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Network providers are well aware that software-defined WAN (SD-WAN) is catching their enterprise customers' interest. This trend challenges incumbent carriers in highly regulated national markets that want to hold onto their private WAN revenue. In executive discussions with national providers in east Asia and southeast Asia, we have seen tension in the balance of interests between the carrier, its regulator and national service obligations, and its customers.

For telcos in highly competitive, freewheeling markets, SD-WAN helps win and retain customers, and opens up new opportunities to sell managed and professional services. Telcos that abstain from SD-WAN risk losing services revenue and clients. Enterprises will use SD-WAN for hybrid networking to decrease their account spend. Network providers will compensate by poaching competitors' clients and by selling more managed services.

For incumbent network providers in highly regulated markets, SD-WAN is a harsh prospect. Regulators restrict telcos' options and SD-WAN erodes WAN revenue. SD-WAN's hybrid networks swap private WAN ports for cheaper internet VPNs, and dedicated network ports for lower-cost broadband. The telco will lose core revenue, and managed services will not make up the difference.

There are no winning options for these regulatory restricted incumbents. They can embrace SD-WAN, invest in managed services, build hybrid networks, and supply deployment expertise. The payback is negative, accelerating their own network revenue erosion. The alternative is to stay away from SD-WAN, but ignoring the technology will only slow down the enterprise shift toward hybrid networking slightly. Enterprises will work with other SD-WAN partners or deploy the technology themselves. A telco that avoids SD-WAN will also feed negative perceptions that it is slow to respond and out of touch with its market.

A third option is to stall – to launch SD-WAN services but limit its availability. The service exists on paper, but enterprises will find it hard to qualify. The provider may re-balance prices between MPLS and internet services, so enterprises are not rewarded with cheaper service if they migrate from an all-MPLS private WAN to SD-WAN and hybrid networks.

Telcos do not have official "stall" policies, but Ovum observed the practice decades ago with the migration from TDM to IP-based voice services. Some very large telcos gave their account teams big incentives to retain clients on TDM. The tactics briefly slowed migration, but at a terrible cost. Enterprises resented the overt manipulation. Best case, it tested their trust in the telco relationship. It also hastened unwanted competition from other options, such as VoIP specialists. Ultimately, efforts to stall did not change the outcome.

SD-WAN and hybrid networking trends are too big to slow down. This wave will destroy value in private WAN services, but network providers can choose how they respond and mitigate the impact. They can demonstrate leadership and build account trust if they accept these technology trends across the company. That means removing internal incentives for business units to fight progress. Whether providers are in a heavily regulated or mostly deregulated market, it is a better long-term practice to allow industry trends to take their course. In that progress, there should be opportunities to add new types of services that reduce the impact of phasing out the older technology.

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