SD-WAN has quickly risen to become one of the most disruptive technologies within the networking marketplace. As a simplified, flexible, and reliable alternative to traditional WAN solutions, the technology has garnered unparalleled attention and buzz. But, while SD-WAN is a major point of interest for forward-thinking enterprises, the question on many stakeholders' lips remains: is it worth it
The Value of Digital Transformation
With its numerous business benefits, its ability to leverage other technologies, and its many advantages over traditional connectivity methods, it’s easy to see the appeal of an SD-WAN deployment.
But, executing a digital transformation is never a decision to be taken lightly, and irrespective of the benefits, key decision makers are unlikely to buy into something potentially disruptive unless the deployment is economical.
When calculating the value for any kind of investment in IT, the two types of savings you can measure are hard savings and soft savings. Hard savings refer to a verifiable reduction in spending, such as the reduction that results from cancelling an MPLS circuit, and are easily quantified. Soft savings refer to benefits like improved productivity, enhanced performance, or better compliance. Since soft savings are harder to measure and more difficult to use as justification for an investment in SD-WAN, I've focused purely on hard savings here.
Achieve Cost-savings with SD-WAN
Making the Business Case for SD-WAN
Before undertaking any digital transformation project, CIOs must present a carefully constructed business case document to key stakeholders. The purpose of this is to outline a clear method of execution and articulate a path to an attractive return on investment (ROI).
Building a practical business case takes several crucial steps, but the most important
Audits are important for two reasons:
- Without knowing the billing records, contracts, tariffs and inventories of each enterprise location, it’s not possible to quantify the cost-savings a deployment can generate.
- Greater insight into the network offers CIOs a closer look at its current state, providing an additional opportunity to review current system performance.
Audits not only enable CIOs to better calculate an accurate ROI – key to achieving stakeholder signoff – they also provide clarity into the locations and performance of digital assets throughout the organization.
A recent study from Jonathan Koomey found that, on average, 30% of physical servers are “comatose.” In this instance, comatose means they have not delivered information or computing services in six months or more. And these findings support previous research performed by the Uptime Institute.
If we assume that average server costs are circa $3,000 – ignoring infrastructure capital costs as well as operating costs – for an enterprise-sized business with 150 global enterprise locations, each running at least two servers simultaneously, the cost of under-utilized infrastructure easily exceeds $270,000.
Simply by performing an infrastructure audit, CIOs can locate these underused assets and disconnect them to generate notable cost savings.
While it's true that this cost-saving is not achieved as a direct result of an SD-WAN deployment, it's worth including because it's a by-product of the preparatory processes that companies must go through to effectively prepare for their digital transformation.
Choosing an SD-WAN Provider
The modern-day SD-WAN marketplace is saturated with vendors, from established industry players to hi-tech start-ups, and it can be a difficult environment to navigate.
The problem is compounded yet further when discerning pricing structure. Few providers are ever forthcoming with their costs, so it's not easy to determine which vendor can provide the most cost-effective solution.
While it’s true that SD-WAN deployments aren’t a one-size-fits-all solution and the cost of the deployment will vary depending on factors such as geographical location and number of enterprise branches, it’s also true that the variance between vendors can be vast for the exact same deployment.
A recent SD-WAN vendor comparison produced by TechTarget found that quotes for an implementation can range from anywhere between $400 to $1500 per site per year. For an enterprise-sized business with 150 global enterprise locations, this cost-differentiation equates to $165,000.
With potential pitfalls and vast cost discrepancies to navigate, it can be worth seeking expert advice at this stage. TEM providers are often perfectly placed to help enterprises benchmark and source a new contract, thanks to their deep understanding of the networking marketplace and visibility into vendors and what they are willing to offer.
Simply by communicating with a high-value provider, enterprises can ensure they get the best rate and terms, as well as achieving the best ROI from their deployment.
Executing an SD-WAN Deployment
Once organizations have settled on their chosen vendor, the real digital transformation process begins.
It’s pretty much axiomatic among providers that you can save money by switching from leased lines, such as MPLS, to SD-WAN. In fact, it’s often claimed that the low cost of internet services relative to MPLS solutions allows companies to reduce their monthly spend on bandwidth by as much as 90%.
At its most cost-efficient, the running costs of an SD-WAN deployment are $1000 per site per year, but reputable networking provider Mushroom Networks estimate that the average cost for an MPLS circuit will come with a listed rate of anywhere between $750 to $1000 per month. Even at its most cost-effective, this works out as $9000 per site per year.
For an enterprise-sized business with 150 global enterprise locations, the theoretical cost saving achieved from switching from MPLS to SD-WAN equates to $1,200,000. However, it is worth bearing in mind this calculation is based upon the notion that SD-WAN will remove all traffic running across MPLS lines. This is rarely the case. In fact, the primary job of SD-WAN is to reduce reliance on costly lines, not remove it completely.
At a conservative estimate, an enterprise's decision to implement SD-WAN can, on average, reduce one MPLS link at every two branch environments, achieving a 50% reduction in reliance. This still yields an annual cost saving of $600,000 per year.
Reviewing an SD-WAN Deployment
The final step of a digital transformation is to review the adoption process and determine whether the maximum cost-savings have been achieved.
Post-implementation, enterprises will instantly begin to experience some of the benefits of their new networking solution. The additional $50,000 per month that they save by switching away from leased lines will quickly be appreciated, but, that is no excuse to not stretch the cost-saving capabilities as far as possible.
To maximize the benefits of an SD-WAN solution, legacy architecture needs to be disconnected. Cross-referencing the audit created in the business case with the new SD-WAN environment and identifying what remains will provide a comprehensive list of networking offerings that are no longer required. To calculate whether or not your enterprise is extracting the maximum value from your implementation it can be beneficial to talk to a TEM provider.
TEM providers are experts at providing fully transparent billing data that includes an accurate list of charges. With knowledge of the providers’ procedures and access to dispute channels, they can help enterprises extract the maximum cost-savings.
Employing their services, enterprises will not only add additional annual cost-savings – see business case section for more clarification – but also reduce the overall complexity of the network environment, further increasing performance.
A Comprehensive Guide to SD-WAN
In this, our sixth and final post in this SD-WAN series, we journeyed through an SD-WAN deployment to determine the maximum cost-savings that this implementation can save your organization.
We have drilled into the economics of SD-WAN and exposed the hard savings that can be achieved as a result of adoption. At final calculation, incorporating infrastructure optimization, vendor comparatives, and reduction of MPLS utilization, the total cost-savings that can be achieved for an enterprise-sized business with 150 global enterprise locations equates to $1,035,000. This total excludes the soft savings that can be generated as a result of increased productivity, greater flexibility and control, and better compliance.
In short, the answer is yes – an SD-WAN digital transformation is worth it. But, to achieve these cost savings, communicating with a TEM provider can offer invaluable support and guidance. With expert insight into the networking space, they are perfectly placed to help enterprises extract the greatest value from their SD-WAN transformation. To speak to a TEM provider who can help you to achieve the level of cost savings outlined above, why not get in touch?
This post is the final instalment in this 6-part series that has explored everything an enterprise needs to know about SD-WAN. To learn how to extract the maximum value from your SD-WAN deployment, while smoothing the transition process, download: The Complete Guide to SD-WAN Deployment.
Topics: SD-WAN
