The SD-WAN Business Case: How SD-WAN Helps Save You Time & Money

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SD-WAN is quickly becoming the dominant solution to streamline connections among multiple enterprise sites. Why? It helps resolve challenges created by the increasing use of cloud, mobile, big data, and analytics traffic. Because these technologies are being adopted into the enterprise at an accelerated rate, investment in SD-WAN is expected to increase significantly. According to research from IDC, the market for SD-WAN is expected to reach $1.9 billion by year-end 2017 and reach over $8 billion by 2021. When considering the impact of SD-WAN to an organization, what is the business case for it? How can a return on investment on SD-WAN be estimated?

Before we answer these questions, let's review the current WAN environment and what SD-WAN can do to improve it. Traditional WAN technology relies on a combination of public and leased lines, such as MPLS. In general, the cost for public broadband line usage typically averages less than $100 per month (depending on the market and other factors), while the cost for MPLS usage can be three to five times that in the United States and up to $1,000 per month in some international markets. According to a Gartner Data Center Conference from December 2015, up to 65% of the network operating budget is attributed to the WAN, which is over three times higher than the next highest cost for the network, which is the data center at 21%. The cost of operation for WAN is an expensive long-term investment that doesn't scale.

Additionally, enterprise bandwidth for WAN traffic continues to increase every year. There are two primary reasons for this. The first is applications and how they are delivered. More applications are moving to the cloud and becoming more robust in their features. The second reason is video. Video based content is becoming more prevalent within organizations and employees are increasing their use of video to communicate internally between departments and externally with customers. Increases in application richness, cloud services, and multimedia video uses are forcing enterprise architects to think about ways to increase enterprise bandwidth to accommodate these trends. The high cost of MPLS and demand for increased bandwidth throughout the enterprise are key reasons why SD-WAN has become a more viable option.

How can SD-WAN improve an existing WAN network?

SD-WAN is a virtualized software solution that utilizes low-cost, high-speed internet services with cloud-services infrastructure to create a more efficient network between headquarters and branch offices. The software defined WAN architecture supports multiple public Internet bandwidth connections simultaneously. As a result, SD-WAN reduces the need for bandwidth received from dedicated MPLS lines through these combined lower cost broadband lines. These lines are aggregated into a single virtual pipe that are load balanced through a centrally managed, application centric policy created by the organization.

Hardware requirements for SD-WAN have the potential to be reduced as well. Depending on the deployment methods and organizational policies and regulations, SD-WAN offers flexibility to potentially consolidate devices to help drive down costs, while maintaining visibility and traffic engineering. The hardware required to implement SD-WAN is typically a single piece of hardware (at each office location), which can displace a rack of gear which could include virtual private network (VPN), firewalls, intrusion prevention systems (IPS) and bandwidth optimization hardware typically found through enterprise facilities.

Estimating ROI on SD-WAN

Deciding to move to SD-WAN is a commitment for any organization. Estimating a return on investment (ROI) can be done by analyzing the existing hard costs for enterprise bandwidth traffic. Let's say a company has 200 branch offices and averages two dedicated MPLS lines from each office at an average monthly cost of $675 per line. If an SD-WAN implementation can reduce the required bandwidth down to one dedicated MPLS line and one high speed Internet bandwidth line per office at an average monthly cost of $75, the monthly savings becomes $600 per office. When this monthly savings is applied to all 200 offices, the total monthly savings becomes $120,000 per month for the enterprise.

Several metrics can be used to measure ROI before deploying any type of technology. One of those methods is the payback period. The payback period is the length of time required to recover the initial outlay of capital in terms of profit or savings. In the previous hypothetical example, assume an SD-WAN implementation costs $600,000. Since the monthly savings amounted to $120,000, the payback period is five months.

This example is one way to evaluate ROI for SD-WAN and how an investment can be measured. Not every organization measures ROI the same way, nor does every company have the same WAN infrastructure costs. Some companies will most likely require additional analysis. In addition to the payback period analysis, companies may also consider ongoing monthly maintenance costs for an SD-WAN infrastructure. Recognizing these considerations, the payback period is a straightforward way to analyze whether more conversations are warranted and further evaluation is required to determine if SD-WAN is right for your enterprise.

SD-WAN is expected to be the next generation of WAN infrastructure for large enterprises. Organizations are realizing the need for more bandwidth as the features and quantity of application development and the use of video continues to increase. SD-WAN offers the ability to reduce expensive dedicated line lease costs and the amount of hardware required throughout multiple offices. Hard savings can be found by replacing the number of dedicated lines with high speed broadband lines through payback period analysis. These conclusions can be used as a basis for further evaluation to understand how an investment in SD-WAN can create better business outcomes for your organization. 


August 31, 2017