Gnome Meeting

How Service Providers are Outpacing Enterprises in SDN Deployments

Service providers are well ahead of enterprises in SDN deployments. The numbers confirm this according to Jim Duffy in his Network World article “Enterprise SDN use lags service providers.” ACG Research estimates that sales of SDN products for live service provider deployments will reach $15.6 billion by 2018, while those that may become live will reach $29.5 billion. Use of production SDNs by enterprises and cloud/service provider data centers will be a fraction of that according to Infonetics Research: $3.1 billion by 2017.

Why are service providers so far ahead of enterprises? To paraphrase the oft-used political aphorism: It’s the business model, stupid. Duffy said it best in his article: “To service providers, the network is the business. To enterprises, the network enables or supports its core business.” 

To a network service provider, technology is the revenue generator in a competitive market. Better solutions and better technology lead to lower costs (and more profits), and/or competitive differentiation. 

Of course, competitive differentiators tend to become commodities over time, and we’ve seen that happen repeatedly in the service provider market. Quite simply, when a technology proves itself to be a success, then others follow. 

It’s simple risk-reward mechanics. While SDN might save an enterprise many thousands of dollars a year in operating expenditures, it may only be after a capital expenditure of hundreds of thousands to migrate to SDN. 

But to a service provider, the entire core focus of revenue generation is on providing the richest and most reliable services to its customers. These expenditures are not cost saving measures, but mission-critical requirements. The potential opportunity cost of falling behind the technology curve is too great; not only may near-term revenue suffer, but also loss of market share is a major risk. 

In short, for enterprises it may be easy to rationalize SDN as a “nice to have,” while for a service provider, the technology will likely be “mission critical.” According to Duffy, another reason enterprises are more slow to adopt SDN boils down to one company: “Enterprises are also largely dependent on a single vendor for their network infrastructures: Cisco. With a dominant market share in enterprise switching and routing, Cisco is loath to disrupt that multibillion dollar installed base with advances like SDN. Similarly, enterprises have invested heavily in infrastructure and training, and grown accustomed to doing things the Cisco way for decades.” 

For those enterprises that DO see a competitive advantage in migrating to SDN, service providers can help them get there with managed services. They can either completely manage the SDN network for them or provide assistance to the enterprise IT staff in deploying and managing the technology, as Dimension Data is doing.  

Finally, there’s one more reason why service providers will continue to outpace enterprises in SDN and similar technology deployments: one of the “services” they provide to enterprises is the ability to try new technologies without committing to them. An enterprise that wants to try SDN always has the option to “rent before buying” – by outsourcing infrastructure and services to a service provider.

Editorial Staff

Add comment

Follow us

Don't be shy, get in touch. We love meeting interesting people and making new friends.

Most popular

Most discussed