Blog » SD WAN: Ideal Opportunity For Smaller Telcos To Enter Enterprise Market
The growing demand for Software-Defined Wide Area Network (SD-WAN) in India is emerging as a perfect opportunity for tier-2 regional service providers to enter the lucrative enterprise space.
The smaller service providers have been eyeing the enterprise market for quite some time but were limited by the prohibitive cost of setting up MPLS infrastructure and regional presence.
“The cost of offering the traditional Multiprotocol Label Switching (MPLS) technology requires huge investment and presence across the country, which is why large service providers dominate this space. Tier-1 Communications Service Providers (CSPs) have a national level presence and wherewithal to invest in expensive MPLS equipment and funds to set up the network,” says Mickky Dhingra, General Manager – BSG and Service Delivery, Tikona Infinet Private Ltd, which offers wireless broadband services in the country’s top 25 cities.
The Indian retail consumer market is a hyper-competitive space with extremely low Average Revenue Per User (ARPU). On the other hand, the enterprise segment continues to record good growth. India’s IT and business services market is likely to reach $14.3 billion by 2020, according to IDC. The enterprise customer is also more loyal and is unable to move quickly and easily from one service provider to another. This is another reason why the smaller service providers are keen to grow their business in this segment.
All this is set to change now with SD-WAN technology, which opens the door for regional tier-2 players to make their presence felt in the enterprise space. The regional service providers can now easily offer managed network services without investing in expensive MPLS infrastructure.
“SD-WAN allows us to combine our MPLS and Internet Bandwidth to provide end to end managed services. Further, we can offer managed services even in areas that are typically not covered by our extensive MPLS network. It is a huge opportunity for us and we plan to focus on the enterprise SD-WAN market this year,” says Mickky Dhingra, GM – Enterprise Networks, Tikona Infinet Private Limited
With SD-WAN, the smaller service providers will be able to offer managed network services even in areas where they do not own fiber or transport infrastructure. This places them in a position to compete with the more prominent players.
The growing discontent with MPLS technology will further help smaller service providers in making a mark in the enterprise market. In a survey conducted recently by Lavelle Networks, 82% of the participants said that they faced bandwidth challenges with MPLS. Further, 76% of CIOs interviewed believed that SD-WAN would help them in addressing performance issues that they face because of an increasing number of SaaS applications and cloud technologies.
There is a growing consensus that SD-WAN promises greater operational efficiency, agility, resilience and most importantly, a much-improved quality of experience for the end user. On the other hand, MPLS is not suitable for cloud and new-age technologies. The enterprises need to upgrade the network capabilities to prepare the infrastructure for all data types such as the Internet of Things (IoT).
This means a growing number of businesses will look to migrate from MPLS to SD-WAN and bigger the pie easier it will be for smaller and regional players to enter and grow their presence in the enterprise space.
The advantages offered by SD-WAN means that it is only a matter of time before Small and Medium Enterprises (SMEs) that operate from multiple locations start using the technology to improve the quality of experience. The growing broadband ecosystem in the country and the Government’s push for the digital economy means that more and more SMEs would be expanding their business and using SD-WAN to operate from multiple locations.
This is also because the technology enables them to address many issues. SME’s often struggle with IT management and expenditure of managing infrastructure and operations in multiple locations. SD-WAN not only helps in bringing down the cost but also in simplifying and automating the network for improved operational efficiency. It also enhances the security of the network and provides SMEs with a cloud-based WAN connection.
The SME SD-WAN market is likely to emerge as a low hanging fruit for the smaller tier 2 players and will make it easier for them to make a mark in the enterprise SD-WAN segment.
The market conditions are perfectly aligned now for the regional players to enter the profitable enterprise segment. As businesses start to digitally transform themselves and move from MPLS to SD-WAN, they may discover that tier-2 service providers are their perfect partners and are able to meet all their requirements.