While independent SD-WAN vendors make their mark, traditional telecom service providers are rolling out their own managed SD-WAN offerings.
Yes, some have developed their own SD-WAN technology, but most carriers have partnered with an SD-WAN vendor to provide a managed SD-WAN option.
Either way you slice it, these services are appealing to customers looking to outsource the procurement and management of both the network overlay and underlay. Today we’re looking closer at what you need to know about managed SD-WAN and the pricing trends we saw in our latest surveys.
Managed SD-WAN is on the Rise
More and more traditional telecom service providers have rolled out managed SD-WAN services for their MPLS customers.
We’ve found that the priority for telcos is to provide a unique service. This is exactly why many have partnered with multiple SD-WAN suppliers to integrate features from several vendors into custom offerings.
We’ve found that the priority for telcos is to provide a unique service. This is exactly why many have partnered with multiple SD-WAN suppliers to integrate features from several vendors into custom offerings. These are likely to be virtual network functions, mixed and matched by service providers to deliver custom, differentiated services. APIs enable substitution of functions like orchestration and user interface.
The overall level of carrier involvement differs between service providers and packages. It can range from joint carrier and customer network management to a fully managed carrier service, depending on customer appetite for control, coordination, and involvement.
A majority of managed SD-WAN providers coordinate the network underlay using their own private backbone. But 33 of the 54 managed service providers profiled by TeleGeography’s SD-WAN Research Service indicate that customers could integrate their own independently-sourced connectivity as part of their SD-WAN solution.
Are there caveats to these solutions? Sure. Those with independently-sourced connectivity reported that they were only able to bring outside internet connections. Further, they had no responsibility for the end-to-end SLA of transport outside a carrier’s private network.
The Bottom Line
One of the most common questions we get is if we can model the cost of a managed vs. unmanaged SD-WAN overlay. And that makes sense. Customers want to assess what it would look like if they went directly to a vendor vs. working with a carrier.
Our SD-WAN pricing survey indicated that—depending on network services employed and SD-WAN service level selected—a managed service may be two to three times more expensive than one sourced directly from a vendor.
Our SD-WAN pricing survey indicated that—depending on network services employed and SD-WAN service level selected—a managed service may be two to three times more expensive than one sourced directly from a vendor.
Let's break that down.
In Q3 2018, the median effective one-year cost of a basic managed SD-WAN service for a hypothetical 36-site network scenario—including both non and monthly recurring charges over a three-year contract—was $130,208. This is approximately twice the price of an unmanaged solution.
Outsourcing Procurement and Management Comes With a Cost
Total Cost of Ownership for Managed and Unmanaged SD-WAN Overlays
Q3 2018
Selecting a premium managed SD-WAN service increased the annual total cost of our hypothetical network to $174,755. This is three times the unmanaged SD-WAN overlay sourced directly from a vendor.
Regardless of the type of solution selected, for most SD-WAN propositions the most significant expense is the initial cost of hardware or software at each network site. Software licensing and total encrypted bandwidth throughput fees make up the bulk of recurring charges.
Similar to hardware pricing, as site capacity increases, so does a customer’s monthly recurring charges.
Want more data like this? Head over to the SD-WAN Research Service to learn more.
Brianna Boudreau
Senior Research Manager Brianna Boudreau joined TeleGeography in 2008. She specializes in pricing and market analysis for wholesale and enterprise network services with a regional focus on Asia and Oceania. While at TeleGeography, Brianna has helped develop and launch several new lines of research, including our Cloud and WAN Research Service.