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How SD-WAN is Forcing Service Providers to Re-invent Themselves (…as NFV did with vendors)

Interesting similarities can be observed between SD-WAN and NFV. NFV aimed at ending the reign of monolithic solutions, with software and hardware decoupling, but also with the use of open APIs that facilitate the ability to pick, choose and replace vendors as necessary. The hope was that increased competition and commodity hardware would drive costs down. This is however not a particularly shiny prospect for vendors.

If you think about it, SD-WAN is also about breaking monoliths: service provider offers. From this perspective, the managed service offer is split into discrete components: connectivity, hardware, WAN/LAN devices, VPN/security and operations. Enterprise customers can theoretically source each item independently and benefit from choice and competition. As a result, a large community of SD-WAN advocates aggressively target service providers, accusing them of offering less and charging more; in other words ripping off enterprise customers. This is equally not a shiny prospect for service providers.

The right answer for CSPs is not necessarily to fully embrace the current offerings of the main SD-WAN players. It may be part of the answer, but not the full one. As with vendors for NFV, this turmoil is forcing service providers to reconsider the value and strategy for each individual component of their offer (connectivity, hardware, operations, etc.

Let’s start with connectivity and VPN. Many SD-WAN vendors build their business case on saving MPLS costs. If you are a CSP and can serve your customer with MPLS easily, this is just a bargaining game. Why SD-WAN then? Just call your service provider sales rep! Many commentators now admit that MPLS is not dead but SD-WAN has highlighted how un-ideal it is: if you need to build a global VPN with branches in Mexico, South-East Asia, etc., those MPLS links become awfully expensive and slow to deploy. This is where it makes sense for CSPs to adopt Over-The-Top VPN technologies as proposed by the mainstream SD-WAN solutions. In other words, service providers do not need full-blown SD-WAN technologies to remain competitive so long as the customer demand is limited to “same as before, but lower cost”.

Of course, there is more to SD-WAN than just building a network overlay: such as being able to easily enforce application policies, monitor network and application performance. In my opinion, this should be viewed as another layer of services that can be offered at a premium cost. Historically, service providers have been extremely successful in outsourcing networks for enterprise customers, especially in Europe. The key ingredients were: a one-stop shopping experience and being a price leader for this outsourcing. The contention here is that they can strike back against SD-WAN DIY and System Integrators. Being a price leader implies they need entry-level Over-The-Top offers, but also a rich set of options to upsell so that enterprises remain attracted to their main marketing asset: a one-stop shopping experience.

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