SD-WAN in 2019: A conundrum for service providers

It’s that time of year again when analysts and experts rattle you off with recaps of 2018 events and predictions for 2019. This article will use information gleaned from recent conversations with system integrators (SIs) and service providers (SPs) to offer some perspective on what the next 12 months hold. 2019 will be a year of opportunity for service providers, system integrators, and SD-WAN vendors, but some of them may not be able to quite get their hands on it yet.

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Further integration

Just when you thought SD-WAN was going quiet, Oracle acquires Talari. Previous major acquisitions include VMware's acquisition of VeloCloud, Cisco's acquisition of Viptela, and Riverbed's acquisition of Ocedo.

It doesn't take much analysis to predict that more and more SD-WAN vendors will be acquired or go out of business as the market cannot sustain so many existing and likely more vendors. In addition to acquisitions between vendors, expect some service providers to join the fray and adopt vertical integration strategies. We will see at least one service provider acquire an SD-WAN vendor in 2019 to consolidate ownership of its SD-WAN offerings. Whether this consolidation will be successful is another matter.

MPLS Price Drop

You may have seen statistics showing that MPLS customers have not disappeared and that MPLS revenues have not been hurt by the arrival of SD-WAN. But remember, we are at the beginning of the SD-WAN trend and many of the early SD-WAN adopters are simply layering SD-WAN but retaining MPLS. As vendors continue to deliver MPLS-like performance and improve service level agreements using multi-broadband links with 4G/LTE backup, it will not be long before the price of MPLS links drops, new MPLS installations decrease, or both, and this trend will be reflected in the data.

Some service providers will effectively sell and deploy SD-WAN

Service providers will continue to face the conundrum of either adopting SD-WAN, pushing back on SD-WAN, or doing both. This is not unlike NFV vendors “hedging” their bets by offering lip service to virtualized network functions that may work but not very well, while they are still pushing their own proprietary hardware that may currently demonstrate a higher price/performance ratio. Regardless, it is clear that enterprises are very interested in transforming their WANs, and business and competitive pressures are compelling them to upgrade their WANs as soon as possible.

Some service providers who were early to join the SD-WAN race faced challenges in selling their services, realizing the following:

• Their sales teams are used to selling basic connectivity services and may not be as good at selling SD-WAN value-added services.
• Their operations team encountered similar issues when running SD-WAN services in their cloud infrastructure.
• Because of the strategic importance of SD-WAN, their points of contact in the enterprise are just expanding from WAN engineers to IT directors or CIOs.

Lack of operational experience may lead vendors to offer white-label or co-labeled hosted or turnkey solutions with service providers. The recently announced Netcracker Business Cloud product falls into this category, a hosted turnkey solution operated by the vendor on behalf of the service provider. If this model is successful, more vendors or system integrators will offer the same service.

Service providers need to improve their collaboration capabilities

One of the principles of SD-WAN solutions is to provide redundancy by multiple links. In order for this capability to be effective, service providers need to promote as much independence of link paths as possible and ensure that the cloud endpoints of these SD-WAN links have sufficient redundancy. This means that a single provider should not provide all of the "last mile" infrastructure. In addition to this, many SD-WAN implementations will use 4G/LTE links, and if the service provider is not already a mobile operator, it will need to work with a mobile provider.

At the same time, service providers will be forced to offer fast connections to popular public clouds as part of their SD-WAN offerings. That means they either have to work with Equinix, Digital Realty and other exchange point providers, or they have to negotiate deals directly with the major public clouds.

All of this means that service providers need to increase their partnership capabilities and their sales teams need to be good at selling bundled links, not just typical VPN-L2 or L3 products. This also means that service providers need to be smarter about cloud connectivity solutions so that they can be transformed into virtual private clouds in popular public clouds. Education and training of sales and operations teams will be a key factor in SD-WAN success.

System Integrators Will Rise

Expect system integrators to pick up the pace in 2019 and bring managed SD-WAN products to market. In addition to some large enterprises that may choose to run their own SD-WAN global services, many small and medium-sized enterprises will want managed services. System integrators can also provide products across service providers and create custom portals and workflows required by certain specific enterprises.

Some enterprises may prefer system integrators over a single service provider due to the perception of being service provider agnostic. System integrators have the flexibility to choose the best connectivity options from multiple service providers while building a SP-agnostic infrastructure for cloud-based management systems. They will also have more software development capabilities to customize or extend the necessary SD-WAN portal to meet specific enterprise needs.

Another aspect that will work in favor of system integrators is their ability to provide services to enterprises beyond the confines of the WAN. Given that SD-WAN tends to span branch infrastructure, enterprise security and cloud development platforms, it may give system integrators a slight advantage over many service providers who don't have the level of knowledge in this area today.

Fundamentally, there is nothing stopping service providers from expanding their services. In fact, some service providers do offer value-added services in managed branch, managed security, and even private cloud hosting. However, there are many companies that are not used to selling products other than connectivity to the enterprise. The dilemma for these companies is whether to stick with what they are used to selling and gain efficiencies, or make the necessary investments to upgrade to become a more comprehensive service provider and assume all the risks that come with that. This decision must be made in early 2019 as the global land grab for SD-WAN kicks into high gear.

Luck favors the brave, but also the wise and pragmatic. So which one will it be?

Original link:

https://www.sdxcentral.com/articles/analysis/sd-wan-in-2019-the-conundrum-for-service-providers/2018/11/?c_action=home_analysis