Is SD-WAN cannibalistic to MPLS?

Telecom companies are always on the lookout for opportunities to generate new revenue through emerging communication technology. Although still in their relative infancy, Software-Defined Wide Area Network (SD-WAN) services have already proven themselves to be major money makers.

As great as these new SD-WAN revenue streams are, they have also introduced some concerns regarding the telecom service industries ability to sustain both SD-WAN and Multiprotocol Label Switching (MPLS) solutions. In particular, some worry that the natural overlap between these two technologies creates an either/or scenario, and as SD-WAN increases in popularity, MPLS solutions will inevitably suffer. Will an expansion of SD-WAN services cannibalize MPLS revenue?

The basis for SD-WAN concerns

Is there a valid reason for all of these fears about the future of SD-WAN and MPLS? Well, there's no denying that SD-WAN is booming in popularity right now, spurred on by enterprise needs for stronger network connectivity and availability at the last mile to reach all of its end users. According to a July 2017 report, global SD-WAN infrastructure and service revenue will continue to increase at a 69.6 percent compound annual growth rate through 2021, when it will eclipse $8 billion.

In many ways, SD-WAN is the solution to the mounting problem of how to sufficiently support businesses that increasingly rely on cloud-based solutions. Branch and remote offices often experience less-than-ideal network connectivity compared with central operations. SD-WAN allows for more dynamic path selections, enabling companies to more efficiently and cheaply transmit data across their networks.

If that sounds awfully similar to MPLS's capabilities, then you're beginning to appreciate the concerns of certain telecom service providers. Will people continue buying MPLS services when they can use SD-WAN instead? More dire predictions might even suggest that SD-WAN will completely replace MPLS one day.

SD-WAN can help enterprises improve network capabilities across their entire network.SD-WAN can help enterprises improve network capabilities across their entire network.

MPLS isn't going anywhere

Despite all of the hand-wringing about the future of MPLS and its viability as a profitable telecom service, the technology is sitting in pretty good shape. A September 2016 Research and Markets report revealed that global MPLS revenue is expected to increase at a 4.1 percent CAGR through 2021. Now, that figure may not come close to SD-WAN's growth outlook, but when you're the establishment, you can't expect to expand at a breakneck pace. It wasn't that long ago that MPLS was putting up impressive growth rates itself. Back in 2011, TechNavio forecast the global MPLS network equipment market to expand at an 18.2 percent CAGR through 2014. Times change, and the market disruptor quickly becomes the disruptee.

"These two technologies work best when paired together."

Demand for MPLS services continues to grow, but that doesn't mean that telecom service providers should be satisfied with their MPLS offerings and ignore SD-WAN altogether. Vendors that only offer MPLS services may lose business competitors that feature both MPLS and SD-WAN.

Pairing SD-WAN with MPLS

"As network managers struggle to maintain security, reliable performance, and costs within their hybrid network topologies, they are looking for new capabilities that offer greater control over WAN environments," wrote Forrester in their article titled "The Future of the WAN Is Software-Defined." "Software-Defined WAN solutions are highly appealing for their efficiency, flexibility, and security benefits. Our survey showed that although still emerging, Software-Defined WAN solutions are integral in shaping the future of WAN management."

We agree with Forrester, but we believe that the reality is that these two technologies work best when paired together, with SD-WAN serving to support key MPLS capabilities. Many telecom customers are likely to need both SD-WAN and MPLS, depending on their network configurations. So it is not an SD -WAN vs MPLS scenario necessarily – particularly for enterprises that already have MPLS. 

Historically, enterprises that have many locations have not typically wanted to rely on public networks. Because of this, MPLS networks were put into place in support of enterprises and their branches. But now, with the ever-increasing move to cloud-based applications, MPLS has proven to sometimes be insufficient to handle all the WAN requirements of today. Cloud applications, which sit in data centers outside of a company's private network, must at some point pass through public networks before they reach businesses. Thus, the value of an MPLS network is insufficient when cloud applications become critical to a company's business. We feel the better solution is to maintain the MPLS network and add SD-WAN so that enterprises have a choice of where to route traffic at an application level. 

So, back to the question of: Is SD-WAN cannibalistic to MPLS? In our opinion, we don't think so.

We feel that SD-WAN alone cannot compete with the security and reliability of private MPLS networks. Additionally, many companies have already invested extensive amounts of money into developing their MPLS network infrastructures. Much more important for Service Providers to know is that MPLS remains in play because it can be complimentary, rather than competitive, with SD-WAN technology. 

"AT&T expects most customers to operate hybrid WANs with both MPLS and broadband connections," IDG wrote. "With the SD-WAN service, the carrier can run these hybrid networks in a unified fashion and make sure the applications that the enterprises need most, will get the performance they require."

We agree with AT&T and therefore we do not think that SD-WAN should be considered by Service Providers to be cannibalistic of their MPLS revenue, simply because pure play SD-WAN providers may be positioning it that way – it's a bit of a hype.  

ITCom Global Senior Consultant and Telecom Ramblings contributor David Wang predicted that one likely scenario for the future would involve businesses running SD-WAN over public internet for some types of traffic, while leaning on MPLS for other important varieties.

"Via such a hybrid solution, hopefully with dynamic load balancing and failover, the client may route non-mission critical traffic like software usages, email and storage file transfers over SD-WAN, while still handle mission-critical applications like voice and real-time video over MPLS," Wang wrote.

That kind of arrangement is ideal for all players involved. Telecom customers receive better connectivity and lower latency across their entire network environment, while service providers generate more revenue with new, impactful offerings. It's a win-win scenario.

Telecom service providers don't need to choose one or the other between MPLS and SD-WAN. In fact, they shouldn't. The best approach is to support both technologies so vendors are in a better position to meet customer needs, whatever they may be down the road.

CloudSmartz Acumen360™ Digital CX Portal Solution can help your CSP team prepare and set the digital transformation foundation with your traditional services (MPLS, etc), while prepping for your introduction and integration of SD-based solutions, such as SD-WAN.