SD-WAN: Is it Time For MSPs to Take a Hard Look?

Disruption from cloud is being felt in every corner of the IT universe and the emergence of software-defined wide area networks (SD-WAN) could present the latest wave of change for managed services providers (MSPs).

The proliferation of commodity broadband and hybrid IT environments is bolstering the business case for geographically distributed enterprises to ditch pricey T1 and MPLS links, and instead deliver that traffic over low-cost public Internet connections.

While adoption of the technology is still in its infancy, experts say 2016 marks an inflection point that will see a sharp acceleration in commercial use of SD-WAN, and a surge in worldwide revenue that’s estimated to surpass $6 billion by 2020.

“Service providers are looking for ways to add value to their services and to fight being relegated to plumbers providing pipes to customers,” researcher Mike Fratto wrote in a Dec. 2015 market advisory for Current Analysis, Inc. “Managed SD-WAN is nicely aligned with managed services and fits neatly into service providers’ network functions virtualization strategy.”

A new report by market intelligence firm IDC projects $6 billion in SD-WAN spending will be driven by a compound annual growth rate of more than 90 percent from 2015 to 2020.

On Friday, Research and Markets also released a report placing worldwide revenue at $4.66 billion in 2015, and estimating that amount will reach $5.57 billion by 2020.

“North America is expected to have the largest market share and would dominate the SD-WAN market from 2015 to 2020,” according to that study.

IDC found that nearly half of U.S. firms are considering moving to SD-WAN over the next two years, while other research suggests the migration is already well underway.

Roughly 70 percent of organizations with WANs had at-least some Internet-only locations in 2015, according to an article by John Burke, CIO and principal analyst for Nemertes Research

Of those companies, an average of 28 percent of worksites were Internet-only.

“This can reduce cost-per-Mbps of bandwidth by 90 percent or more, and can allow IT to meet pent-up demands for huge bandwidth increases that MPLS costs often made prohibitively expensive,” Burke wrote.

The growing market has drawn the interest of a small-but-growing number of companies vying to be early players.

Last September, Verizon launched a managed SD-WAN offering that utilizes Cisco’s Intelligent WAN (IWAN) platform, promising a reliable, secure hybrid network that allows automatic rerouting of application traffic based on the system’s current state.

“Simply set up the rules for how certain traffic should be treated, and the solution takes care of the rest,” according to a Verizon white paper. “Managed SD-WAN supports growing cloud workloads and unpredictable user demand by measuring delay, jitter and loss, and moving traffic along a path that meets its requirements.”

Firms like Silver Peak, VeloCloud, Viptela and SevOne, are developing solutions to enable monitoring and managing and other SD-WAN-related tools.

Viptela and SevOne, for example, partnered on the SevOne Digital Infrastructure Management Platform, which features a single-pane-of-glass display.

And within days of Verizon’s managed service launch, Silver Peak announced an SD-WAN channel program for partners, and released a network overlay called Unity Edge Connect, aimed at making broadband transmission as secure as MPLS.

“Silver Peak … is making a case that when public Internet connections are managed at a higher level of abstraction, MSPs can provide that same level of security while taking advantage of multiple Internet service providers to optimize network traffic flows at any given time, based on availability and cost,” Mike Vizard wrote in an article for MSPmentor.

SD-WAN vendors are increasingly marketing products to service providers, with “APIs for OSS and BSS integration, function modularity, and flexible licensing models,” said Fratto, the researcher for Current Analysis, Inc.

He argues that MSPs and other service providers hoping to win a share of the SD-WAN market should expect fierce competition from other providers and from networking vendors who sell directly to business customers.

“Enterprises, particularly in North America, distrust the ability of MSPs and SPs to deliver timely services, which providers will have to address in the sales process,” Fratto wrote in the market advisory. “To compete effectively, providers will have to demonstrate that they can deliver better service, faster and less expensively than enterprises can do on their own.”

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