloud-native way), the edge (and edge computing and IoT), respectively.
  • Increasing use of AI technology: Artificial intelligence (AI) and machine learning (ML) are pouring into all areas of technology and network infrastructure is no exception. The dynamic nature of traffic patterns over SD-WAN make it a prime candidate for this kind of tech to enable, say, security threat detection or traffic routing optimisation. Whichever direction SD-WAN takes, it is sure to make use of AI/ML.

In this report, we detail each of the three options, with particular reference to how they might benefit both enterprise customers, and those who will provide such SD-WAN services.

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Flavours of SD-WAN: What’s on offer and which work?

Introduction

This is the second in a mini-series of three reports which seek to explore SD-WAN technology from an enterprise perspective, covering the challenges that SD-WAN is designed to address, the differing flavours of SD-WAN product on the market today, and how we envisage SD-WAN-type services evolving in future.

The first and third reports in the series are:

This report examines the role that different types of SD-WAN solutions can play in helping digital enterprises address their growing networking challenges.

SD-WAN as a solution to the networking challenges of digital enterprises

In the first report, we discussed some of these challenges. These revolve around the need to carry a growing range and volume of mission-critical, application-specific data flows – reliably and securely – across a hybrid multi-cloud, multi-domain and distributed WAN environment. This includes different types and sizes of enterprise sites, branches, campuses and remote workers served by diverse access networks on a 24/7 basis.

We highlighted seven main networking challenges that SD-WAN products and services are designed to address, as follows:

  1. Managing the costs of WAN links
  2. Improving control of hybrid WAN and multi-cloud environments
  3. Assuring service and prioritising business-critical traffic
  4. Introducing new sites and capabilities
  5. Preventing attacks and mitigating security risks
  6. Managing different network domains and services across the whole enterprise
  7. Future-proofing enterprises’ advancing requirements while reducing complexity.

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In the present report, we look at SD-WAN in the context of the different flavours currently available on the market, and explore how current offers differ across several aspects:

  • Use of Customer Premises Equipment (dedicated appliance, uCPE or cloud?)
  • Networks used to deliver SD-WAN (overlay, hybrid or dedicated?)
  • Network topologies employed (hub and spoke, partial or full mesh?)
  • Security functions integrated
  • Extension across multiple geographies and domains

Throughout the report, we differentiate between these aspects of SD-WAN and the management requirements and features associated with them.

We also identify some of the leading vendor and service provider products and services that correspond to each of the types we discuss. This is intended for illustration and guidance only and does not constitute a recommendation.

What are the aspects of different SD-WAN deployments?

As set out in the introduction, we are differentiating in this report between aspects of SD-WAN and the management requirements and features associated with each aspect and with SD-WAN as a whole. These are:

Aspects of different SD-WAN deployments

aspects of SD-WAN deployments: CPE, networks, topology, security and extensions across geographies and domains

Source: STL Partners

In the rest of this report we highlight which management elements we regard as more specific to each individual aspect.

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Enterprise networking challenges: How can SD-WAN help?

Introduction

This document is the first in a mini-series of three reports which seek to explore SD-WAN technology from an enterprise perspective, covering the challenges that SD-WAN is designed to address, the differing types of SD-WAN product on the market today, and how we envisage SD-WAN-type services evolving in future.

The next two reports in the series are:

What networking challenges are faced by today’s digital enterprises?

Enterprises throughout the world are rapidly digitising their operations. Increasingly, the digital strategies they are adopting include the transition of business tools, applications and processes to a ‘multicloud’ environment: involving a hybrid combination of applications and data hosted in one or more public clouds alongside the company’s own private data centres.

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/>Digital enterprises require secure access to their applications and data from any location, at any time, via any device and over any network. At the same time, they need to ensure that their end users – both employees and customers – have the same application quality of experience as they did when the tools, applications and processes were hosted in the company’s own private data centre.

Unfortunately, existing WAN architecture models often do not provide the scale, flexibility or agility required to support this transition. These legacy WAN architectures typically leverage a hub and spoke network topology, where the hub is in the corporate data centre and static, point-to-point circuits that often require manual provisioning for deployment, moves, adds and changes connect the hub site to the branch offices. As these organisations transition to multicloud, the corporate data centre, hub site, becomes a bottle neck. Additionally, their static, manually provisioned circuits can’t keep pace with the dynamic nature of multicloud traffic flows.

Consequently, these businesses need to look for a new, simplified and automated approach to managing and transforming their WAN. Additionally, as enterprises look to leverage broadband internet to simplify and manage the cost of the WAN, they need to maintain the same SLA levels, ensure application quality of experience (QoE), and to be mindful of the security implications and risks in doing so.

SD-WAN platforms and services represent a response to these networking challenges that is being adopted more and more by enterprises of all sizes – from SMBs through to the largest multi-nationals – across all regions worldwide.

In this report, we highlight the main networking challenges that SD-WAN is designed to address, and outline in brief some of the ways it does so.

In a subsequent report, we will discuss the main types of SD-WAN platforms and services available on the market today, along with the leading vendors and communications service providers that provide them. And in a third report, we discuss some of the ways in which we expect SD-WAN technology and services to develop over the next few years as it expands to encompass more and more aspects of enterprise information and communications technology, and to meet the needs of new applications and automated processes

Which networking challenges does SD-WAN address?

In this section, we discuss the main problems faced by network engineers and operations personnel managing the WAN, and evolving its architecture and functionality, in response to the rapidly changing, digital requirements of their enterprise. At the same time, network operations are under increasing pressure to reduce costs while maintaining, and indeed improving, quality of service and experience.

With these pressures in mind, we have identified seven key networking challenges faced by enterprises:

7 key enterprise networking challenges

7 enterprise networking challenges

Source: STL Partners

In the rest of this report, we explore each of these challenges in detail, and how SD-WAN helps to address them.

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