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SDN Raises Business Challenges

Mitch Wagner
7/8/2014
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SDN demands carriers change their business models, creating challenges that go beyond the technical, says Jeff Smith, strategy and marketing director for the connectivity segment at Interxion.

Challenges include adapting to customers on a pay-as-you-go plan, educating customers about changing networking model, and loss of control of the network, Smith says.

Interxion is a carrier-neutral datacenter operator with €307 million revenue last year, operating 37 data centers in 11 countries across Europe. Smith's connectivity business unit connects 500 carriers, 20 peering points across Europe, as well as CDN operators and mobile backbones. The connectivity segment is one of five main business units for Interxion; the other four are finance; digital media, which includes gaming and advertising; systems integrators and enterprise; and cloud providers.

Interxion doesn't provide SDN services and operations itself -- its business ends at the rack. But Interxion's role as an infrastructure provider allows it to see how SDN plays out in each of those segments, including the carriers who serve all the segments, Smith says. Interxion sees the challenges in multiple market segments.

Pay-as-you-go
The pay-as-you go model is a chief challenge. Cloud providers have introduced enterprises to a new payment model for services and enterprises now demand that kind of payment model from carriers, Smith says. Instead of enterprises making a large, upfront payment to carriers for fixed services, enterprises now want to subscribe to services only when they need them. Carriers saw a similar transition with unified communications, and cloud is accelerating that trend.

That kind of change to the revenue stream presents steep challenges to carriers' existing business model, Smith says. Some carriers are succeeding with the transition by offering service bundles.

Lost control
In the pre-SDN networking model, carriers controlled the end-to-end experience for the customer. Customers and carriers agreed in advance on how the network would be used, bandwidth requirements, SLAs, and other parameters. "You'd know what the network looks like now, and you know what it will look like in six months, based on demand," Smith says.

"As soon as you turn that on its head and give the customer control -- which is what SDN promises because of APIs and portals -- it throws a big curve ball into capacity management," Smith says. SDN allows customers to configure their own virtual networks using self-service portals. "Infrastructure teams have to be sure that capacity is in place," Smith says.

Connecting to other companies' networks is another avenue to lost control. SDN is relatively straightforward to implement inside a single company's data center, more difficult on a metro and regional level, and more difficult still on a national and international level. "The bigger you get, the less control you have over what partners and their equipment are doing," Smith says. SDN and NFV offer centralized control as a benefit. "That's great when you control the environment," but problematic when you don't.

Education
Carriers need to educate enterprise customers on the new world of virtualized networks. Change often worries businesses, who are used to the current way of doing things. "Not all customers have the scale and tech-savvy departments that know how to use this to their advantage," Smith says. "There's education to be done, and that's where telcos can gain an advantage." Carriers can gain particular advantage in the small and medium enterprise market through education.

— Mitch Wagner, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profileFollow me on Facebook, West Coast Bureau Chief, Light Reading. Got a tip about SDN or NFV? Send it to wagner@lightreading.com.

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DHagar
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DHagar,
User Rank: Light Sabre
7/8/2014 | 8:03:44 PM
SDN Raises Business Challenges
@mbushong, I like your point about the moving up the supply chain with the next wave being analytics.  The changing models drive the focus to where you can add the most value (new controls).

It also seems that the ecosystem you refer to will be the result of what you need to survive these challenges, size and unique adaptability.
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
7/8/2014 | 7:46:55 PM
Re: Control is interesting
@mbushong - Indeed, as we've seen on Wall Street, when you control networks programmatically the results can be unfortunate. 
@mbushong
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@mbushong,
User Rank: Moderator
7/8/2014 | 10:04:34 AM
Control is interesting
The point on control is an interesting one. It is likely made worse because not only are we sharing control, but we are moving from a model where control is complete and absolute. When you rely on explicit configuration to make things work, it is a big leap to move to anything that is state driven, using APIs as the intermediary. It changes the entire provisioning model in profound ways, and it will absolutely disrupt troubleshooting processes in a lot of cases. 

You would think that this will open the door to broader integration. Analytics should be the next wave of things we talk about. And integration with things like capacity planning systems will be critical. The ecosystem of infrastructure starts to mean more, which should make the competitive landscape a whole lot more exciting in years to come.

Mike Bushong (@mbushong)

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