Wholesalers see limited use for SDN

Catherine Haslam/Ovum
19 Oct 2016

Software-defined networking (SDN) is one of the hottest topics in telecoms right now and a concept that appears to fit perfectly with the demands of international wholesalers for more efficient, more flexible network infrastructure and services. However, a lack of interoperable equipment, limited skillsets, and an inability to extend SDN capabilities beyond the reach of their own networks mean that international wholesalers are only deploying SDN for a limited number of use cases. The international wholesalers that are most advanced in their rollout of SDN are the disruptive challengers, not the established market leaders.

SDN promises to deliver two major benefits to the network owners that deploy it:

  • The ability to launch new services more quickly, provision services more quickly, and support new offerings and business models including on-demand services
  • Lower costs due to less expensive equipment and more efficient use of network resources.

SDN therefore appears to be a natural fit for international wholesalers.

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However, while the price-sensitive nature and tight margins associated with the majority of international wholesale services suggest that the primary drivers of SDN deployment are efficiency gains and cost savings, this is not proving to be the case.

Use case 1: Enhanced transport efficiency

The transport efficiency use case for SDN is at best ahead of its time. The international wholesalers we spoke to believe that the gains that can be made are at present unproven and the risks too great. For example, Interoute outlined its overriding network requirements as scale, stability, and low cost per bit. Although enhanced transport efficiency promises lower cost per bit, the risk to network stability is considered too high.

There is also a widespread belief in the international wholesale market that existing infrastructures, particularly G-MPLS, are adaptable enough. Optical vendors already offer software control of their dedicated optical equipment and this infrastructure is supporting well-provisioned networks. Furthermore, for many of the large-scale wholesale customer segments, over-provisioning remains a credible and affordable approach to ensuring capacity growth requirements are met.

Use case 2: Bandwidth-on-demand data center

Connectivity into and between data centers is where the majority of international SDN developments are taking place, although most are enterprise-focused rather than wholesale at this stage.

SDN was born in the data center, and international carriers are keen to build on the growth of connectivity demands into and out of the data center. Telstra Global, Tata Communications, Colt, and Telefonica have all targeted this as the initial point where SDN will be used to enhance service portfolios. There are generally two approaches being taken by international players:

  1. On-demand capacity between data centers. This is a necessary and logical extension of the on-demand philosophy that underpins the cloud. It is also a fast-growing market. Ovum’s Data Center Interconnect Forecast: 2015-20 projects that the global market for optical equipment associated with data center interconnection will grow at a CAGR of 10% between 2015 and 2020. Long-haul connectivity is a little less at 6%, but it is still an attractive growth market. Both are indicative of the rate of growth of demand for data center interconnection services and therefore appeal to wholesalers.

However, there are issues. Firstly, the majority of international wholesalers do not own a significant number of their own data centers. According to Ovum’s Global Data Center Analyzer 3Q15, 51% of all data centers were carrier-neutral, and 33% were operated by communications service providers (although not necessarily by the same service provider). Secondly, the largest webscale companies driving data center growth on the back of cloud services, such as Amazon, Facebook, Google, and Microsoft, are building or buying fiber and operating their own services. Therefore wholesalers can at best only provide one link in the chain.

With interoperability limited, it becomes even more difficult to connect data centers with each other via pure-play on-demand bandwidth. As a result, international carriers are instead looking at bundling on-demand connectivity with the cloud.

  1. On-demand connectivity bundled with the cloud. International carriers that also offer enterprise cloud portfolios are focusing on using SDN to extend the flexibility of the cloud to the connectivity into and between clouds. These wholesalers, exemplified by Telstra Global and Tata Communications, are using SDN in the network to bundle dynamic connectivity and load balancing in the network with the compute flexibility of cloud so end-user enterprises can easily utilize cloud capabilities across multiple clouds.

Extending cloud-like on-demand, pay-as-you-grow, and pay-for-what-you use models into other high-capacity service environments is a natural next step.

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