SD-WAN Tide Is Turning... And It's Not All Good News!

A short while back we were talking about new exciting, disruptive providers like VeloCloud and Viptela breaking the mold in network services with software-defined WAN, or SD-WAN, technology releasing a whole new world of simple-to-manage, low-cost networking. Things are changing.

AT&T and Sprint use VeloCloud technology in their managed SD-WAN services. Verizon has a tie-up with Viptela, which not long ago analysts favorably compared with Cisco's monolithic Intelligent WAN, or IWAN, offering. But Cisco recently acquired Viptela and, in the meantime, also brought to market the much lighter weight Meraki SD-WAN solution, in part to respond to the excessive complexity of IWAN.

Let's be honest, SD-WAN is great, and many of the SD-WAN alternatives could provide serious enhancement to the enterprise networks that have long relied on the once-revolutionary technology that is Multiprotocol Label Switching, or MPLS. Like many technologies, MPLS had a lengthy gestation period but when this networking technology took hold it did so with a vengeance. We have every reason to think SD-WAN will do the same, as the next great (possibly greater) evolution in networking technology.

In its March 2017 "Market Guide for WAN Edge Infrastructure" report, Gartner puts the SD-WAN market at $1.3 billion annually by 2020, while other analyst organizations have even higher predictions. We are also seeing large enterprises that have moved through the feasibility, proof-of-concept, and pilot stages into operational deployment of SD-WAN.

Enterprise Ahead?

Here lies one of the emerging problems. Some SD-WAN providers, such as Talari Networks and Silver Peak, are struggling to gain traction in the large enterprise space. Talari offers attractive application performance benefits with its packet-based product, but has some scale issues in the size of circuit it can handle (5 Gbps at the moment, 10 Gbps on the roadmap). Silver Peak has been pushing SD-WAN for the enterprise, but its publicly available customer list for SD-WAN still has a mid-tier company feel to it. There's actually a lot to like about Silver Peak's approach, so the penetration may change as large company inertia is overcome and network transformation based on SD-WAN takes hold. For the time being, we are seeing carriers and the likes of Cisco leading the SD-WAN charge.

The "big players" are beginning to exert a control on the market just as SD-WAN blossoms into a mainstream technology. The partnerships and buy-outs support this assertion. While other smaller SD-WAN providers have a start-up's agility, they don't have scale and resources to meet the fast-growing demand. The big players also have existing enterprise relationships, and a massive interest in protecting their revenue streams.

Rising Cost?

The changing dynamic in the SD-WAN market is going to mean higher cost. The promise of very low-cost, self-managed SD-WAN is drifting away. Cisco doesn't have a track record for "inexpensive" services. For a slimmed down solution, for example, Meraki isn't low cost, and Viptela offerings are unlikely to escape the Cisco influence!

Equally, carriers will work hard to justify and apply the "value add" premium for their managed services and use all the tricks of old and some new ones to lock you into their managed services ( speak to us if you want to know what some of these tricks are). Meantime, the likes of Silver Peak and Riverbed will adapt pricing to align with what they can get away with.

Collectively, the "big players" are now better placed to defend their revenues against the threat posed by the emergence of SD-WAN. Your skills in procuring managed services and picking the right providers will be tested more than ever, and the financial stakes compared, for example, to managed router services, are going to be higher.