More for Less: SD-WAN and 5G Driving Evolution of WAN Economics

More for Less: SD-WAN and 5G Driving Evolution of WAN Economics

There are still savings to realize with new networking approaches, even though the time has passed when an you might expect to make massive cuts in WAN spending by deploying SD-WAN and using it to facilitate a switch off MPLS and onto Internet-only connectivity.

Why To Expect Savings With SD-WAN

Nemertes Next Generation Networking 2020-2021 Research Study clearly shows that organizations that get to the end stage of an SD-WAN deployment are still seeing significant decreases in costs: a 41% decrease in WAN spending per site, and a 61% decrease in WAN staffing per site.  WAN spend savings  come with replacing more expensive connectivity such as MPLS with less expensive Internet links, mainly. Staffing savings come mainly from the centralization and automation of WAN management, and the reduction downtime-causing events.

Why Savings Are Shrinking

Bigger savings were possible in the past mainly because the premium for MPLS services was much higher than it is now. In the early days of SD-WAN, one could easily have spent 10 times as much on MPLS as on a similarly sized Internet link. The presence of SD-WAN and the perception that it can create near-MPLS-quality services out of Internet links has driven that premium down. MPLS service providers are better served by retaining customers at a lower margin than by losing them altogether, after all.The higher quality of MPLS services makes them a great backbone for an SD-WAN, and the market is now getting a much more precise fix on just how high a premium that quality is worth. It is common now to see pricing well under 200% of a business internet link’s cost, and even as low as 130% in some places.

At the same time, we are seeing that although significant savings still attach to having an SD-WAN, the path to getting there is longer and bumpier than IT teams had previously expected. Deployment times on networks with many sites still run to 2 years or so, for example. And, it takes many hours of staff time to prepare for deployment, with median figures of anywhere from 30 hours to transition a site to a DIY overlay SD-WAN to more than 60 to hand off a site to a managed service provider. All of this cuts into the return on the investment.

Next Up: More Cost-Effective 5G WWAN for SD-WAN

One major new factor in the next generation network will be 5G for site connectivity. More than 42% of organizations deploying or planning to deploy 5G in the next 18 months aim to use it for connectivity at some sites. And, whether it is being deployed as a startup network, a failover network, an out-of-band management network, or as permanent sole connectivity for a site, its use as a pillar of the WAN will depend on how carriers charge for it. Currently, with most 4G plans, one pays for access at the best speed available in a location, with a consumption cap. Exceed the cap – send or receive too many bytes of data – and you have to pay more or see a reduction in speed (or both).  This is not conducive to wider use of WWAN – it makes budgeting too difficult and performance management challenging.

We see early signs that carriers are evolving more WAN friendly pricing policies. All-you-can eat pricing, as with a wired link, is the ideal endpoint. Along the way, we are seeing things like pooled access, where one branch over-consuming can be offset by another branch under-consuming. Or partitioned quotas, where some kinds of traffic are guaranteed a given level of performance, but other kinds might be down-shifted after a cap is passed. As 5G infrastructure spreads, and especially as bandwidth slicing features get deployed, WAN-friendly pricing should spread as well.

Takeaway

Just because savings are not the main reason to deploy SD-WAN now, and dramatic savings are more difficult to realize, doesn’t mean IT should give up on realizing some, now and in the future.

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