Telecoms operators should prioritise the launch of SD-WAN – podcast
12 September 2019 | Research
Video and podcast | Large Enterprise Voice and Data Connectivity
In this podcast, Research Director, Tom Rebbeck explains why telecoms operators should prioritise the launch of SD-WAN.
Listen to or download the podcast
Many telecoms operators are postponing the introduction of SD-WAN or at least only launching it cautiously, primarily because of the perceived risk that it will cannibalise revenue from their existing MPLS services.
We believe that delaying the introduction of SD-WAN is a mistake.
Other types of service providers are launching SD-WAN regardless of what telecoms operators are doing.
By waiting, telecoms operators risk losing business to more-aggressive competitors. They may also miss out on opportunities to learn how best to sell and support SD-WAN. By the time these operators do add SD-WAN, it may be too late.
In our recently published report How telecoms operators can launch SD-WAN, we argue that operators should look to expedite a simple SD-WAN product and use it as a base for adding more features and services – and for generating new revenue streams.
Many of the reasons that explain operators' reluctance to introduce SD-WAN can be countered
If we take the four most-common arguments, first, there is the potential impact on MPLS revenue.
In many regions/countries (for example, in Europe or Australia), MPLS circuits cost the same as dedicated internet access circuits. The impact on revenue in these countries is negligable. In countries where MPLS solutions are more expensive than internet circuits, enterprises are already migrating to lower-cost internet circuits and are adding SD-WAN over the top.
The second argument we hear is about the business case, that SD-WAN is not supported by a sufficiently strong business case.
However, many small service providers are launching SD-WAN, often based on simple solutions such as Cisco Meraki, which require limited investment. We are also seeing other models where vendors or suppliers take on more of the risk of launching SD-WAN. Perhaps more importantly though, telecoms operators will need to match their competitors to retain market share, even if returns are not as high as for other services.
The third argument is about demand – some operators say that demand for SD-WAN is not strong yet.
In countries where there are significant cost advantages for SD-WAN (such as the USA), demand already exists. Elsewhere, demand is emerging (and perhaps not as quickly as some had hoped), but it will take time for service providers to understand which features are most appealing in these markets. Service providers that already offer SD-WAN are learning quickly; others will need to catch up.
The fourth and final argument we have heard against SD-WAN is that it cannot support critical services, like voice.
We also question this. We have spoken to an increasing number of service providers who are using SD-WAN to support business-critical services. We are even aware of one company that is running its call centre over dedicated internet circuits and SD-WAN.
These counter-arguments build an essentially negative case: operators need to launch SD-WAN, and if they do not, other providers will.
More-positive reasons for supplying SD-WAN also need consideration
Eventually, SD-WAN could be a platform for providing new revenue-generating services, including security, LAN management, and even IoT services. Former Harvard Business School professor Clark Gilbert describes how innovation can be framed as a threat, as a way of securing resources, and then as an opportunity once resources are secured.
The same approach could be used by operators launching SD-WAN – use the threat of competition as a way of getting funding to make the investments required, and then explore how SD-WAN can be used to open new opportunities, like IoT.
When telecoms operators do launch, they don't need to have a complicated product initially, and probably should avoid this. Even a relatively simple solution will take many months to develop; providers should avoid additional barriers by making the solution too complex.
The underlying technology can come from one or two vendors. With limited technology differentiation, there is little need for most service providers to integrate and launch solutions from multiple vendors.
The standard features that run on top of SD-WAN can also be limited to a few basic services, such as firewalls. Businesses may value a selection of firewall vendors more than they do a selection of SD-WAN solutions, especially if this allows them to continue their relationships with trusted security suppliers like Palo Alto and Fortinet.
Operators can also simplify the process of selling SD-WAN by targeting a select group of customers. Companies that have multiple sites of different sizes, high levels of usage of cloud services, or are likely to add or take down sites quickly, or are cost conscious, are all good prospects for SD-WAN. The retail, finance and insurance, construction and manufacturing sectors are most likely to meet these criteria.
Perhaps equally important is the attitude of a potential customer's organisation to new technology. SD-WAN will initially only be adopted by IT departments that are more open to using new technology, regardless of vertical market or size.
Many businesses still view SD-WAN as a new and relatively unproven technology. Operators can focus their sales resources more effectively by filtering prospects by those open to new technology (for example, companies who adopted cloud services early).
Finally, we recommend that operators focus on direct sales, at least initially.
All services providers that use channel partners will want to sell SD-WAN through these channels, but few have to date. Selling through channel partners can be a longer-term ambition but will be a distraction in the near term.
SD-WAN will probably become the default technology for connecting wide-area networks
Indeed, some services providers are already exploring when to stop offering MPLS to new customers. All business-focused operators will need to introduce it at some point, or they will be pushed towards the provision of basic connectivity/wholesale offers, with others commanding the primary customer relationship.
Starting early will allow service providers time to experiment with the technology while the market is developing. Launching after others may leave less time and resource to experiment.
The dangers of being late to the SD-WAN market outweigh those for being too early.
More fundamentally, many operators have a problem in how they are perceived by business customers: customers view many operators as expensive, non-responsive and unwilling to innovate. An early introduction of SD-WAN will demonstrate to customers that some of these issues are being addressed, while delaying will do nothing to fix the sense of frustration that customers feel.
The risk is that established operators delay launch, never catch up their more-ambitious competitors and only add to their reputation for being slow and lacking in innovation.
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