Carriers: Gain New Revenue from SD-WAN Value-Added Services
October 18, 2018
Telecom carriers are uniformly seeking ways to broaden their connectivity services for enterprise customers. One motivation is to offset MPLS revenues, which are essentially flat and are expected to decline over the next few years. Broadband and wireless connectivity services are growing fast, with no sign of abating, but revenue from vanilla broadband is much less profitable than MPLS.
This scenario is where value-added gateway services may be the key to future revenue growth. Managed service providers already moving in this direction are beginning to reap the benefits. According to research by Catherine Hammond with Analyses Mason, operators now see the potential to create higher-margin value-add services building expertise around security, analytics and AI, and then follow on professional services that bundled together facilitate faster SLA attainment.
While revenue today from value-added services represents a small percentage of overall telecom services revenue, high-value managed network services are beginning to see improved growth with technologies like SD-WAN.
There are multiple factors bringing about this changing dynamic. The cloud, VoIP, smart devices and unified communications, are now able to leverage diverse low-cost Internet links to connect the network of everything. NFV-based SD-WAN is an enabler for managed service providers to offer higher-margin value-added services – supported by well-trained and highly skilled professional service organizations and value-added monitoring, analytics and threat intelligence services.
Delivering high-quality network connectivity is critical, in order to support these high-margin services and ensure customer satisfaction. Service-chained gateway services alleviate a good deal of complexity when integrating a multi-cloud solution. Service providers that have highly capable professional services can realize good upside, by managing all of the complexity on behalf of their customers. Some of these challenging issues include: integrating legacy systems with multiple cloud services, handling branch office and WAN security, dealing with regulatory compliance, and managing various issues within different jurisdictions. Offering these high-value services, and implementing them flawlessly, are what bonds an enterprise to a trusted managed service partner.
Enterprises Benefit by Leveraging MSP Economies of Scale
With all the issues around multiple clouds, Internet of Things (IoT), and the diversity of network connected devices and computers, there just aren’t enough skilled resources, with specific domain expertise to manually manage all of these elements.
A carrier integrates many technologies, and builds their connectivity service offering to support large numbers of organizations and hundreds of thousands of users on a global basis. When they build out multi-tenant connectivity with SD-WAN, a cloud network and applications, they are able to leverage huge economies of scale. Carriers that offer robust value-added services will build and operate them, and then apply value-add on top to their enterprise customer deliverables. This approach saves the enterprise from spending months, if not years, re-architecting legacy topologies, allowing the MSP to worry about making it all work together, and then MSP monitoring and managing everything.
With SD-WAN, service providers do more than simplify WAN infrastructure. They become a single-point-of-contact for the enterprise, and deal with a multitude of complicated elements. Simplifying the complex, not just for deployment and provisioning, but with business continuity guarantees, is a major benefit of working with a managed service provider.
Consider the volume of IT service tickets from each branch office when applications don’t load properly, or run too slowly. If the enterprise builds their own SD-WAN, and they have hundreds of remote sites, each with multiple links, the IT support team must identify which service provider is responsible for a troubled link, locate their network operations center, and unravel the problem. If the problem is in a different time zone, or a different country, the issue becomes even more complicated and frustrating.
SD-WAN simplifies the management of HA issues with a single, central management plan and unified visibility. When this service is implemented by an MSP, there is a huge economy of scale advantage with a multi-tenant, centrally managed and orchestrated network of local and regional ISPs.
Cloud and SaaS have simplified data center complexity for the enterprise. They leverage economies of scale, and offload all of the complex and manually-intensive tasks, while lowering costs by virtualizing functions and running them on commodity hardware. This is what SD-WAN does for distributed network infrastructure. When SD-WAN is delivered as a fully managed service, enterprises are able to migrate their traditional WAN infrastructure more quickly, without the costly and complex problems of having to do it themselves. While digital business transformation is a strategic imperative across many enterprises, transforming the branch network is paramount to transforming the business.
Enterprises thus don’t have to incur huge upfront capital expenses, and they also generate lower operating costs, because the SD-WAN operator is able to provide connectivity services at a reasonable price. MSPs manage this environment by leveraging the NFV infrastructure investments they made across multiple customers. A trusted third-party offering SD-WAN as a managed service, allows enterprise IT teams to focus their time identifying the applications and use cases they need for their organization to achieve the agility that allows them to better compete in the marketplace.
When a managed service provider benefits from the intelligence, monitoring and analytics derived from their SD-WAN service, they have an ideal platform for building a professional services wrapper, with the proprietary data to position trusted-advisor services. A managed service provider utilizing all of the branch networks’ vital data, can additionally offer high-value security services, by using the data to substantiate they are actually improving the customer’s security posture and reducing attack surface vulnerabilities with the same policies and contextual visibility for every single remote site.