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Enterprises have traditionally maintained their own network infrastructure. But, from the time operators first started offering VPN services, enterprises have adopted managed network services to offload operations burdens. That same driver will continue -- and even expand -- in 2020.
Managed network services have grown based on the idea that a management economy of scale exists, meaning managed service providers (MSPs) can provide network management at a lower cost than enterprises by using personnel and tools across a larger base. That's a fair but subtle argument.
In the last two years, specifically, the progress of managed network services trends has depended on linking them to something with a clear business case: software-defined WAN (SD-WAN).
SD-WAN spurs change with managed services
IP VPNs displace the circuit-and-router network model, which benefits enterprises by eliminating trunk and router costs and simplifying operations. SD-WAN's initial value proposition was its ability to extend a company VPN to locations where MPLS VPNs were unavailable or prohibitively expensive. In 2019, SD-WAN technology modernized and expanded the VPN model. The growth of broadband internet, even in areas with limited business populations, ensures further expansion in 2020.
Managed services have been the primary vehicle for SD-WAN delivery from the beginning. The sites where MPLS VPNs are impractical are also sites where it's difficult for enterprises to sustain network support. Local labor pools rarely contain the skills needed, for example, and branch locations don't offer personnel realistic career paths. Even in locations that can obtain the necessary skills, the cost of staffing these locations is relatively high because personnel can't serve other missions in small offices.
MSPs offer an answer to this challenge with supported SD-WAN, but some enterprises are uncomfortable when dealing with relatively small MSPs. Large network operators, reluctant at first to enter the SD-WAN market, have gradually increased their support for SD-WAN technology. In 2020, those operators will be the largest source of new SD-WAN services. Operators' effect on the SD-WAN market will bring three immediate changes to managed network services trends.
1. Shifts in pricing
The first change regarding managed services is a reduction in MPLS VPN pricing, which primarily affects the low end of currently supported sites. This price reduction is an operator reaction to the risk of displacing MPLS sites with internet-connected SD-WAN, and it will eventually reduce small-site costs for VPN connectivity by as much as a third. There will be a general trend toward lower MPLS VPN pricing, even beyond 2020, because the lure of SD-WAN will motivate operators to reduce the immediate financial benefit of shifting to SD-WAN. This will cause a smaller but synchronized reduction in pricing for SD-WAN managed services.
2. Expanded SD-WAN feature sets
This pricing shift will create a second change of expanded feature sets. Small sites undertake SD-WAN transformation for pure cost savings reasons. But, if SD-WAN savings decrease, the justification becomes more complicated. This means SD-WAN features beyond over-the-top VPN capabilities become more valuable.
All major SD-WAN implementations already support cloud connections -- a capability that is expensive with MPLS VPNs -- so the features that add value are higher on the service stack. Only a handful of SD-WANs currently offer any such features, but that will change. The number of SD-WAN vendors that offer value-add features -- such as explicit connectivity control for zero-trust security -- nearly doubled in 2019. It will double again in 2020, as SD-WAN vendors work to provide their MSP and network operator channels with features to accelerate SD-WAN adoption.
3. Increased management scope
The third immediate change is a drive by MSPs to increase the scope of their management, extending it from the SD-WAN demarcation inward to site LAN connectivity. If remote sites on traditional VPNs and SD-WANs are difficult to support with in-house resources, that difficulty likely extends to on-site connectivity as well.
In 2020, managed network services trends will extend to cover network support right to the on-site systems and users. That means on-site networking tools will increasingly be considered extensions of the company VPN and be tied to VPN technologies, especially SD-WAN. That requires end-to-end network awareness at all levels of the network -- from desktop to phone to data center.
It's hard to see end-to-end network awareness as anything less than a generalized VPN model, disconnected from a specific technology like IP/MPLS, capable of extending over any connection facility set that's available. SD-WAN is the technology most suited to create this generalized model. This means SD-WAN will expand in its scope and application to merge with some software-defined networking concepts to create a virtual network.
Standardization may be the most critical point for enterprises, especially in terms of planning. If the industry converges on a single model, it will be important to avoid accidentally impeding this convergence with near-term product and technology selections. The challenge with managed network services trends is to align this general-model vision with the total anarchy of the SD-WAN space.
SD-WAN convergence, in the sense of accepting a single standard, is surely not going to happen in 2020 -- or likely for years after. What might happen is efforts of standards bodies, like MEF, will define a way of creating gateways between SD-WAN implementations. MSPs could currently do this by using tandem nodes -- two SD-WAN nodes from two different vendors, placed back to back. A single-node approach is coming, perhaps as early as next year.
It's too dramatic to say 2020 will be the year of managed services. But it will certainly be a year when managed network service trends and opportunities increase because user benefits are also increasing. It will also be a year when we start to see what's almost a managed service model -- a model that extends management throughout the entire network in an orderly way.