For many years IPVPN MPLS has been the mainstay of service providers. However according to the OVUM IP VPN Services Market Forecast (1) the revenues will decline in the next few years even as traffic will continue to grow.
What’s driving this decline? Certainly part of it is competitive pressure. Not only is IP-VPN a highly mature, saturated, price-sensitive market, but there is also evidence that IP VPN prices fall as customers demand more capacity.
It’s also true that customers are using more and more cloud-based applications and services, which reduces their dependency on VPNs that link to corporate data centers. However, perhaps the biggest disruption to the traditional MPLS market is the availability of cheaper broadband services, adoption of hybrid networks and the simplicity of SD-WAN, which is increasing rapidly. According to IDC, by 2020, SD-WAN market size is projected to grow to $6 billion from 2015 to 2020 (2).
What is the attraction of SD-WAN? Simply put it’s the capability to intelligently, dynamically and efficiently route traffic across multiple WAN connections such as MPLS, public Internet, 4G/ LTE, broadband, and other methods. With this capability SD-WANs can reduce networking costs for enterprises. The exact amount will depend on the number of branches an organization has, the types of applications being used, and compliance requirements.
In addition, SD-WANs have a number of other advantages for enterprises. They:
Enable high bandwidth applications – such as video conferencing and collaborative applications - to be supported without using expensive MPLS connections
Accelerate the delivery of WAN services to branch offices
Speed up mergers and acquisitions by allowing new sites to be integrated onto the corporate WAN more rapidly.
Figure: Key advantages of SD-WAN for Enterprises
With all these benefits it makes sense for many enterprises to move to SD-WAN and they have a number of choices about how they do it. They can adopt a DIY approach, deploying and managing all the solution components themselves. They can use a specialist OTT SD-WAN provider, or they can look to their existing MPLS service provider to provide them with a fully integrated solution.
Some service providers might see SD-WANs as a threat to their existing MPLS and managed service revenues, because they are inherently cheaper and reduce the need for on-site resources. However, we feel that this is a shortsighted view.
Figure: Threats and opportunities of SD-WAN for Service Providers
The reality is that SD-WANs will offer service providers substantial opportunities to improve their business. First they open up the possibility of a whole range of new revenue streams. For example, by providing new differentiated services, automating licensing and reducing the time to market for additional features, or offering consumption-based pricing models.
The second area of opportunity for service providers is in improving customer value. With the capabilities of SD-WAN, they can offer customers greater visibility into their WAN performance, through a customer portal for example, increasing engagement and loyalty. They can also use it to quickly and economically recommend, demonstrate, and provision add-on services for customers.
Finally, service providers can drive operational efficiencies, which will flow directly to the bottom line. These include increased opportunities for automation and simplifying monitoring and the visibility into network traffic. Plus, the costs of troubleshooting, configuration and managing the network are substantially less with SD-WANs.
The choice for enterprises is simple. SD-WANs significantly lower cost of ownership, while providing a wide range of other advantages.
Figure: Service Provider Options with SD-WAN
For service providers the choice is not so obvious. They can decide on the status quo, that is, protect their existing MPLS revenue, but risk losing customers to SD-WAN providers. But we think it is imperative that SPs adopt an SD-WAN strategy and the more interesting question is how to implement. They can resell services from an SD-WAN OTT player, but risk the OTT player being perceived as the most value-adding brand. Or they can offer SD-WAN alongside their existing MPLS services, augmenting their current services, while retaining and expanding their existing customer base.
I know which one makes the most sense to me!
Watch the following video to learn more about how the Juniper Cloud CPE solution will help Service Providers to create profitable SDWAN services.
1“IP VPN Forecast: 2015–20”, OVUM, June 2015.
2“Cloud and Drive for WAN Efficiencies Power Move to SD-WAN,” IDC, March 2016.
3“Communication Service Provider Adoption of SD-WAN Technology and Its Impact to MPLS VPN Services”, IDC, February 2016
This blog might also be of your interest: The Magic of NFV through Cloud CPE—Now with SD-WAN Functionality