SD-WAN networks are revolutionizing the telecommunications sector

After the huge changes witnessed in the first decade of the new millennium, with the rise of corporate IP networks, the telecoms sector and its supporting ecosystem are facing further disruption with the arrival of Software-Defined Wide Area Networks (SD-WANs). Etienne Costes, a Partner at Parthenon-EY, and Jonathan Shulman, a Partner at McKinsey & Company, reveal the trends, opportunities and new challenges in the market.

Towards better connectivity and more mobility

“The needs of today’s corporate networks are being seriously impacted by two major trends,” begins Etienne Costes. First of all, there is an improvement in connectivity around the world, notably thanks to the widespread installation of optical fibre in all regions. Secondly, we have the deployment of 4G technology for mobile networks – and the imminent arrival of 5G. “These technical innovations make internet access much simpler for companies. They also allow players in the telecommunications ecosystem to create new ways of managing corporate networks – in the shape of SD-WAN solutions.”

In the past, companies handed over their Wide Area Networks to the world’s leading telecoms operators, who deployed equipment across their networks in order to connect several different sites together and then manage the secure connections. “Carrying out these deployments and linking together the different infrastructures requires a physical presence,” underlines Jonathan Shulman, “and significant corporate investment.” With SD-WAN, all that’s needed to link up a company’s various locations is an internet connection, plus a software layer to ensure the quality of the connection and the security of the transmissions. In this model, networks and company sites can all be managed at an application level. It means that companies who are ready to adopt this approach can turn to firms who will either provide them with the SD-WAN software or who will build an SD-WAN network for them – either way, it’s quicker and less expensive.

CTOs on their guard, and a redesign of the telecoms ecosystem

“It’s a real revolution in the sector, and it’s creating new players who have complete mastery of these technologies,” explains Etienne Costes. “The United States has benefited from having high-speed networks earlier and is therefore more advanced, particularly when it comes to network management, which is more mature in the view of CTOs.” That said, Europe will follow in those footsteps fairly soon. “The fact that European CTOs are so interested in this is quite simply spectacular,” says Etienne Costes. “However, they are still very sensitive about the security aspects, so they are remaining prudent. They are establishing Proofs of Concept (POC) in order to test these solutions at two or three of their sites.” Underlying this popular enthusiasm is a single expectation: to outsource the company’s entire infrastructure management. This would enable the internal technical and IT teams to focus on deploying applications or software for the company’s end-users. “The management of services is a significant value proposition for CTOs and CEOs,” adds Jonathan Shulman. “The question of network management has become so critical that they are looking for the perfect solution, and they can’t find it within the company.” As a result, CTOs are looking for a provider that can deliver an operational “turnkey network”, along with the IT servers that will host applications developed by their teams. “The service quality and the availability of both the network and the servers are the sector’s two big KPIs,” says Etienne Costes. “Expectations are also high when it comes to flexibility – in terms of adding, moving or increasing a site’s capacity, for example.” Another considerable advantage of the SD-WAN is its greater agility. Compared to traditional networks, it is easier to add a new site to a corporate network. “It also means that IT issues can be resolved more quickly, by intervening remotely, in a virtual way,” highlights Jonathan Shulman.

SD-WAN providers, pure players and traditional companies relying on acquisitions are all trying to position themselves in an effervescent market sector. Traditional operators are focusing on providing a hybrid model for large corporations, combining the dominant Multi-Protocol Label Switching (MPLS) protocol for critical sites and SD-WAN for smaller ones. “In the United States, however, a few pioneers are now ready to shift to a 100% SD-WAN model and call directly on pure players like Expereo,” says Etienne Costes. However, changes like these do not happen at the flick of a finger. Companies have a huge need for support as the project will have a direct impact on 100% of the employees: CTOs cannot afford to make a mistake. “A network cannot be unavailable, even for an hour. In both their personal and professional lives, users expect applications to be available immediately,” explains Jonathan Shulman.

Support, reliability, availability… the winners tick all the boxes

Given this exponential demand for connectivity and the extremely high demands, the value of creating physical connections will gradually diminish, once the transition to fibre optic cable has been completed, according to Etienne Costes. “Today, only 14% of French companies’ sites have fibre. However, the value of services being delivered on their networks will keep growing.” For these two experts, the winners will be those suppliers who can put together the different components needed to deploy a solution for customers. Responsive, high-quality networks will come out on top. Clearly, success will also be about providing a good software solution for managing network services. It will also involve having teams who are responsible for deploying and monitoring those services, and who can reassure the CTO that they can deal with any problem that arises within the hour. That means building solid partnerships between network providers, SD-WAN solution providers, and system integrators. “Everything will be decided in the next five years,” the experts concluded.

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