A Perspective on SD WAN - WSTAthe next generation network ecosystem. This discussion is focused on how SD-WAN fits into the taxonomy and the importance of evaluating the various SD-WAN

August 2018

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A Perspective on

SD WAN

August 2018

August 2018



Cautionary Language Concerning “Forward-Looking” Statements

This paper contains 'forward-looking statements' which are based on management's beliefs as well as a number of

assumptions concerning future events made by and information currently available to management. Readers are

cautioned not to put undue reliance on such forward-looking statements, which are not a guarantee of

performance and are subject to a number of uncertainties and other factors, many of which are outside AT&T's

control that could cause actual results to differ materially from such statements. These risk factors include the

impact of increasing competition, continued capacity oversupply, regulatory uncertainty and the effects of

technological substitution, among other risks. For a more detailed description of the factors that could cause such

a difference, please see AT&T's 10-K, 10-Q, 8-K and other filings with the Securities and Exchange Commission.

AT&T disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result

of new information, future events or otherwise.

August 2018



Table of Contents

Abstract ..................................................................................................................................................................... 1

Industry Research ...................................................................................................................................................... 2

Technology Considerations........................................................................................................................................ 6

Operational Considerations ....................................................................................................................................... 7

Evaluation Criteria ..................................................................................................................................................... 8

Conclusions ................................................................................................................................................................ 9

Industry Analyst References .................................................................................................................................... 10

Appendix .................................................................................................................................................................. 11

Prepared by:

Sr. Principal Architects

AT&T Financial Service Vertical

Mike Brophy

Rodney Callum

Scott Pierce

August 2018



1

Abstract

The digitally transformed Enterprise is becoming increasingly distributed, with critical business functions spread

out across geographies, requiring technologies that support employees and customers where they live and work.

The Wide Area Network (WAN) has emerged as a key pillar in the digitally transformed business, where new

applications are highly dependent on connectivity to create more immediate and direct interactions with

customers and employees. It is this imperative to move applications and compute closer to where they are being

consumed that is pushing IT to respond more quickly, with greater capability and security, while helping reduce

costs and management overhead.

Given these pressures, the industry has given rise to the concept of Software Defined Networking (SDN), where the

SDN based products that are emerging are showing great promise in reshaping how WANs are delivered and

managed. Think of SDN as an architectural concept, or ecosystem, where there are technologies being developed

as part of that ecosystem. Those technologies: Software Defined Wide Area Networking (SD-WAN), white box,

commodity hardware (vCPE), and Network Function Virtualization (NFV). In 2017, SD-WAN became one of the

hottest topics in networking and has emerged as one of the preeminent use cases of SDN. The rise in interest for

SD-WAN solutions comes from enterprises simply looking for a better solution to their existing WAN deployments7.

The focus of this whitepaper is on SD-WAN.

SD-WAN findings circa August 2018 are discussed in the following sections:

Industry Observations. Research was gathered from leading industry analysts such as Gartner, IDC, Frost & Sullivan

and such to determine hype from reality. The research shows that SD-WAN is delivering on the promise of

improved costs, more agile management, accelerated delivery and tighter linkages to applications. Additionally,

adoption across the Enterprise has taken root and is expected to substantially grow over the next year or two.

Technology Considerations. The SDN taxonomy includes vCPE, NFV, and SD-WAN, and all are required to realize

the next generation network ecosystem. This discussion is focused on how SD-WAN fits into the taxonomy and the

importance of evaluating the various SD-WAN solutions in the context of the broader SDN taxonomy, and an

Enterprise WAN strategy.

Operational Considerations. Selecting an SD-WAN solution requires an assessment of the preferred choice of

operational support models. The research shows that some enterprises favor service provider managed solutions

and others favor a “do-it-yourself” approach. This discussion suggests ways to think about one versus the other

regarding SD-WAN.

Evaluation Criteria. A common characteristic of emerging technologies is that those technologies tend to reflect

limited maturity, thus new entrants bring innovations to the marketplace at a rapid clip. This means that new

capabilities, features, and functions may be introduced beyond what market incumbents have to offer. It is

important to approach an evaluation of SD-WAN with a set of capabilities that satisfy both IT and Business

requirements during this period of persistent technology change. This section consolidates the key SD-WAN

evaluation criteria from the industry research.

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2

Industry Research

This SD-WAN research includes 9 documents from 6 different sources. The sources included: IDC, Nemertes,

Ovum, Gartner, SDN Central, and Frost & Sullivan. The reports were a combination of the following: industry

surveys on SD-WAN, product classifications, and general insights into drivers, trends, benefits and so forth. The

documents range in publication dates from 2017 with the most current being Gartner’s Hype Cycle for Enterprise

Networking and Communications published on July 13, 2018. Additionally, the source citations are included as a

reference at the end of this document. Following are the highlights from the industry research.

Observations from the Research

SDN

Software Defined Networking (SDN) can trace it roots back to the separation of the data plane and control plane in

the public switched telephone network to simplify provisioning, management, and improve operational efficiency.

Today, SDN has evolved to encompass the data network where it has become the foundation for a new way to

rearchitect wide area networks (WAN). Over the past few years, a shift has been occurring from purpose-built

hardware solutions, to virtualized software functions. At the edge, solutions have emerged where WAN

management and application performance are becoming tightly coupled. For the Enterprise, this means a new

way to architect networks. The new capabilities change how technology will be licensed from network hardware

suppliers. It will shift provisioning from manual processes to API driven automation. Cycle time will be reduced

due to software-based provisioning. Lastly, WAN economics are becoming more cost effective with a shift to OpEx

based management models, and the expansion of alternative access methods to reduce last mile costs.

SD-WAN

Common themes across this research are that SD-WAN has moved well past the conceptual and introductory stage

and is entering the growth stage, providing production solutions for enterprise customers, both large and small.

Many of the surveys conducted show that a large percentage of enterprises are planning to pilot SD-WAN followed

by a larger scale rollout in the next year or so. Estimates are that 10% of US companies have already deployed SD-

WAN, 20% are planning to deploy in the next year, followed by 30% considering it3. In general, the research is

supporting that SD-WAN technologies are taking root and beginning to deliver on it promises. Other key findings

are as follows:

• The ability to choose alternative access technologies to lower WAN costs, optimize WAN usage,

bandwidth management flexibility, application monitoring and management based on policies, are the

top considerations when selecting an SD-WAN solution.3

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3 • Enterprises most significant concern is regarding the reality of the promise of SD-WAN. As SD-WAN

technologies are evaluated, the Enterprises want to properly assess and verify that the solutions are

stable, highly secure, reliable and that performance and cost efficiencies lives up to claims.6

• The primary use case for SD-WAN solutions are for organizations that have many remote locations,

business partners, and mobile employees.7

• SDN, NFV and SD-WAN are beginning to converge to enable enterprises to achieve a truly dynamic WAN.5

• The SD-WAN market is forecasted to grow by 38% CAGR between 2017 and 2022. This is from $300m in

2017 to $1.45b by 2022.5

• The market is still young, so much more innovation is expected. But, given the newness of the market,

there are many entrants. Eventually, market consolidation will occur which could have an impact on early

buying decisions.7

• SD-WAN is reshaping how IT organizations think about the WAN. Speeds and feeds are diminishing in

importance whereas balancing application portfolio demands via application-based policies and

performance SLAs are increasing in importance .4

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4 Gartner’s Hype Cycle for Enterprise Networking and Communication.

Source: Reference 9. Gartner (2018)

The Hype Cycle is Gartner’s assessment of key technologies and their respective impact on business performance

over the next 10 years. Gartner’s theory is that technology goes through 5 phases as noted at the bottom of the

illustration. The emergent, and promising technologies are on the left side while the mature and proven

technologies are on the right side of the chart.

Observations from on the Hype Cycle

What is notable is that of the 37 technologies assessed on this illustration, there are 7 that are related to the SDN

ecosystem. (noted on the illustration). One could conclude that SDN is becoming a key technology ecosystem for

the WAN. Also, you can see where the elements of the ecosystem are in various stages of evolution, but SD-WAN

is furthest along. This is consistent across the research from the other industry analysts. Now, given that the

different components of the SDN ecosystem are in various stages across the Hype Cycle, one conclusion is that

having an SDN strategy, led by SD-WAN, is necessary for developing the next generation WAN. With a holistic

strategy in place, properly sequenced due diligence can be done on the components of the strategy, which

becomes input into planning and budgeting cycles for IT, and ultimate deployment.

Lastly, a brief description for these 7 technologies highlighted in the illustration can be found in the appendix.

2

1

3

4

5

7

6

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5 Market Concentrations

Source: Reference 5. Frost & Sullivan (2017)

Frost & Sullivan produced the report, “Analysis of the SD-WAN Market, 2017” 5, from several sources including: interviews with leading SD-WAN vendors, research of quarterly and annual reports for public companies, detailed analysis of internal and external databases on customer wins, existing site deployments, pricing and contract models, and sales and marketing channels. The data indicated that approximately 56% of the market share was held by 3 companies: VeloCloud, Viptela and Silver Peak. Refer to the following chart for the market composition. Please note that Viptela is now owned by CISCO and VeloCloud is owned by VMWare.

Observations on the Market Concentration

SD-WAN is an emerging technology. The earliest companies were formed in 2013 introducing product in 2014.

Offerings in this market fall into one of two categories: SD-WAN developed from the ground up, legacy network

offerings with SD-WAN-like features/functions. As of this writing, analysts have estimated 30 companies have

entered the SD-WAN market. Given the market is still emerging, one would expect even more entrants entering

the marketplace in the next few years. Also, one should be observant of market consolidation. While there have

not been any signs of consolidation, acquisitions have already occurred. In 2017, Cisco purchased Viptela and

VMWare purchased VeloCloud. Between the two, they represent a commanding 43.9% market share. One could

conclude that when market consolidation occurs, it will be with the remaining entrants. This may influence buying

decisions where the market leaders become the dominant choice further pushing other acquisitions or

consolidation. The risk of not selecting a market leader is disruption from consolidation of the other providers. By

having an SDN strategy in place, encompassing SD-WAN and the other technologies, risk can be reduced. For

those enterprises with a small appetite for risk, VeloCloud and Viptela may represent good choices given their

respective backing from VMWare and Cisco.

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6

Technology Considerations

The SDN Taxonomy

Source: Reference 7. SDN Central.

SDN Central has developed the following reference model to simply explain the relationship of the key components of the SDN taxonomy. SD-WAN’s role in the taxonomy is to integrate the WAN functions into a common, software-controlled platform. The key capability of SD-WAN is to provide dynamic path optimization over encrypted data paths, over a mix of access technologies, terminating in a device at the company locations.

Observations on the SD-WAN Ecosystem

SDN is about the separation of the control plane from the data plane, typically at the network core. SD-WAN is the

productization of SDN principles, typically at the end user edge. When SD-WAN solutions first appeared, the

model was to implement a separate appliance that ran the encrypted tunnels as an over-the-top application. That

drove the concept of the Hybrid WAN. It has now evolved to where SD-WAN is converging with vCPE and NFV

capabilities. SD-WAN is becoming a virtual function that can run on a vCPE (commodity white box hardware) at

the premises. Given this convergence, one could conclude that SD-WAN is no longer a standalone decision, but it

is co-dependent on the other SDN technologies. The evolution is going from discrete specialized services to one

that is a modular architecture. One key observation that SD-WAN should be considered under the broader tenants

of an Enterprise SDN strategy – as well as your carrier partners’ SDN strategies - prior to any purchasing decision.

AT&T has adopted an SDN virtualized core, cloud carrier edge, vCPE/VNF customer edge strategy resulting in a

virtualized edge-to-edge ecosystem. Further, this ecosystem has shifted toward OPEN in principal and practice.

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7

Operational Considerations

Frost & Sullivan indicates in their research that managed SD-WAN 5 is gaining preference over the doing it yourself

(DIY) approach. They have observed that since 2014, most SD-WAN implementations were sold directly to

enterprises that followed a DIY approach to procure, deploy and manage SD-WAN Solutions. A shift is now

occurring where many Enterprises are choosing managed services for their SD-WAN implementation. The belief is

that enterprises are realizing that the SD-WAN ecosystem extends into other technologies (vCPE and NFV) and that

there is great benefit to having an end-to-end managed solution. Also, the Frost and Sullivan research shows that

over 60% of SD-WAN sales are through some type of service provider (including systems integrator, VAR,

applications service or communications service provider).

Additionally, the IDC research, from their 2017 US SD-WAN Enterprise Survey 3 shows that Incumbent

Communications Service Providers are growing in favorability as the managed service provider for end-to-end SD-

WAN solutions. 1,200 companies were surveyed (with 500 having > 5,000 employees) where they were asked,

“How do you plan to implement SD-WAN?”. The key responses were as follows:

• 42% responded that they would pick an integrated solution from a traditional communications service

provider (i.e. AT&T, Verizon)3

• 26% responded that they select an overlay solution from an alternative service provider (e.g. Aryaka,

etc.) 3

• Only 3% responded they would implement directly from the SD-WAN supplier. 3

Observations on Operational Considerations

The debate over do-it-yourself versus using a managed service has been a significant discussion across IT organizations for the past several decades. Choosing one approach over the other should be done in the context of the Enterprise’s IT operational model. What is of high importance is to choose the approach taking into consideration the totality of the SDN ecosystem. While the initial deployment may be just the SD-WAN components, also think about your plans for vCPE (the white box), and virtualized network functions. One would suggest that approaching the SDN ecosystem as a set of independent decisions may lead to multiple support models. Having multiple operational support models for a complex IT system leads to complex support interfaces between the enterprise and the various suppliers resulting in increased costs.

Another consideration is the financial difference between DIY and managed services, or CapEx versus OpEx. When an Enterprise adopts the DIY approach, the equipment is purchased and depreciated over time. This approach can put a strain on the company’s capital. With managed services, the solution is typically delivered as a service fee and would be accounted for as an operating expense. Deployment of SD-WAN solutions is predominantly becoming delivered as a managed service.

While this whitepaper does not make a case for DIY over managed service, the suggestions is to select an approach that is in alignment with the overall IT operational support principles, human capital skill levels, and financial requirements and apply those principals to the SDN ecosystem strategy.

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8

Evaluation Criteria

SD-WAN provides the IT organization with the essential stepping stones to help move from traditional WAN management to an organization that can deliver on an SLA oriented, application focused ecosystem that is in lock step with the company’s digital transformation plans. Building this type of platform requires a combination of technical capabilities that are important to the IT organization and application capabilities that are critical to the business. All the research indicated that there are a set of key capabilities that SD-WAN delivers, and these should be part of the evaluation methodology. They are as follows:

• CapEx versus OpEx financial agility with the ability to change VNFs every 30 days.

• Lower WAN transport costs. Many of the enterprises surveyed are looking to reduce WAN costs by using lower cost network options such as broadband, and cable. 3

• Highly secure network connectivity regardless of network path. Using internet broadband introduces a new risk that need to be remediated. SD-WAN can transmit the traffic across internet connections using encryption. 6

• Policy Based intelligent path selection. Applications can be directed across the different paths based on level of priority. 3

• Flexibility to use different networks (e.g. broadband, MPLS. LTE) 3. Many Enterprises want to have access options providing cost and deployment options.

• Prioritize network connection by application type. SD-WAN can be tuned to prioritize key applications

across the connectivity options. 3

In addition to the core set of capabilities noted above, it is important to develop a list of key attributes to help get to a shortlist of potential suppliers.

• Buyers should understand the tradeoffs and their WAN traffic characteristics before making a purchase decision. Be aware of channel-bonding and multi-path forwarding capabilities. 7

• Understand the impact that the network has on applications, including options for secure Direct Internet Access (DIA) as the Enterprise consumes more applications in the SaaS model. For example, when running real time voice applications over the WAN, traffic prioritization becomes important. Hence QOS becomes a critical feature.7

Observations on the Evaluation Criteria

The key points here are to understand both the IT requirements and business application requirements given these new capabilities. For example, traditional WAN management led to IT performance metrics that did not quite align with business goals. Mean time to repair is usually quite meaningless if you don’t understand the business impact of restoration times. Because SD-WAN technologies provide application level management capability, it enables IT to deliver more of a Network as a Service for the business.

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9

Conclusions

The evidence indicates that SD-WAN technologies are establishing a new way for WAN deployment and

management. When SD-WAN was introduced in 2014, the deployment model was to deploy an appliance at the

endpoints, thus treating the technology as an independent and standalone solution. As SDN has evolved over the

last few years, a convergence has been occurring where SD-WAN, the site hardware (vCPE), and network function

virtualization (NFV) are becoming part of a larger ecosystem.

Given this convergence, recommendations would be as follows:

Strategy Development - Consider the operational impact of OPEN ecosystems versus proprietary vendor

silicon, and the shift from CapEx to OpEx. Develop an SDN technical strategy that encompasses the key

components (SD-WAN, vCPE, NFV), and considers additional access technologies to supplement current MPLS

networks including broadband, LTE and eventually 5G. The strategy should include the incorporation of

application and WAN management principles that allow the Enterprise IT team to move from siloed WAN

management to more of a Network as a Service.

Evaluation – Start operationalizing the strategy with the evaluation of SD-WAN. Consider the maturity curves

of each vendor’s offering. This includes vendor stability, support, market share, and whether each product was

designed to deliver SD-WAN from the ground up or is simply a set of features/functions incorporated into a

legacy product. The key outcomes from the evaluation would be:

• The validation of the technology

• Confirmation of the cost savings from the introduction of alternative access methods

• Cycle time reduction for service delivery

• Improvements in application performance from policy-based routing

Operational Support – Consider the cost of workforce skilling and the commitment thereto. Take a hard look

at procuring the service from a managed service provider. If you subscribe to the notion that this is a co-

dependent ecosystem, then procuring the solution from a managed service provider places the burden of

technology integration on the service provider. Additional benefit can be realized through broader, end-to-

end, service level agreements. Additionally, think about the impact of these solutions enabling the concept of

software-based provisioning where the provisioning at the edge is managed through an orchestrations system

where network functions and application-based policy routing can be implemented without the need for a

physical site visit.

Lastly, be cognizant of the impact of market consolidation. Given this is a new technology, the market will see

many more entrants with the promise of new innovations. Be thoughtful on the balance between selecting a

market leader and the latest entrant. Further, explore who each vendor has partnered with or been acquired by,

as the support ecosystem for these relatively new technologies will only scale through the parent company or

partners. As of this writing, given that VeloCloud and Viptela were both just acquired by industry leaders, there

are compelling reasons to consider SD-WAN solutions from one of these two suppliers.

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10

Industry Analyst References

IDC

1. Worldwide SD-WAN Managed Services Forecast, 2018–2022 (US43787218). IDC. Abdo, G., & Mahale, V.

(2017).

2. IDC Innovators: SD-WAN (US42549917). IDC. Casemore, B., Greene, N., Ghai, R., & Mehra, R. (2017).

3. U.S. SD-WAN enterprise survey. IDC. Ghassan, A., & Munroe, C. (2017).

Nemertes

4. The Network’s Cloud-like Future: SDWAN to Networks as a Service (DN3661). nemertes Research.

Burke, J. (n.d.).

Frost & Sullivan

5. Analysis of the Software-Defined WAN Market, 2017 (BCS 11-5). Frost & Sullivan. Honnachari, R.,

Stadtmueller, L., & Suby, M. (2017).

OVUM

6. Enterprise Network Services Survey (ENS004-000012). Ovum. Washburn, B. (2017).

SDN Central

7. SD-WAN and Virtual Edge Report: The Evolving SD-WAN, vCPE and vCPE Landscape. (2017). SDNCentral,

LLC.

Gartner

8. Market Guide for WAN Edge Infrastructure (G00318943). Gartner. Lerner, A., & Rickard, N. (2017).

9. Hype Cycle for Enterprise Networking and Communications, 2018 (G00338722). Gartner, 2018.

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Appendix

Gartner Hype Cycle for Enterprise Networking and Communications, 2018

Definitions of the elements of the Hype Cycle identified on the illustration on page 4.

1. Virtual CPE. This is the hardware that runs the virtualized network functions, and in some configurations,

the SD-WAN virtualized function. In this report, it is also referred to as the white box or vCPE. Examples

of suppliers for the virtual CPE are AT&T FlexWareSM, Cisco’s ENCS, and Juniper’s Virtual CPE to name a

few.

2. Managed SD-WAN service. This includes the SD-WAN product, transport single point of contact and

management. This is essentially the evolution of managed router services from the past. Providers

include telecom carriers such as AT&T and Verizon, OEM’s with service arms like Cisco, system integrators

and value-added resellers.

3. NFV Service. These are the virtualized network functions that were previously provided by dedicated

physical appliances, e.g. router, firewall, etc.

4. Enterprise Network Function Virtualization. This is where the SDN ecosystem is managed internally

by the enterprise rather than being acquired as a service from a provider.

5. SD-WAN (Products). These products offer a replacement for traditional branch routers that provide

several features including: dynamic path selection based on business or application policies,

centralized policy management, WAN edge device management, and software-based configuration.

SD-WAN Products are access agnostic and create secure paths across multiple connections.

6. Software Defined Networking. This is an architectural approach that delivers agility and extensibility

by abstracting the control plan from the data plane. SDN concepts are implemented in SD-WAN

products.

7. Hybrid WAN. This creates a single enterprise WAN out of a blend of multiple networking

technologies where traffic is forwarded based on application policies. Typical implementations blend

MPLS and internet access. This has been used as a best practice for the past several years.

For further information on Gartner’s Hype cycle for Enterprise Networking and Communications, please refer

to Gartner publication G00338722, July 18, 2018.

Documents

A Perspective on SD WAN - WSTAthe next generation network ecosystem. This discussion is focused on how SD-WAN fits into the taxonomy and the importance of evaluating the various SD-WAN