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

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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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Thinking ahead: Eradicating downtime needs strategic vision as well as technology

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Organizations focused on delivering network connectivity services, from big national telcos to small, regional service providers, are under pressure to reduce network downtime. A recent report from IHS Research(1) highlighted that US organizations are losing as much as $100m per year to the problem. It seems to be a similar story in Europe, too, where network outages are estimated to be costing companies an average of €75.5k per year(2).

Meanwhile, business technologies are evolving at a blistering pace, raising the stakes even further. The steady march into the Cloud, together with the rise of enterprise mobility are increasing network traffic and deepening the enterprise’s dependency on the network. Looking not so far ahead, the surge of un-manned connections from machine-to-machine (M2M) initiatives is set to compound matters. Against this backdrop, communication service providers (CSPs) are making it their mission to futureproof their networks so they can maintain network stability, speed and security as their customer’s demands intensify.

Organizations that manage multiple branches across dispersed geographic locations, like hotel chains, petrol stations and retailers, have multifaceted dependencies. Here, network performance outages can halt the business in its tracks, severing the link through which customers engage, card payments are verified and the supply chain is managed.

One such organization demonstrating ‘best practice’ in network management is Tokheim, a global managed service provider specializing in the retail oil and gas industry, whose purpose-built international network connects 5000 petrol service station customers worldwide. The success of Tokheim’s business rests on the quality of its network.

In 2013, with the future in mind, Tokheim set about evolving its business-critical network to ensure that it could support the fast growing, always-on transaction environment required by its network of branches To meet performance requirements, Tokheim centralized the application infrastructure management functions needed to monitor the variety of networked point-of-sales (POS) devices deployed on its customers’ forecourts. This upgrade delivers a faster, more reliable payment experience to its customers, supporting its efforts to increase market share. Importantly, the organization also delivered PCI-DSS compliant POS connectivity for its real-time transaction processing and, to minimise the risk of network down time, integrated a number of backup options including 3G and secure VPN remote access to networked locations worldwide.

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