SD-WAN has been evolving in a number of ways, but the most important of the lot is the way an enterprise buys it. There are three options now available—directly from someone (vendor or VAR) as a product to be installed by the buyer, from a managed service provider (MSP), and from a network operator. Of the three, the network operator channel is by far the fastest-growing and the most credible with prospective users, and that’s likely the primary driver behind SD-WAN evolution overall. What might that mean for SD-WAN overall?
Operators I’ve talked with are frankly confused/conflicted about SD-WAN. On the one hand, they hate the idea that something could displace MPLS business, which is profitable for them. On the other hand, many operators admit that MPLS isn’t all that profitable except in major sites (like secondary data centers or regional HQs) because of the pricing pressure on it. They also admit that the question may not be whether SD-WAN kicks MPLS out of some sites as whether it’s their own SD-WAN or someone else’s that does the kicking. Self-cannibalization is better than being eaten by a third party.
Perhaps the most attractive truth about SD-WAN is that it is much more likely to be sold as a managed service than an MPLS VPN. Operators have long hoped to improve managed service sales on the grounds that they could (with proper tools) create better management economies of scale than users, and that this could then let them make a nice profit on services while still offering users a net reduction in total cost of ownership. Some operators tell me their surveys suggest the MSP gains could be much more than any possible MPLS displacement losses. Others disagree.
The conflict within each operator is mirrored by confusion on how to sell the service. Do you put the SD-WAN arrow in your quiver and keep it ready in case a competitor starts casting covetous eyes at your MPLS sites? Do you step up to promote SD-WAN where the buyer doesn’t have MPLS now, risking their extending it to marginal MPLS sites too? Most important, is SD-WAN just a strategy for VPNs via the Internet, or is it something bigger, broader, and more compelling?
Many operators are actually in multiple camps on these issues. Some see SD-WAN purely defensive in one regard, and yet also see that MSP opportunities are greater if the SD-WAN solution has some real useful features that could add to the buyers’ business case. About a dozen operators have, or are planning to have, multiple SD-WAN strategies in the near term, all somewhat covert to prevent confusion, and unwrap the one that turns out best when the buyers’ needs are clear.
In the short term, operators are most comfortable focusing on SD-WAN as a managed service that’s designed to extend existing MPLS VPNs to sites where they’re not available or priced acceptably. This extension mission doesn’t involve a lot of complicated features, but it also directly collides with MSP offerings and missions. Some operators, even today, don’t think they can sustain such a limited SD-WAN service objective.
In the longer term, operators’ strategic planners think that it’s inevitable that SD-WAN will become a feature race. They point out that the basis for “vanilla” cost savings from MPLS displacement and management economies of scale are almost identical regardless of the specific SD-WAN solution. Nobody wants to be in a pure price competition, particularly players like the network operators who are already engaged in commodity service marketing. Adding feature value improves differentiation and also increases buyer benefits, which can then justify higher service prices and profits.
That, of course, raises the question of what those higher-value features should be. So far, most SD-WAN vendors offer little beyond the essential overlay network capability that SD-WAN depends on. A few have traffic management capabilities, can identify and optimize routes, and provide other connection-related features. Some now offer cloud-resident clients, and a very few (two, perhaps) have logical networking and network-as-a-service features that actually advance connection management and security considerably. However, my research shows that buyers are curiously unfamiliar with most of the SD-WAN features or the differences among vendors.
One reason for that lack of familiarity is that SD-WAN’s business case is easily made by MPLS VPN extension or displacement, and everyone in sales knows that the goal is to get the check without raising spurious issues. Operators in particular are not accustomed to feature differentiation, or even to selling and marketing in the traditional sense. Rather than make the market for feature-based SD-WAN, they’d prefer that vendors make it. Most, at this point at least, are a bit annoyed that the vendors have not been doing much of a job of conditioning the market for a feature-based SD-WAN future. One operator told me that three-quarters of the SD-WAN vendors don’t have any features (beyond the vanilla) to promote, and the rest don’t know anything about promotion.
Those same operators will inevitably be forced to extend SD-WAN beyond the basics, not the least because it offsets the risk to their MPLS VPN business. That may spell the defining truth of the evolution of SD-WAN. Most of the current incumbent SD-WAN vendors, ironically all of the current market leaders, are feature-deficient in the extreme and they’ll have to fix that quickly if the operators drive more attention to features. But all the vendors are going to have to decide how to promote SD-WAN at the feature level, and that’s harder than it seems.
The media hates nothing more than an attempt to re-launch something. It’s lousy for attracting readers and ads, after all. It also calls into focus the fact that the initial story on the technology was off-base, which makes it harder to push the next wave of hype. It takes some very clever PR work to get a feature story on SD-WAN out there, and good website collateral, follow-up material, and even training and sales initiatives at trade shows and events. In short it takes a program, and nobody really has that today.
There’s also the problem of what could be called “feature collision”. Can a vendor like Cisco, for example, push all the wonderful features of network-as-a-service, including many features designed for cloud symbiosis and security, when their sales of other technologies in those very space are what buoyed up their most recent quarter?
Why has security become such an issue today, when in the old days of IBM SNA and Dataphone Digital Services or other leased-line services it was a minimal problem? Answer: the old model was intrinsically secure. If SD-WAN made VPNs intrinsically secure, would that obviate the need for (and sales of) a whole bunch of security layers and tools? Probably it would at the least reduce that need/sales combination.
Feature collision doesn’t pose a threat for vendors who don’t have security features besides those provided in their SD-WAN product. That’s what makes Oracle’s deal to acquire Talari interesting. Talari doesn’t have a particularly feature-insightful offering, but perhaps Oracle would be less resistant to pushing the feature envelope than a network vendor like Cisco, with a security business to protect. VMware, who purchased Velocloud, might also be expected to enhance features to gain additional market traction.
A feature opportunity that seems immune from collision issues harks back to my comment on economies of scale. If you’re going to do SD-WAN as a service, you need to make best use of any resources you provide, but most elements of SD-WAN will be hosted with the customer. The big issue will be operations economies of scale, which means a lot of zero-touch automation relating to the deployment of SD-WAN and maintaining its service levels in conformance to the contract. SD-WAN vendors offer management tools, of course, but nobody yet is really focused on zero-touch automation.
Network operators, obviously, could expect to sweep SD-WAN under the umbrella of their general plans for service lifecycle or zero-touch automation…if they had them. Right now, operators lack any real progress toward a general solution (the latest version of ONAP is about to come along, but I don’t yet have the details on what they might have included). That raises the question of whether an SD-WAN vendor might add an automation strategy of their own, or even whether an MSP might come out with an effective approach. There are enough pathways to success that somebody is sure to take one of them.
All this is going to take time, though. The most recent deals for market entry into SD-WAN services (MSPs and operators) have tended to focus on the relatively feature-disadvantaged market leaders. This shows, in my view, that most prospective providers of SD-WAN-based services are interested only in the basic value propositions—lower connectivity charges using business Internet rather than MPLS, or productivity gains by extending VPNs to sites not suitable for MPLS connection. If network operators are unusually defensive about SD-WAN impact, and if they’re the fastest-growing channel for enterprises to get SD-WAN, then it’s going to take a lot of kumbaya moments among the operators’ executives to socialize a feature shift. But it only takes one major player to see the light and the rest will follow, or lose.