At the Layer 123 SDN World Congress event in The Hague last week, it appeared that the topic of SD-WAN has finally rattled enough service provider cages to make it to the top of the agenda, and most (if not all) service providers have made plans to start reselling SD-WAN products as soon as possible.
The fact that service providers are moving quickly is testament to the potential loss of revenue they face. One tier one carrier told me there was over a billion dollars of revenue at stake in 2017 alone. At face value then, as an arbitrage play against expensive MPLS connectivity, reselling an SD-WAN vendor’s products, where at least you keep some revenue appears to make sense.
That’s not necessarily how its playing out though. SD-WAN products work best when they have diverse paths – these product chooses dynamically which path will give you better voice connectivity, better SAP performance and separates-out non-essential (read social media) traffic from business critical applications. Further, when simply resold as an extra box to enterprise customers, the products operate over-the-top, meaning they simply need cheap, dumb internet pipes from service providers to work.
So what actually happens it that enterprise customers are encouraged to buy cheap, dumb internet connectivity from not one, but multiple service providers simultaneously, so the product can choose the best path for the traffic at any point in time. Any service provider who operates in this straight resell model is therefore giving business to their competitors, while eroding their MPLS product base.
Its telling that it’s often the resell arms of service providers that are signing these SD-WAN vendor contracts, not necessarily with the blessing of the network product groups, simply because they (rightly) see customer demand and want to raise the revenue of their own group.
So what to do? Well in parallel to the SD-WAN movement, the industry has been following a different, if slower track – the virtualization of network functions or NFV. Until SD-WAN came along, the plan of record for many service providers was to roll-out virtual CPE devices that encapsulated not just basic routing, but three, four or five different services on premise and/or in the cloud. This device would collapse the four or five individually managed physical boxes cluttering-up larger retailers and bank branches into a single, centrally managed device.
For example, the service provider’s virtual CPE offering would include routing, firewall, advanced persistent threat detection, voice services and WAN acceleration all in the same (virtual) system. This is seen as generating incremental revenue for the service provider as they take-on more services, while being hugely beneficial to enterprises who no longer have to rack-and-stack multiple physical boxes in each site to secure and operate their network.
So can SD-WAN be incorporated into service providers’ vCPE strategies? Well it turns out that SD-WAN is a set of business logic, tucked behind some fairly standard routing features – policy based routing, DPI, queueing and policing. What if this business logic could be set to solve a slightly different SD-WAN problem – how to provide diverged paths within the same network, so that an enterprise wouldn’t need to buy IP services from different providers?
In other words, co-opt SD-WAN technology to blend the MPLS network together with the IP network, reduce circuit costs to the enterprise and up-sell them with security, WAN acceleration, and so on.
This approach can also take advantage of the fact that many service providers have excellent connectivity to many cloud providers such as AWS and Azure and, with the right path selection and prioritization can provide much better connectivity than any over-the-top SD-WAN play - AT&T Netbond® being a good example.
At issue is timing – can service providers bring vCPE to market fast enough and at the right cost points to co-opt SD-WAN before it damages revenues? Brocade’s service provider customers think so and this is where we are focusing our efforts as our customers bring their vCPE products and services to market.