The business case for SD-WAN

In a time where IT departments are under pressure to deliver a better connectivity at a lower or flat cost, it becomes critical to evaluate the business case for the evolution of the Wide Area Network (WAN).

The shift towards a hybrid WAN, with the adoption of Internet based connectivity, is a key enabler for achieving cost efficiency on the WAN. However, to manage an MPLS-Internet hybrid WAN, one has to consider the adoption of an overlay technology that acts as the single plane of glass to manage the network: SD-WAN. So how can we move to a new technology while reducing or keeping the overall Total Cost of Ownership (TCO) flat?

Cost structure of traditional WAN networks

To understand the cost impact of hybrid WAN and SD-WAN solutions, it is important to understand the typical cost components associated with the WAN. When we look at the annual recurring costs (ARC) of traditional WAN networks of typical enterprises, which are MPLS connectivity based, these comprise three main categories:        

  • WAN Connectivity
  • WAN Optimisation Services
  • Operations and Maintenance (O&M)
  Source: Deloitte Analysis

WAN Connectivity

As seen on the previous section, connectivity accounts for the majority of the IT spend on the WAN, making it the prime target for optimisation. However, it is usually not possible to decrease bandwidth due to the general increase in traffic, so a different approach is required.

For most companies, Internet traffic (e.g. browsing and accessing to cloud applications) already account for up to 90% of the total traffic volume, however, in a MPLS-based WAN it is carried through the same links as high sensitive traffic (e.g.: accessing to critical business applications). It becomes clear that it is very cost-inefficient carrying Internet traffic over expensive dedicated MPLS links, when compared with alternative options such as broadband Internet, direct internet access or mobile connectivity, which can be up to 50% to 70% less expensive.

Furthermore, studies (1) point to an increase in traffic of around 20% per year for the Western Europe region until 2022, which will be translated into an increase in network capacity demand. Increasing the existing capacity in an MPLS-based WAN architecture is highly expensive, especially when compared with the utilization of Internet based connectivity.

By replacing MPLS with Internet based connectivity, organisations are able to increase the overall available capacity while reducing overall network connectivity spend. Nevertheless, a hybrid WAN solution brings new challenges, as traffic needs to be routed effectively between multiple links depending on the business requirements. Companies typically leverage Internet based connections for less sensitive traffic (e.g.: Internet browsing, MS Teams meetings, etc.), freeing capacity on the MPLS links for sensitive traffic only (e.g.: corporate applications hosted in own DCs). The success of a hybrid WAN architecture lies on having an overarching control plane to all available connections.

In this sense, a hybrid WAN orchestrated by a SD-WAN solution allows not only to reduce the connectivity cost, but also to mitigate any security risk generated by shifting MLPS to Internet based connectivity, through integrated features such as enterprise firewalls, secure web gateway, malware protection, URL filtering or IPsec encryption.

In addition to connectivity costs, organisations also need to account for hardware and licensing costs, e.g. associated with WAN routers and firewalls. When moving towards a SD-WAN solution, it is usually required to replace the existing hardware by SD-WAN compatible equipment. While these are usually more expensive than legacy equipment (depending on solution type and vendor), the savings generated by the connectivity usually compensate the difference in cost. In addition, this change can be considered as part of the network hardware lifecycle management process (when existing equipment is reaching end of life and needs to be replaced), aligning the investment cycle in new networking equipment with the adoption of a new WAN solution.


(1) Cisco VNI, 2018 (Business IP Traffic, 2017–2022, Western Europe).

WAN Optimisation Services

Organisations recognise the limitations of a traditional WAN architecture and feel the need to evolve it and make it more sophisticated in order to address the growing challenges in this context. In this sense, they opt to deploy WAN Optimisation Services focused on increasing network performance.

However, when analysing these solutions in a standalone perspective, they are relatively limited in terms of functional coverage and their level of integration is low. Therefore, to achieve significant levels of efficiency and automation in managing traffic and applications throughout the network, may imply the acquisition of different solutions of this nature.

Furthermore, they require the utilisation of multiple single-function devices and appliances, increasing the complexity of the network landscape and the unitary cost per device. This cost component tends then to increase in the medium to long term as WAN challenges become more complex, both at absolute and percentage (weight in the cost structure) levels.

The WAN Optimisation Services are already embedded in SD-WAN technology, which is materialized in an all-in-one solution, endowed with scalability and configurability, seeking to respond in the best way to both current and future individual needs of each organisation. In this sense, the SD-WAN adoption allows to suppress this cost component, offering a potential for significant savings in the medium to long term.

Operations and Maintenance (O&M)

Traditional WAN architectures are characterised by non-integrated overlay technological solutions with limited functionalities. As a result, there is no visibility across the entire network landscape. The lack of a centralised controller feature implies a manual and local management of all the networks components, which leads to a high O&M effort and cost.

The adoption of a SD-WAN based solution provides full visibility and control of the network environment from all the organisation’s branches. The network is centrally and efficiently managed by allowing the automation of applications management and the deployment of network services (e.g.: firewalling, IPS and URL filtering services) remotely from a single location.

Therefore, the overall O&M effort is reduced with a consequent impact on OPEX, which also decreases. For example, planning and deployment time can be cut up to 75%, overall time spent in managing WAN can be reduced by more than 30% and respective staffing required can be downsized by 20%, compared with previous environment. All in all, these may reflect a 20% to 30% OPEX reduction.

Putting it all together

In a time where IT departments are under pressure to deliver a better connectivity at a lower or flat cost, it becomes critical to evaluate the business case for the evolution of the Wide Area Network (WAN).

Moving towards a hybrid WAN architecture, with an SD-WAN overlay, has clear cost benefits from both a technical and a financial perspective. The business case for SD-WAN is primarily built on replacing traffic from MPLS connections by broadband Internet links, which will drop the connectivity costs while increasing available bandwidth. This move is seen as critical to meet the ever increasing traffic requirements while keeping spend under control.

Our customers managed to reduce the Total Cost of Ownership (TCO) of the WAN by up to 30% over a 5 year period. The benefits are considerably higher for a global company with hundreds of sites, when compared to a local company with a smaller footprint.

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