It is hardly news that data center hosting, connections to cloud services, and the range of “as-a-service” cloud options have had a huge impact in the way enterprises conduct business. Cloud services and the data center are a focal point for enterprise networks. Enterprises push less and less data directly between branch offices and headquarters. Instead, end locations now concentrate on hosted data centers and cloud services, using a hub-and-spoke or partial mesh WAN. This change distorts enterprise WAN architectures. It concentrates networks and pushes down prices.
For telcos, helping enterprises make this transition from premises-centric to data center/cloud-centric networking should be business as usual. MPLS VPN is a flexible and capable tool that can support any enterprise architecture, extending easily into hybrid cloud and multicloud. But as with other aspects of the relationship between WAN, data center, and cloud, nothing is ever simple.
Three market forces pull enterprises away from traditional telco services once they shift their focus to data centers and cloud:
Cutthroat competitive network prices between major data centers: Once in a major data center, an enterprise can buy switched Ethernet, wavelengths, and SDN-based variable bandwidth to other major data centers, with costs starting at a few hundred dollars per month. Enterprises can spike capacity between their data centers, and still pay a fraction of the cost of their MPLS WAN.
Low-cost regional and national alternative carriers: Once a global enterprise customer moves off the global MPLS backbone in favor of data center core capacity, it is also easier to partition the enterprise WAN into regions for individual bids. That opens the door to bids by smaller, low-cost competitive carriers.
Cloud providers: Cloud players structure their pricing to ingest customer data and never let it go. Large cloud providers have their own WAN backbones and transfer data between their global facilities at virtually no cost (or in IBM Cloud’s case, literally no cost).
Enterprises benefit from these three market forces even if they have no interest in them. Just the existence of major, network-connected data centers and cloud providers helps to push down WAN prices. If an enterprise wants to see if a better deal is available, it can drop hints to its WAN suppliers about considering a data center shift to lower its costs. A telco account manager should take that as a cue to hunt for extra promotions or discounts. But a good telco account manager will look beyond discounts and engage with the enterprise proactively to migrate to a lower-cost WAN model. That may be through hybrid networking with or without SD-WAN, or by offering proactive assistance to the enterprise for its cloud migration plans, even if it means ceding some MPLS revenues.
But whatever the strategy, enterprises should be cautious on suggestions to splinter the enterprise WAN into pieces. There is a tradeoff of cost savings against management complexity, and there are benefits from working with just one or two key global telco partners responsible for the corporate network. The trade-offs may be complex, but any move – including staying in place – has potential for WAN cost savings.
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