Managed service providers take note: the future of MPLS services is SD-WAN

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Service providers in the business of providing MPLS technology are listening closely to their clients as they begin to inquire about managed SD-WAN services. And with good reason.

MPLS is a lucrative $80 billion business that will not go away anytime soon. Global businesses have been depending on the proven security and reliability of MPLS for nearly two decades, provisioning dedicated circuits to connect branch offices to centralized host systems, and to ensure high availability of mission-critical systems.

By contrast, software-defined wide area networks (SD-WAN), a paradigm which simplifies the management and operation of a WAN by decoupling networking hardware from its controlling software, has risen to prominence in recent years. Its progress is astonishing, rapidly making inroads into the global market with Gartner predicting that by the end of 2019, some 30% of enterprises will have deployed SD-WAN technology in their branches.

The trend is hardly surprising, given the powerful and compelling argument it presents: instead of adopting an exclusive private infrastructure inherent with MPLS, SD-WAN allows organizations to make use of any mix of connectivity including affordable consumer broadband, and layer it with security and network protocols to provide wide area networking services equivalent to those found in MPLS setups. The result can reduce connectivity costs by as much as 90%, according to data by TeleGeography.

Another important benefit is the quick deployment timelines intrinsic to SD-WAN. Using this technology, connectivity can be provisioned in a matter of days, or even hours, compared to the weeks needed to provision a new MPLS circuit.

The bottom line for service providers is that by 2020, IDC expects the market for SD-WAN to reach $6 billion, a staggering compounded annual growth rate of 90% from just $225 million in 2015.

With most companies focusing on their core business, they will rely on their trusted third-party service provider to enable global connectivity, demanding cutting-edge technologies and skills that can substantially help their bottom lines, both from a cost reducing standpoint as well as growth.

This presents an incredible opportunity for progressive service providers to leverage as enterprises turn to them for managed, turnkey SD-WAN solutions across an expanded geographical footprint.

For service providers hedging their bets on SD-WAN technology, they need to first deliver flexible hybrid WAN managed services at a lower total cost of ownership that accommodates evolving enterprise requirements for more agile and flexible WAN services, including increased use of broadband, and increased use of hosted cloud services.

To deliver SD-WAN as a next generation managed services platform, they need to build an SD-WAN infrastructure that leverages the intelligence of network appliance software that can be reprogrammed centrally, and that breaks away from tedious hardware procurement locally.  Service providers can rapidly expand their geographic footprint out of region, creating new revenue opportunities without incurring significant capex for customer premise equipment router infrastructure expansion.

As such, the SD-WAN implementation must enable the flexibility of being able to automatically provision and set up customer branch office connections from a centrally-managed location, without requiring expensive truck rolls or teams of networking staff.

When it comes to choosing technology partners, service providers would do well to go to industry leaders with fully featured solutions and proven track records, as it can greatly impact the breadth and profitability of their new managed SD-WAN services portfolio, enabling them to streamline service management for thousands of customers.

Going further, service providers seeking to go the extra mile for customers should ensure that their SD-WAN implementation not only has high performance, but has the ability to analyze the network as well as the performance of services provided through the network including hosted and outsourced applications. This not only helps service providers identify and generate new revenue streams for value added SD-WAN services, but also assure SLAs are met, while addressing the increasing demands of customers that want to actively manage and optimize their connected infrastructure.

Perhaps an even more aggressive and lucrative approach for service providers would be to proactively push an SD-WAN agenda, even if it cannibalizes MPLS-based services. With the significant potential growth looming in the years ahead, it stands a company in good stead to be a highly visible provider of SD-WAN services rather than just passively meeting the needs of customers. After all, when it comes to a technology that has game-changing potential, it only makes sense to be a first mover, and remain entrenched as a leader.

Written by Shayne Stubbs, vice president of service provider and cloud at Silver Peak

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