How SD-WAN is changing the network services market

As technology continues to evolve, SD-WAN (wide-area software-defined networking) is changing network purchasing decisions, opening the market to new players and redefining networking itself.

Every decade or so, a business faces a major shift in its competitive landscape. These “strategic inflection points,” to borrow a phrase from former Intel CEO Andy Grove, are often hard to spot, but they allow executives who notice them to make fundamental changes in their businesses. In the telecommunications industry, SD-WAN is one of the key points in creating these.

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The meteoric rise of SD-WAN is no secret. While metrics vary, analysts expect both enterprise spending on SD-WAN and corresponding vendor or service provider revenues to grow rapidly over the next few years. Behind these predictions, however, are fundamental changes in the market. In particular, by consistently impacting the application landscape, SD-WAN is transforming network purchasing into a C-level decision and enabling nontraditional vendors to enter the market. Along the way, it is redefining networking itself.

Questions about executives

In the IT and telecommunications world, technology typically drives the market. Voice over IP (VoIP), Multiprotocol Label Switching (MPLS), and virtualization are all traditional ways of operating. Today, SD-WAN is not only challenging specific existing network technologies such as MPLS, but it is also disrupting the way these services are bought and sold.

The traditional decision framework for network purchases is more tactical than strategic. In a typical scenario, a lead engineer or executive or vice president evaluates a range of proposals and decides which two of three attributes—faster, better, or cheaper—best meet the need at hand.

With SD-WAN, this “pick two” model breaks down. The rules that govern self-contained and relatively static environments like MPLS no longer apply. Because SD-WAN offers the promise of using multiple transport technologies (including the increasingly fast public Internet), traffic tends to use the cheapest route (or the best route based on the type of traffic). SD-WAN is also faster to configure, allowing for “auto-configuration” rather than a high-touch approach that requires a lot of manual intervention. Because “cheaper” and “faster” are readily available, SD-WAN enables enterprises to focus more on other capabilities, including advanced features such as security, performance, visibility, and analytics.

As the old paradigm shifts, so too do the decision makers. Because SD-WAN impacts network security, mission-critical application workloads and other strategic issues, networking becomes a critical business decision that belongs to the CIO, CTO or CEO or anyone responsible for positioning the enterprise’s business strategy in a competitive market.

New network provider

The SD-WAN market is a busy space. According to Gartner, the number of vendors has grown from four at the end of 2014 to more than 30 in the first half of 2017. The landscape is constantly changing as new players emerge, some disappear, and some are acquired.

One of the characteristics of this market is the sheer number of vendors. As my colleague Karim Eljai, senior director of service offerings, pointed out in a webinar last fall with Jim Duffy, senior analyst at 451 Research, large markets require more research by enterprise customers. Moreover, the technology is inherently cross-domain. Because SD-WAN can span any number of physical infrastructures, vendors’ core competencies now extend beyond traditional networking to software, security, WAN optimization, virtualization, and other areas.

But as the market shakes out, network and managed service providers have a big role to play in evaluating and assembling all the pieces, from analytics to cloud connectivity to application acceleration to security and more. As network equipment becomes “white boxes” and transport becomes somewhat commoditized, SD-WAN becomes more of a management necessity. Those who put together the most effective frameworks and toolsets are the ones most likely to survive and succeed.

The network is redefined

If SD-WAN achieves in MPLS-based networks what virtualization did in computing, it will be in part because of the digital and cloud transformations that are underway in enterprises.

The share of enterprise workloads running on the cloud is about to cross a milestone. According to information from the Voice of the Enterprise from 451 Research, 45% of all workloads in 2017 could be described as SaaS, IaaS, hosted private cloud or on-premises private cloud. In two years, this number could grow to 60%. As workloads migrate, enterprises will make greater use of SD-WAN's application-centric and cloud-friendly capabilities, which will enable enterprises to quickly adapt (bandwidth and path selection) to major changes to application flows as multi-cloud and hybrid cloud become the new standard.

While MPLS and SD-WAN will coexist for the next few years, the days of relying solely on MPLS are numbered. As the desire for big bandwidth and easily configurable applications grows, the strategic benefits of SD-WAN to enterprise customers become stronger. As Andy Grove describes, technology providers that fail to adapt to this change may feel like they have hit a strategic inflection point or find themselves lost in the woods.

At the same time, enterprise executives who are accustomed to delegating network decisions to others should take note: SD-WAN’s disruptive and strategic significance is making it a core technology for the business, so it must be firmly in their own hands.