SD-WAN Shines in a Dark Enterprise Market
SD-WAN promises to deliver revenue growth to telcos and other service providers to offset flat revenues from other enterprise services, according to Heavy Reading analyst Sterling Perrin.
"Network operators need a way to grow their revenue, and here comes SD-WAN growing revenues the way they want," Perrin said at Light Reading's Network Virtualization & SDN Americas conference in Dallas last week.
SD-WAN revenues are almost $4 billion today, and are set to grow to nearly $10 billion in 2023, a compound annual growth rate (CAGR) of more than 20%, according to a study by Ovum, Perrin said.
That contrasts with global enterprise services revenues, which aren't growing, Perrin said.
Also, the climate for SD-WAN has gotten more business friendly. Where customers 18 months ago were concerned about cost savings, customers have become more interested in other things during the past year, John Isch, Orange Business Services practice director, network and voice center of excellence, said on a panel discussion following Perrin's presentation.
"The conversation has moved to 'How do I use SD-WAN to enhance my network?' not 'How do I use SD-WAN to save money on the network?'" Isch said. Customers are still interested in saving money, but a year ago operations wasn't part of the conversation.
Demand for SD-WAN is driven by changing enterprise network architectures, as applications move closer to the end-user, said Scott Irwin, Frontier Communications' senior director of SD-WAN.
Those complex architectures make analytics more important. Analytics help to provide visibility (to monitor that branch offices are connected), control traffic across MPLS and other access networks, and enable traffic steering based on insights into application performance, Irwin said.
"It brings insight into how the network is being used in the enterprise environment," the Frontier man said.
Eighteen months ago, the SD-WAN conversation was about connecting branches to each other, but now customers are becoming more interested in connecting users to cloud applications, said Wadah Ely, Bell Canada GM Networks and Cloud Connectivity. Customers need guaranteed performance and service level agreements from the end user to the cloud.
SD-WAN is emerging as an overlay in a multi-link environment that includes MPLS, said Rupesh Chokshi, AT&T Business assistant vice president, Edge Solutions Product Marketing Management.
Similarly, Windstream will sell SD-WAN bundled with the network underlay, or allow its customers to buy access separately. The operator is not trying to protect MPLS revenues, noted Mike Frane, Windstream Enterprise vice president of product management for SD-WAN.
SD-WAN and universal CPE (uCPE) are often seen as going together, but Windstream is seeing limited demand from its enterprise customers for uCPE, Frane said. Universal CPE is only a great fit for the biggest enterprises, the top 250 biggest organizations in the world, with thousands of locations that look like small businesses, such as those in retail and healthcare laboratory services, he said.
Windstream's customers are big, but not that big -- they're the biggest enterprises who have the majority of their network in North America. Those customers are put off by the 30–40% price premium for uCPE: Bigger enterprises value uCPE flexibility over cost.
For enterprises, the most important business benefits to SD-WAN are supporting new business applications and technologies and connecting branches to both private and public clouds, Perrin said.
Delivering these benefits present great opportunities for telcos. But it's a competitive environment. Service providers can differentiate by providing integrated functions, quicker deployment and lower cost, Perrin said.
Service providers face a choice of whether to bundle the underlay and overlay network. About half of operators say there will be a high degree of integration between the underlay and overlay network, and about an equal number say they'll be sold separately. That's significant because service providers offer both SD-WAN services and the underlying network, whereas SD-WAN specialist companies need to partner to get the underlay network from service provider partners, Perrin noted.
Enterprise customers are evenly split between those who will get their SD-WAN and security services separately, versus those who will get it in a bundle, Perrin said.
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— Mitch Wagner Executive Editor, Light Reading