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SDN business case: How software-defined WANs save money

Build a strong SDN business case in the wide area network, with potential for significant return on investment in both savings and performance.

We talk a lot about when and how software-defined networking (SDN) will become the industry norm, but that discussion...

often neglects the importance of establishing a clear SDN business case. Before we can expect to see widespread SDN deployments, networking professionals have to convince decision-makers that the technology offers good return on investment (ROI) to justify its expense.

The software-defined wide area network (WAN) presents a use case that excites SDN enthusiasts, as well as a clear and compelling business case that should pique the interest of any geographically distributed organization. Software-defined WANs (SD-WANs) use software- and cloud-based technologies to simplify delivery of WAN services to branch offices, enabling network abstraction that results in simplified network operations, as well as substantial cost and performance benefits. It enables IT and business managers to quickly and easily deploy inexpensive, high-quality, reliable and secure Internet-based connectivity (with its benefits of ubiquity, high bandwidth and low cost).

Operating and capital costs

Connecting geographically distributed branch offices and/or retail locations significantly impacts IT budgets -- many large organizations spend more than $1 million per year on multiprotocol label switching (MPLS) connections alone. Worldwide spending on WAN business services approximates $40 billion -- including MPLS-based virtual private networks, virtual private LAN service, Ethernet, Digital Subscriber Line, cable, Long Term Evolution (at a branch) and others. When we compare the costs of MPLS and Internet circuits, the latter present attractive potential savings, as Internet circuits typically cost just one-third to one-half of what MPLS does. Additionally, Internet services have the advantage of wide availability and rapid provisioning times. In contrast, MPLS can be hard to get in some locations and can take a month or more to provision.

SD-WAN offers compelling advantages for organizations with critical branch operations, including increased business agility, improved app performance and cheaper connectivity.

While managed service (e.g., MPLS) prices are gradually decreasing by about 5% to 10% per year, Internet circuits are experiencing rapid improvements in performance without commensurate price hikes, especially with the growth in optical fiber builds. Many Internet connections are available at 100 Mbps and even 1000 Mbps, and we can expect rapid increases in speed over the next couple of years.

Operational expenditures (Opex) typically constitute a large part of IT budgets due to the expense of hiring, training and paying IT professionals. SD-WAN may improve centralized WAN management capabilities, thereby reducing the need for network professionals to physically visit branch locations. Such SD-WAN ROI will typically be in "soft dollars," however, and therefore is difficult to measure directly.

Of course, SD-WAN products and services carry their own capital expenditures (Capex) and Opex. SD-WAN suppliers have a variety of business models that can include one-time charges and/or regular subscription fees for service and support. Expect to pay an initial fee of at least $1,000 for on-premises software or appliances, with costs varying depending on capacity needs. Monthly subscription fees can start at around $20 per user or several hundred dollars per branch office.

Recommendations for buyers

SD-WAN offers compelling advantages for distributed organizations with critical branch operations, including increased business agility, improved application performance and cheaper connectivity. Organizations evaluating possible implementation should consider the following when building an SDN business case for the WAN:

  • Clear use case. Identify part of your current WAN with specific bandwidth or traffic challenges, and evaluate how various software-defined WAN products and/or services could help solve those problems while improving overall network performance.
  • Hard-dollar cost benefits. Internet circuits are significantly cheaper than carrier-grade MPLS connections. Many organizations should consider migrating towards a more Internet-based WAN to reduce Opex. Crunch the numbers to determine how much money SD-WAN could save your organization by decreasing its reliance on MPLS; most decision-makers will find the potential ROI hard to ignore.
  • Soft-dollar cost benefits. Although harder to quantify, also consider potential soft-dollar savings -- such as those associated with on-premises equipment maintenance that requires IT visits to branch locations.
  • Strategic, measured implementation plan. As with any new technology, evaluate various vendor options carefully and systematically. Propose measured pilot projects to minimize disruption, and expand your use of SD-WAN strategically, over time.

Next Steps

MPLS sees competition in the wide area network

Are hybrid WAN, virtual WAN and SD-WAN one and the same?

SD-WAN energizing WAN optimization market

This was last published in August 2015

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