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SD-WAN: The Winners and Losers - How will you stack up?

Who stands to gain the most from this disruptive new technology that is fundamentally changing the traditional WAN landscape?

sdwan winners and losers.jpeg

The Rodney Dangerfield of the IT Stack is about to get a lot more respect.

With all due respect (pun intended) to the great comedian, the Telecom layer of the IT stack has generally been perceived as the least exciting, least strategic space; so much so that the classic analogy used to describe it over the decades since divesture has been: 'its a utility'. Not the most flattering reputation.

That is about to change in a big way, and there will be Winners and Losers as a result.

Software-Defined Wide Area Networking (SD-WAN) is a transformational new communications technology solution that is well on the way to full marketplace adoption in the coming years. Tech media, blogging experts, independent consultants, and early enterprise adopters have all jumped on the bandwagon with passion. Simply put, there is no lack of consensus regarding the certainty of its benefits and therefore inevitability of its rapid adoption. SD-WAN will be the networking solution that will become the enabler for the cloud era application tsunami that is upon us.

As evidence of this sure bet, one need look no further than Gartner’s estimate that SD-WAN will go from approximately 5% of the WAN market share today, to over 30% within the next 2+ years. This growth reflects the fact that there is really no serious debate regarding the many benefits that accrue to the numerous stakeholders within the enterprise. Frankly, rarely can it be stated as fact vs. opinion that ‘everyone wins’. Even the most diverse aptitudes (represented by the CFO vs. the CMO for example) will find SD-WAN is an enabler for real benefits to be realized by all functional areas of a business.

However, like all seismic shifts driven by technology innovation, there will be winners and losers scattered across the landscape.

Let’s take a moment to see how this disruptive new technology solution will affect players and users across the industry…

The Winners:

The pure play SD-WAN providers

Some of the biggest winners in this space are obviously the Magic Quadrant SD-WAN providers themselves of course. Specifically, those true pure play innovators creating the greatest value that deliver successful EARLY implementations and gain a large and reference ready install base. The truly innovative SD-WAN providers that step up to take on a leadership position in the industry are gaining the most funding and attention early on. Proof of this has already been manifested by the recent acquisitions of the two most celebrated early pure play innovators: Velocloud and Viptela.

Broadband Players

A key group of winners are broadband providers. Specifically, those who can deliver the highest bandwidth, with the shortest install intervals and the lowest cost. Hence, clear winners here will be fiber-rich cable companies, 4G/LTE wireless carriers, high bandwidth asset companies (vs traditional carriers), reliable DSL providers and wireless data providers. Prior to SD-WAN, these players had a value play that painfully pitted both an economic benefit (much lower cost) and technical benefit (i.e. oftentimes more bandwidth than MPLS) against the reality that there was much less reliability, security, and ease of management.

However, with SDWAN technology, these players enjoy the rare trifecta of optimizing the three primary value dimensions of all technology decisions: The best combination of Economics, Technology AND Support and Service outcomes.

Cloud Intensive Enterprises

Enterprises that have many cloud applications (or big plans for cloud app adoption) are on the winning side in this space. Those that need affordable high bandwidth, multi-lane yet aggregated-for-production-use paths, DR-certain, highways to enable their many critical applications while ensuring a secure and resilient network are perfect candidates for a pure play SD-WAN solution. Enterprises that expect to see significant change activity via acquisitions, divestitures or organic growth, will enjoy the speed of implementation and ease of management as key benefits of SD-WAN as an option vs. the lethargic, complex, management-intense, and significant CPE investment cost needed via the traditional MPLS route.

IT Organizations: CIO’s, Reputations, and valuable IT Personnel

As a still relatively young profession, IT is in the midst of a reputational transformation. Historically viewed as the “Service Bureau” to the business, the early reputation of IT suffered from a perception that they are a reactive business unit. Therefore, traditional boardroom thinking was that they did not need to be at the planning table and their success was defined in terms of risk mitigation and keeping costs down while providing the business what it ‘thought’ it needed. SD-WAN, properly leveraged, becomes the access card to open the doors of every area of the business and grab a seat at the planning table with the business acumen hat on--not the service bureau hat. If the enterprise IT organization has already adopted a BRM (Business Relationship Manager) role they can really accelerate intelligent conversations around the ‘what if’ possibilities for every business unit from Marketing to Sales to Operations. No limitations, no ‘it costs too much’…. only good business ideas and the latest differentiating applications to out-flank the competition…. all delivered affordably and reliably via SD-WAN super highways.

Additionally, valuable IT personnel will find SD-WAN career liberating vs. threatening. Occupational fulfillment is better served by focusing on strategic initiatives using the latest technology vs. wrestling with yesterday's WAN solutions and their complexity, management headaches and consequent indictment (when things go wrong). The genie is out of the bottle. Embrace it, sponsor it, then let others manage it so you can apply your skills to technology that will make a real difference vs. 'keeping the lights on' with outdated WAN solutions.

Managed Services Solution Providers

Enterprises will require expertise and ethically guided partners to assist them in this migration to SD-WAN. Most IT organizations are stretched thin and this reality may cause some enterprises to move slowly even though they know the ROI and business benefits are compelling. Best-in-class enterprises will not let resource or expertise limitations stop them from embracing the competitive advantage offered by SDWAN adoption. They will seek out and partner with reputable managed services firms with proven models to Assess, Architect, Procure, Implement and Manage the SD-WAN road map. Letting internal limitations (whether they be talent, time, or money) delay adoption of SD-WAN will prove to be a poor reason to find yourself behind your peers and competitors who act now with the help of qualified and authorized MSPs. Additionally, a red-hot economy will not lessen the challenge in finding the internal talent any time soon.

Cloud Providers

In effect, SD-WAN provides a larger freeway for cloud applications and cloud providers to operate and removes the cost drag and security concerns regarding adoption of cloud applications. This allows more companies to enjoy the many productivity benefits via more applications delivered efficiently and effectively. Well positioned cloud providers, already in growth mode, will see this solution as an enabler for accelerated growth.

Enterprise End Users

Lastly, we cannot overlook the fact that Enterprise End Users will also win in this space. Employees will enjoy greatly improved productivity and faster access to cloud apps — a huge competitive advantage to those companies that execute both cloud, and the needed connectivity, swiftly and aggressively. Employees of firms who have deployed SD-WAN may never know the reason, but suddenly they will find themselves fully enabled (via accelerated cloud app explosions and all the bandwidth you ever needed) to be the most productive, happy, and retained group of talent in a very competitive labor market. Think of SD-WAN as creating a 'Millennial-Friendly' zone trumping your less enlightened competitors seeking this same talented and demanding segment of the labor force.

The Potential Losers

Large Tier 1 Carriers

To coin a popular phrase: “this is not their first rodeo”. Major Telcos (specifically non-wireless players who were not able to put the saddle on a different horse years ago) have just finished licking their wounds brought on by witnessing high margin TDM voice evaporate and become a mere application on the network with the near ubiquitous adoption of VoIP over the past decade. To replace or mitigate this margin loss, they have enjoyed large embedded bases of profitable MPLS connectivity to handle voice as an application along with many other apps of course. Now, however, SD-WAN has forced them to act. They can choose to either resist, delay, precipitously reduce legacy MPLS pricing, innovate with their own offerings, or some combination of these responses. It is clear however that they will see this base of business slowly erode over time much like TDM voice. To be fair, nearly every carrier (Tier one and smaller) has publicly embraced their own SD-WAN solution (many choosing one of the "V's' as their platform.....Velocloud, Viptela, or Versa).

It remains to be seen how trusted large carriers will be to provide and manage an integrated solution in a BYOB (bring your own bandwidth) environment where they will have to develop new and better program and project management skills than what has brought them to the dance in the first place (i.e. managing their own network solutions while grappling with last mile issues). How quickly and how well they execute on this strategy with their own quality solutions and managed services will determine the severity of the loss of their legacy offerings and client relationships.  But make no mistake: the days of slow bandwidth, long install times, costly CPE investments, complex on-going management AND high costs, are (or will be) over. The case is simply too compelling not to move....and fast.

One final comment in fairness to the carriers is that there could be a long 'tail' regarding MPLS deployment via SD-WAN solutions. Many early adopters may choose a hybrid solution and therefore keep their traditional MPLS connections as one of the two paths connected to their SD-WAN appliance. However, in this scenario, the negotiation leverage rests with the Enterprise given the options available to simply replace it with other secure high bandwidth options.

Traditional Telco Agents

Any business model dependent on commissions from higher cost, low value solutions will lose out in the SD-WAN battleground. The inherent conflict of interest that resides with a revenue model dependent on ‘higher’ monthly recurring costs, not lower costs, will eventually require soul searching that should yield the hoped for conclusion to ‘do the right thing’ while perhaps altering the business model to include managed services and other offerings to augment the inevitable large reductions in bandwidth costs (and consequent commission reductions) brought about by SD-WAN replacements of high cost MPLS networks. Those Solution Partners who have pivoted to managed services options (specifically with the expertise to journey-map SD-WAN migrations for their clients) to augment or replace the dependency on agency commissions, are best positioned to produce real value for their clients and thereby thrive vs. the entrenched and transaction-minded telecom agents of old. Consolidation within the Telecom Agency market is already well underway and SD-WAN adoption will accelerate this trend leaving higher valued Agent/MSP’s and only the largest Master Agents in positions of growth and value.

Hardware players

All of us know that the “As a Service” revolution enabled by Cloud technology impacted the Enterprise Data Center economics in a big way.

There is not a CPE player who historically focused on the Enterprise Data Center who hasn’t had to change their strategic focus and offerings as a result.

SD-WAN simply brings that economic model to the enterprise at the end point level with regard to traditional Wide Area Networking architecture and CPE needs.

Big iron players will likely see heavy hits and have already begun making plans for it. For example, Cisco acquired Viptela to compete, complement, integrate (their stated roadmap) with their ubiquitous (and complicated) iWAN solution.

As a general rule (with exceptions, and a long evolution perhaps) router, switch, firewalls, and other complex, and costly, CPE endpoints necessary in a distributed WAN environment to perform discreet functions will no longer be needed due to the simplicity of SD-WAN technology at its best (i.e. pure play providers with the best integrated technical solutions on premise and in the cloud will ultimately replace many of these complex, segregated CPE elements). In effect, any entity selling something today that’s premise-based, singular in function, and enabling a traditional MPLS network will see their revenues diminish over time despite the long tail on these markets. 

Slow-to-Adopt Enterprises

Enterprises that take a risk-averse traditional approach to networking will find themselves on the wrong side of the SD-WAN competitive battlefield relative to their peers who have accepted early adoption because of all the many benefits that come from SD-WAN. Don’t be on the wrong side of this 'bit'coin. Early adopters will get the most resources from the SD-WAN companies. They will get the best support from managed services firms that help them get there. They’ll get the most attention, quicker installations, and more customer-service focus than ever as providers will wish to have multiple positive references. And they’ll get all the benefits of SD-WAN before their competitors. A true competitive advantage in the market.

SO NOW WHAT?

So, what are YOU going to do to be on the winning side of the SD-WAN revolution?

Cloud application adoption and high costs of MPLS networks will nudge you along to be sure. But, your competitors who adopt earlier will enjoy lower costs, greater productivity, simplified management of their WANs and ultimately a competitive advantage. After all, faster rollouts of game changing cloud apps may enable them to serve their clients and employees better and faster and cheaper than you.

Proactively informing your CEO you are embracing the future will pay big dividends. Let him or her know this will enable the acceleration of technology and digitization projects to create a competitive advantage while trumping the costly security blanket of ‘playing it safe’ with MPLS for another contract cycle, all while your enterprise suffers from slow bandwidth, poor service, and high costs.

The choice is yours. Begin the process today to build a strong Business Case and ROI via the assistance of a qualified partner.

Your CEO will be glad you did.

Your competition will not be.

>I NEED HELP WITH MY SD-WAN JOURNEY >


About the Author:

Myron Braun, Vice President of Sales and Marketing, Renodis

As Vice President of Sales for Renodis, Myron Braun is responsible for helping lead the company to new levels of customer satisfaction and growth.

During his nearly 10 years at Renodis, Mr. Braun has leveraged his many prior years of experience within the Telecommunications Industry to help develop the nation’s only fully integrated, complete life-cycle managed services solution helping enterprises eliminate the pain and frustration of managing Telecom and Mobility environments. Turnkey Telecom ManagementTM (TTM) has many fans within the CIO community. The success of TTM has enabled the company to grow its managed services business 40+% year over year since 2013.

Prior to Renodis, Myron enjoyed a lengthy career at MCI/Verizon, where he was named Branch Vice President of Enterprise Markets for Minnesota. Under his leadership that branch grew to achieve the highest market share of any office in the country, with revenues in excess of $190 million in 2006.

December 12, 2017 / Colleen Kranz
Telecom Guide

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