Innovating the Enterprise Private Line Portfolio/media/informa-shop-window/tmt/...The current state...

Innovating the Enterprise Private Line Portfolio

2 Informa Tech Ovum © 2020 Ovum PLC. All rights reserved.

Summary..........................................................................................................................................................4

Introduction ...................................................................................................................................................4

1. The enterprise private line market ..................................................................................................4

1.1 The current private line portfolio .......................................................................................................5

1.2 Private line portfolio challenges ........................................................................................................6

1.3 Private line portfolio growth areas .....................................................................................................8

2. Private line portfolio differentiation – strategic relationships ........................................................9

2.1 Developing innovative partnerships .................................................................................................10

2.2 Managed, co-managed, and unmanaged services ...........................................................................10

3. Private line portfolio differentiation – network innovation ............................................................11

3.1 Competitive SLAs ..............................................................................................................................12

3.2 Committed network SLAs are key for product differentiation ........................................................13

4. Conclusion .......................................................................................................................................15

Appendix ........................................................................................................................................................15

Methodology ................................................................................................................................................15

Further reading from Ovum ........................................................................................................................15

Contents

3Informa Tech Ovum© 2020 Ovum PLC. All rights reserved.

© Copyright Ovum 2020. All rights reserved.

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About the author

Elana Farah

Elana Farah is a consultant working across Ovum’s TMT research projects. Her focus is on primary and secondary research and data analysis.

Elana works on the scoping, design, and delivery of bespoke global consulting projects across all telecoms, media, and technology sectors. Her key areas of expertise include data analysis to enhance research insights, secondary research to support project delivery. Recent projects include working with a telecoms provider on a go-to-market strategy to better understand their value proposition, and helping an enterprise security vendor identify and size their most lucrative markets. Elana provides market insight through data analysis whilst designing and executing strategic methodology.

She joined Ovum in 2017, shortly after graduating with a master of science degree in strategic marketing from Cranfield University.


Introduction1. The enterprise private line market Enterprises are adjusting and evolving through their digital transformation journey to remain competitive in highly dynamic business environments. The private line portfolio of enterprises is commanding similar adjustments to support the move of critical applications from local data centers to the cloud. The purpose of this white paper is to understand the key trends, the size of the market, and growth potential for enterprise private line portfolios. As part of this white paper, Ovum interviewed top-tier network service providers about their product portfolio, how they are innovating to meet the evolving needs of enterprise customers and where there exist key differentiations in strategic approach.

One of the biggest ongoing industry trends in networking has been vast enterprise migration to the cloud. Ovum forecasts that the combined total addressable market for hybrid and private managed cloud services will be worth $99.2bn worldwide by 2024, with a 12.5% compound annual growth rate (CAGR) for the period 2016–24. Network service providers have been supporting the growing needs of enterprises by leveraging their underlying network infrastructure to deliver innovative and differentiated solutions. As such, there is increasing demand from enterprises for broader coverage, support for sensitive applications that they have migrated to the cloud, and agility in meeting their demands for bandwidth in real time. While competition intensifies and price pressures from enterprise customers persist, the digital transformation that enterprises have been undergoing is providing important opportunities for growth that network service providers are attempting to capitalize on.

Summary

Successfully competing within the enterprise network and connectivity services market (hereafter referred to as the "private line" market) requires continued efforts from network service providers to engage with their enterprise customers on completely new levels. The current state of service providers' private line portfolios is very dynamic.

• Providers are adapting to the digital transformations of enterprise customers, which requires them to expand their portfolio and innovate by investing in products such as software-defined wide-area networking (SD-WAN) and Cloud Connect.

• Others are reacting by developing strategic relationships with global internet service providers (ISPs) to expand their coverage and reach, or by creating virtualized laboratories to collaborate with enterprise customers on customized solutions that satisfy their requirements.

• This growth in innovative solutions extends to managed services, giving enterprise customers control and visibility over their network performance. Enterprises can then demand better-suited service-level agreements (SLAs) such as time to market, time to repair, and bandwidth on demand (BoD).

• The future of the enterprise private line market will be highly differentiated, with SLA-focused enterprise customers that demand more customized solutions for their complex digital businesses.

This Ovum white paper examines private line trends and what they mean for enterprises. It includes examples of innovative platform and service features implemented by the world's largest, forward-thinking network service providers. The purpose of this white paper is to inform enterprises about new industry innovations. Companies can use this information to evaluate and compare with the platforms, services, and features offered by their own service provider partners and prospects.

“ “Ovum forecasts that the combined total addressable market for hybrid and private managed cloud services will be worth $99.2bn worldwide by 2024, with a 12.5% compound annual growth rate (CAGR) for the period 2016–24.


1.1 The current private line portfolio The current state of the enterprise private line market is very dynamic (Figure 1). Ovum's research has identified that the total Ethernet market will grow from $48.19bn in 2019 to $67.14bn in 2024. Indeed, there are moderate revenue opportunities in enterprise Ethernet VPN, dedicated internet access (DIA) services, and SD-WAN, but providers will increasingly struggle to maintain enterprise multiprotocol label switching (MPLS) revenue. While even in its decline MPLS VPN revenue still commands the most private line revenue, DIA will continue to move from strength to strength. Ovum's research also found that the compound annual growth rate (CAGR) in enterprise DIA in 2019 was +0.6% in the Americas, +1.8% in Europe, +2.0% in Asia and +2.9% in the Middle East and Africa. DIA has been fueled by the enterprise move to cloud, by new sites connected using DIA from the outset, and by the transition of existing private WAN services to hybrid networking and to DIA-only connections. Moreover, in most countries, DIA ports are a fraction of the cost of MPLS VPN services. Besides the price arbitrage, DIA in many countries is of adequate quality for today's business services. We sum up the market outlook for individual private line products and services below.

Private IP VPN has been the first choice for enterprises for two decades, displacing earlier generations of packet, frame relay, and cell-switching technologies. It still has a future ahead but global enterprise services revenue has plateaued. Port growth and bigger bandwidth have been able to push back against price compression for the past four years to keep global MPLS IP VPN revenue at a level $27–28bn. From 2020, decreasing revenue will start to outpace slowing port growth. Ovum estimates that the global enterprise MPLS IP VPN market will lose up to a quarter of its revenue over the next five years. The move to the cloud is pushing enterprises to add Cloud Connect ports over private IP VPN, but it is also causing a much larger shift away from MPLS to hybrid networks that mix broadband access, DIA, and Ethernet VPN.

Enterprises take advantage of business-grade broadband where it is available and are slowly reducing their exposure to legacy (non-fiber) dedicated access services. Within Ovum's research, SD-WAN is identified frequently as a concentrated area of focus by network service providers and it features heavily as a priority within their private line product portfolios. Ovum predicts that for the period 2016–24 managed SD-WAN revenue will grow to around $11bn. Much of the revenue in managed SD-WAN is from one-off costs; recurring managed network services revenue will build momentum over time. SD-WAN's feature set has become a major market and Ovum estimates that managed router and firewall upgrades, and the transition away from managed WAN optimization specialty platforms, will continue to fuel managed SD-WAN's rapid growth trajectory.

Service providers continue to make massive investments in fiber and the latest optical transport networking solutions. They are reaping benefits from its implementation. Enterprises that subscribe to optical services can expect purpose-built products that lower the cost per bit and offer greater programmability, address more use cases, and provide greater operational visibility. For service providers operating large-scale optical networks, most of the value from software-defined networking (SDN) is in optimizing operational and capital expenditure. However, providers can also use SDN to support more powerful services for disaster recovery and business continuity, and BoD services at very high capacities. Network agility will increase as providers apply Big Data analytics concepts that fine tune parameters to optimize and monetize network resources.

Managed local area networking (LAN) is a more mature offering in the enterprise private line portfolio. It is used in both public-facing wireless LANs (WLANs) such as guest internet access and private-facing wireless technology for secure connectivity. However, Ovum predicts that WLAN will grow in the period

“ “Port growth and bigger bandwidth have been able to push back against price compression for the past four years to keep global MPLS IP VPN revenue at a level $27–28bn.


2016–24 from $5bn to $10bn, whereas managed LAN will slowly decrease from $12bn to just below $11bn. Some vendors have described their combination of wireless LAN, centralized controller, and analytics as "SD-LAN," and in the future, some wireless LAN features and capabilities might also be absorbed as part of the overall SDN services. However, despite contractions and challenges in the markets of some products, more opportunities are likely to present themselves as areas of growth for operators. Section 1.3 highlights these areas.

Figure 1 gives a summary of revenue flows, showing how enterprises are shifting their spending from areas such as private line and MPLS into areas such as SD-WAN, DIA, and Ethernet. Transport and private line are a bucket of time-division multiplexing (TDM) and wavelength services, and both access and national/international long-haul services.

1.2 Private line portfolio challenges Challenges arise from innovation in any market. Network service providers are having to evolve from suppliers into collaborators, providing services and initiating discussions that an enterprise would traditionally hold internally before evaluating network solutions. There are challenges to this new, collaborative relationship dynamic that include client trust, provider suitability to the client's business requirements, and strong competition for the customer relationship. The ability of network service

Fixed broadband Fixed broadband

Market size Market revenue outflow +x.x%, -x.x%: CAGR through 2024xyz

ManagedWAN opt.

ManagedWLAN

ManagedLAN

+2.4%

-2.8%

-6.3%

-1.6%

Managedrouter

ManagedSD-WAN

-4.6%

PrivateIP VPN

Private IP VPN

Ethernet VPNDIADIA

-5.4%

+9.4%

+19.9%

+2.8%+1.3%

Private line& transport

Private line& transport

Managed LAN

ManagedWLAN

ManagedSD-WAN

ManagedWAN opt.

Ethernet VPN

Managedrouter

Figure 1: Enterprise network services revenue changes through 2024

Source: Ovum


providers to acknowledge these challenges and then strategically respond will enable them to become the essential providers of business network services.

One of the first challenges comes from evolving the relationship between network service providers and their enterprise customers. Enterprises need to be able to trust that their existing network service provider will advise them to do what is best, even if that means a reduction in contract value. They need to trust their network service provider to help them choose the correct customized services to support their digital transformation, enterprise applications, and move to the cloud. To develop this trust, network service providers need to have preemptive discussions with their clients to showcase their interest in building customized solutions and managed services long before contract renewal.

Another challenge is for incumbent network service providers to showcase their ability to provide enhanced network services for their customers. For example, many network service providers already offer performance SLAs between locations connected by their internet services, which is an important value-added feature. When designing customized network services with enterprise clients, the incumbent provider needs to highlight its ability to offer enhanced performance through network monitoring and managed services. Network monitoring applications let network service providers customize SLAs so enterprise customers can get solutions that are fully optimized for their own use.

Finally, private line competition brings cost challenges. Carriers should cooperate with vendors to utilize innovative technologies to reduce costs per bit and maintain their profits. For example, 90% of private line services are carried on SDH networks and then investment is stopped. The challenge lies in providing an alternative solution with similar bandwidth granularity and cost.

In the evolving market of private line portfolios, network service providers are being forced to keep up with the oscillating demand patterns for different services amid the move toward more flexible and agile solutions. The changes in demand require building a scalable, high-performing underlying network infrastructure that accommodates all these services (i.e., SD-WAN, MPLS, and Ethernet) while maintaining consistent network SLAs. All this needs to happen whilst building up the trusted relationship with enterprise clients, resulting in customized solutions that can continue to support the digital transformation of enterprise businesses.

Private line portfolio recommendations:

• SLAs are a good area of opportunity for growth with new investment. This is driven by the scale and scope of the connectivity demands of enterprise customers.

• Network service providers need to be proactive in regularly checking with their enterprise clients to see if they can assist with one-off or recurring managed services. They can help at every step of the enterprise networking journey and increase the likelihood of a trusted relationship.

• Smaller competitors can partner with regional/international wholesale network aggregation providers, but need to be mindful of how they will differentiate their offers besides cost.

• Consider DIA, SD-WAN, Ethernet VPN, and optical networking as areas of growth. The same can be said for managed WLAN, which opens new opportunities to network service providers. These are all key areas for future growth.


1.3 Private line portfolio growth areasAs enterprise customers evolve through their digital transformations, growing demands have been pushing network service providers to expand their private line products and services portfolios. Table 1 highlights the variances in 11 global network service provider product portfolios, based on Ovum's research and discussions with operators. Key areas of growth for each provider are highlighted in purple. Ovum's research identified key areas where providers are strategically focusing their investments. In some cases, this is due to a reaction to an enterprise requirement, a geographical shift in attitudes toward to the role of network service providers, or a focus on the needs of the small to medium-sized businesses.

Network service providers are tackling a wide range of enterprise customers' needs and requirements by offering unique private line products and services to different verticals and geographies. For example, Ovum's research found that several network service providers offer high-speed, ultra-low-latency point-to-point wavelength connections for the financial industry such as BT's Radianz. Financial services firms are willing to pay a premium for a network that has high bandwidth and remains on-net end-to-end. Another example of tailored and customized private line solutions is CenturyLink's products and services offered to the energy industry. CenturyLink has been expanding its footprint toward the remote areas that energy enterprise customers require. CenturyLink allows its customers to connect to cloud applications without special software requirements using standard server message block/network file system (SMB/NFS) protocols, and to dynamically allocate bandwidth based on requirements to upload or download large files.

Many network service providers are pursuing differentiation in focusing on growth in geographical areas, and serve the interests of enterprises in those areas, such as Asia. By building in country networks between Korea, Singapore, Japan, Taiwan, and China, network service providers can establish a strong presence in those areas, and strategically invest in services and directly cater to enterprises there. Even within their respective local markets, service providers are expanding their focus. One prong in Windstream's enterprise customer strategy, for example, is to focus on offering broadband, entertainment, and security services for consumers and small and medium-sized businesses in rural areas. Even beyond private lines, for campus networks, SD-LAN makes operational management and troubleshooting easier thanks to a more straightforward configuration, which is a traditional pain point.

Ovum's research reinforces that the key growth areas for network service providers' private line portfolios are SD-WAN and Cloud Connect services. Ovum estimates that managed router upgrades and the transition away from managed WAN optimization specialty platforms will continue to fuel managed SD-WAN's rapid growth trajectory. Network service providers are finding the growing interest in SD-WAN alongside the growing challenge of virtualizing their network to support SD-WAN. Within this growth in popularity, the need for differentiation is critical. Providers are attempting to position themselves advantageously to reap the benefits of SD-WAN.

In the APAC region, a top-tier network service provider is offering internet speeds of 100Gbps using an internet backbone. The carrier supports 30% of the world's content traffic flowing into Asia. Because the provider's enterprise clients were becoming more interested in SD-WAN, the operator had to start developing solutions using the network that it had. However, when running SD-WAN on the network, the pressure on the network is large. To quickly make SD-WAN available to customers, legacy infrastructure such as the internet backbone can be used to give providers the opportunity to quickly compete in the SD-WAN space.

“ “Ovum's research found that several network service providers offer high-speed, ultra-low-latency point-to-point wavelength connections for the financial industry such as BT's Radianz.


Top-tier providers have said that the bulk of their network connections are still coming from MPLS services, alongside the increasing demand for DIA. BT believes that MPLS will remain a cornerstone of its enterprise customers' networking requirements for the next five years. The requirements for this service are still strong for connections that enterprise customers view as mission critical and sensitive. DIA connections transport less critical and sensitive applications, leading to hybrid solutions for enterprises. An example of this requirement from BT's enterprise customers can be seen within the manufacturing vertical. The rise in industrial IoT has influenced the increased demand for MPLS. Manufacturing customers are sensitive to the high-security risk of exposing their IoT manufacturing devices to the internet, which could expose them to hackers. With MPLS, customers in manufacturing can protect their devices and their businesses.

Ethernet is still a focal point for many providers. CenturyLink's Ethernet services have a history of being at the forefront of their own innovation journey. The company's range of BoD services have given its customers the flexibility to adjust and change their network depending on the needs of their business. Consequently, CenturyLink was one of the first national carriers to launch end-to-end dynamic capacity, allowing customers to test and deploy applications with secure scalable, high-performance connectivity.

2. Private line portfolio differentiation – strategic relationshipsNetwork service providers are approaching the sales and marketing of their private line services portfolio as end-to-end solutions rather than individual products and services. This involves showcasing their capabilities and coverage from partnerships with cloud providers (e.g., Microsoft Azure or Amazon Web Services) and service providers. Their ability to provide seamless connectivity to private data centers or co-location data centers represents opportunities for network service providers to leverage their unique strategic partner relationships as an advantage that differentiates their portfolio from their competitors.

With the advent of more critical network requirements, the end-to-end solution approach enables network service providers to upsell new connectivity solutions to their existing customer base. This tactic for private line portfolio differentiation is evident through Ovum's research of global top-tier network service providers.

It is clear from our interviews with the network service providers that they take full advantage of their network infrastructure to upsell to their enterprise customers. Using this infrastructure, they can invest to upgrade their network capabilities to provide reliable exchanges and then rely on partnerships to provide cloud connectivity. Network service providers have been increasingly dedicating specialized teams to

Table 1: Enterprise network service provider product portfolios and growth areas

Network operators Ethernet services

SD-WAN MPLS VPN

Cloud Connect

Ethernet VPN

Managed Wi-Fi

TDM Wavelength Internet

True Telecom 4 4 4 4 4 4 4 4 4

Verizon 4 4 4 4 4 4 4 4 4

Orange 4 4 4 4

BT 4 4 4 4 4 4 4 4

Telefonica 4 4 4 4 4 4 4 4 4

CenturyLink 4 4 4 4 4 4 4 4 4

Deutsche Telekom 4 4 4 4 4 4 4 4

SingTel 4 4 4 4 4 4 4 4

Windstream 4 4 4 4 4 4 4

AT&T 4 4 4 4 4 4 4 4 4

Telstra 4 4 4 4 4 4 4 4

Note: 4 The provider has the product in its portfolio This product is a growth area for the provider

Source: Ovum


align their solutions with enterprise customers. For example, Telstra and its professional services team provides customized and tailored solutions for different verticals and industries. The specific requirements for enterprise customers are then reflected in the private line solutions that providers offer. Indeed, the network service provider customizes around 30% of its private line solutions to specific verticals.

2.1 Developing innovative partnerships Ovum's interviews with global network service providers find that using innovative partnerships to deliver enhanced solutions is a key point of differentiation.

BT uses this approach to have more competitively priced solutions by working with vetted ISP partners to drive locally managed customer relationships. The chosen ISPs are monitored 24x7, with BT reacting swiftly to any anomalies. The experience is also more localized, as BT has relationships with ISPs in its customers' countries of operation. Similarly, AT&T has complemented its AT&T dedicated internet service with AT&T internet aggregation services to 184 countries. AT&T extends dedicated internet access and shared internet access (broadband) with over 400 carrier agreements.

Alternatively, when offering SD-WAN solutions, Orange uses its internal partnership with 5,000 scientists, engineers, technicians, designers, and marketeers that work together in virtualized test centers. The dedicated research and development labs are deployed globally, enabling Orange and its enterprise customers to co-construct the right technical solutions. These labs help set customer expectations for the network and help design on-site deployments. The labs also allow customers to experience the benefits of external partnerships that Orange has with cloud technology, cyber security, and machine-to-machine (M2M) vendors.

As enterprise digital transformations increase, network service providers also need to design networks that enable reliable end-to-end system flow and can handle multiple product interdependencies. This can be seen with Windstream and its investment in overall network automation, for example. Investments in incorporated SDN orchestration can provide any industry vertical with an optimized service. Customers are clearly becoming more interested in what network service providers can do to support their newly digitized business.

2.2 Managed, co-managed, and unmanaged servicesBased on Ovum's research on global network service providers, managed services are an area of differentiation. This trend is growing in popularity in the APAC region, and it is well established in the EMEA and North American regions. The benefit of managed services is that they continue the conversation post sale between network service providers and their customers, providing further opportunity to upsell by adjusting end-to-end solutions and highlighting lucrative technology partnerships. From the enterprise customer's perspective, managed services relationships expose them to the private line portfolio and give them the opportunity to demand more from their provider by expressing their unique requirements. The increasing customization of network solutions and management may lead to lower-value contracts but greater customer loyalty.

The increasing interest in managed services means that network service providers must provide their customers with more contact points. This is one of the main challenges highlighted by Ovum's research. It also represents one of the main areas for differentiation and innovation. For example, network service providers have been investing in customer portals that empower enterprise customers with visibility of their

“ “As enterprise digital transformations increase, network service providers also need to design networks that enable reliable end-to-end system flow and can handle multiple product interdependencies.


network performance and the ability to flex port sizes and traffic prioritization through BoD. An example of this is the CenturyLink Control Center portal, which provides API integration with cloud service providers (CSPs) to automate the connection within the CSP network to the virtual private clouds/virtual networks (VPCs/VNETs) without the customer needing to go into the CSP portal. CenturyLink is investigating the resale/enablement of its services via partner CSP portals, which would give enterprises the flexibility to add or delete their connections from the CSP portal if they prefer. As another example, the Windstream Enterprise (WE) Connect Portal lets enterprise customers seamlessly request changes to their products, manage their contracts, and expand their bandwidth in real time; the portal represents a full-service one-stop shop. Additionally, the AT&T Business Center Portal can change access, port, VLAN, and iVLAN speeds in near real time.

Customer portals give enterprise customers greater control by monitoring network issues. Portals give network service providers the chance to showcase their efficacy at fixing issues swiftly, without compromising the operational performance of their enterprise customers. They also give network service providers the opportunity to cross sell products and demonstrate their ability to provide customized solutions. Before the customer's contract comes up for renewal both parties can review the network solution for performance and suitability to the customer's requirements. The portal can then be used to provide the customer with a more suitable solution from the provider's product portfolio or technological partnerships.

3. Private line portfolio differentiation – network innovationOvum's research finds that network service providers are innovating their network from the bottom up. There is a focus on supporting solutions such as Cloud Connect, network functions virtualization (NFV), SDN, and cybersecurity. As an executive at one leading provider stated: "the trend towards software-defined networking and virtualization has immensely increased the pressure on network infrastructure. Therefore, in order to offer differentiated IT-based solutions at higher application levels, top-tier network service providers have been innovating their network infrastructure and capabilities from the physical layer. This innovation has expanded local and international footprint, bandwidth, speeds, and architectural flexibility with supported network solutions and configurations."

The most important new network service that most top-tier network service providers are offering is cloud-based connectivity, giving their enterprise customers direct access to different public and private cloud providers such as Google Cloud Platform, Amazon Web Services, and Microsoft Azure. Cloud connectivity solutions are offered through different types of private line products and services in the private line portfolio, although MPLS and Ethernet are dominating the connectivity options. Orange is offering cloud connectivity solutions with BoD options on private interconnection. Orange has MPLS and Ethernet connections in Europe, North America, Africa, and Asia. The provider gives global customers the control over modifying, upgrading, or downgrading existing connections to cloud service providers. This works well for customers working in remote locations, such as the energy industry. Cloud connectivity, coupled with the ability to increase the bandwidth when downloading or uploading to the cloud, is critical.

“ “

The most important new network service that most top-tier network service providers are offering is cloud-based connectivity, giving their enterprise customers direct access to different public and private cloud providers such as Google Cloud Platform, Amazon Web Services, and Microsoft Azure.


Solutions that connect enterprise customers to their chosen cloud providers over secure, high-performance connections with network SLAs play a key role. AT&T's Netbond solution, for example, enhances customer visibility of their cloud connection by using customer portals, mobile applications, and APIs for a view of the data and metrics. The extent of customer control over their cloud connection extends to SDN-based capabilities that have been layered onto network services, providing greater visibility, flexibility, and provisioning of application traffic and the underlying bandwidth in near real time. SDN-controlled services add flexibility that assists with planning, troubleshooting, and fine-tuning the network for optimal performance and cloud connectivity.

3.1 Competitive SLAsAs a result of the continuous investments that global network service providers have undertaken in their network infrastructure and capabilities, a key area for differentiation has been their SLAs. This level of customization can be seen in Table 2, which shows a range of SLA examples in a private line portfolio. Network service providers have attempted to maintain competitive network SLAs throughout their portfolio. Ovum's research finds that network SLAs are tailored to specific customer needs and applications and are enforced through service credits, prompt support from the provider, and continuous monitoring.

Table 2: Examples of enterprise network service provider product portfolio SLAs

IP Connect Eth Connect Ethernet over fiber physical layer

SD-WAN Leased line Cloud Connect

Speed 2Mbps–1Gbps 1Mbps–10Gbps 10Mbps–10Gbps Depends on access technology

50Mbps (Express)– 10Gbps (BTnet)

10Mbps to 1Gbps

Latency and QoS

Low latency + multi-class of service (CoS) (DSCP)

Default + multi-CoS (five classes)

Default + multi-CoS (five classes)

Depends on access technology

Ultra-low latency(10–20ms)

Global interconnects to enable fast access

Redundancy Full end-to-end resiliency to customer

Standard – a secondary, diversely routed path from the same building entry point – two service boxes, each with a single diversely routed path from different building entry points

Standard – a secondary, diversely routed path from the same building entry point – two service boxes, each with a single diversely routed path from different building entry points

Depends on access technology

Standard – failover – backup – load balancing

Fully resilient

Availability 99.9% (standard option)

99.95% – 99.997% – 99.998%

99.95% – 99.997% – 99.998%

Availability category (SLA category) determined by the service, configuration, and site location; up to 99.998%

100% 99.95%

Monitoring 24x7 (managed and unmanaged options)

24x7 (managed and unmanaged options)

24x7 (managed and unmanaged options)

24x7 for managed and co-managed options; self-managed SD-WAN also available

Managed; BTnet user portal

24x7 managed

Support Managed (instant alert to issues and quick fix)

Service-level guarantee (SLG) for on-time delivery and another for repair within five hours of a total outage

SLG for on-time delivery and another for repair within five hours of a total outage

24x7 support Fast fix (five hours SLA); 24x7

24x7 support

Source: Ovum


Enterprises are demanding clearly stated and committed network SLAs for time to market, latency, jitter, availability, and packet delivery as part of their chosen network solutions. Based on Ovum's research, network service providers expect SLAs to continue to grow in importance. For example, a top-tier network service provider is differentiating its cloud connectivity solution by tracking and committing to go-to-market times, latency, availability, and packet delivery, in addition to speed and bandwidth requirements. Notably, installation interval and time-to-repair SLAs are growing in importance. With regard to the installation interval SLA, network service providers are offering basic and premium service-level objectives related to the time to market "from customer signature to turn-up" as offered by CenturyLink, for example. Some network service providers can provide services for customers in almost real time. Additionally, the requirement for faster time to market has manifested in increased network coverage (and on-net buildings in particular).

With customers using portals to monitor the performance of their network, and relying more on managed services, evolving demands for different private line products and services has highlighted the importance of consistent network SLAs. Amid the growing demand for its SD-WAN service, Telefonica executives observe that its enterprise customers are less concerned with the underlying access technologies and are more concerned about contractual network SLAs. This is also the case for active-backup network configurations, where network service providers offer competitive SLAs for both active and backup links.

When considering network SLAs in the context of SDN services, enterprise customers are focusing on superior and consistent network performance 24x7. BT has introduced software to monitor the end-user experience of every cloud, SaaS, thick client, and enterprise mobile app running on customers' network solutions to ensure that their SLAs are met. Ovum's research finds that network SLAs are usually not part of the enterprise RFP process, but they play an important role in the bid process. Ultimately, monetary compensation when SLAs are not met is less important to customers than contractual assurance that the performance of the network remains consistent 24x7.

Enterprise customers are less interested in monetary compensation for underperforming networks, so SLA actions in addition to service credits play a key role as a differentiator for network service providers. As providers evolve into a one-stop shop for cloud connectivity and other applications, competitive SLAs are enabling enterprise customers to demand a consistent service that they can rely on to support their increasingly complex IT solutions. Premium SLA examples range from short time to market, committed down times of less than five minutes a year, latency of less than 10 milliseconds, BoD with a self-service element to adjust the bandwidth at whim, and multiple redundancy and availability options.

3.2 Committed network SLAs are key for product differentiationBefore network service providers can offer differentiated private line products to meet enterprise requirements, their underlying networks must be able to commit to key SLA metrics such as time to market, availability, and latency. Network SLAs need to be open and transparent to enterprises as part of their portfolio offering.

Committed time-to-market SLAsTime to market is measured in different ways, whether through installation interval or "quote to cash." No matter how it is measured, time to market depends on fiber cable and optical network coverage, and the complexity of commissioning end devices. If new construction is involved, installation normally takes months to complete. To speed up the provisioning of private lines, one Middle Eastern operator has begun relying on the latest 5G technologies. The operator can deliver up to 1Gbps temporary broadband connections to enterprises within days of a service order. This way, the enterprise has network connectivity while the provider follows through with cable construction, connection, and optical equipment installation. Once the fiber is in place, the enterprise benefits from the full performance and reliability of optical private line service and can keep 5G as a second link for higher reliability.


Committed high-availability SLAsPrivate line service uptime is the most important performance indicator for organizations, especially governments, finance, large enterprises, and wholesale partners. The robustness of private line services mainly depends on redundant physical fiber and equipment, and fast time-to-repair capability. The latest automatically switched optical network (ASON) technology creates optical meshes that help private line services recover even if they experience multiple fiber cuts. Active fiber quality monitoring and fault prediction solutions also help detect and remedy service problems before an outage occurs. With these solutions, operators can commit up to 99.999% service up time.

Transparent and on-demand SLAs To add new types of performance SLAs such as predictive latency, enterprise IT buyers often used to change contracts. They would swap premises equipment, which might take weeks or even months. With the development of SDN solutions powered by segment routing (SRv6), changing private line routes to meet the required SLA can take minutes, with just one configuration touch to customers' premises equipment. With SRv6, the network SDN controller calculates the optimal service route, for precise SLA monitoring and reporting to operators' OSS/BSS IT systems, and reporting through the customer portal to the enterprise.

Network cost efficiency is the bottom lineFor decades, transport services based on legacy synchronous digital hierarchy (SDH) infrastructure have provided dedicated, secure bandwidth to enterprises. SDH technology is now coming to the end of its industry lifecycle. Operators need to consider the next generation of dedicated transport solutions. Optical transport network (OTN) technology is a strong candidate. OTN has a similar design philosophy to SDH, but OTN is also designed for speeds of 1Gbps and above, which makes cost a challenge at lower speeds. Future wavelength-division multiplexing (WDM)/OTN technologies that support sub-500Mbps private line services at a competitive cost per bit could offer a strong combination of dedicated transport quality and cost efficiency.

Service

Private line Basic connection Enhanced SLA

Site to site xPON

Ethernet VPN/IP VPN

Wavelength/WDM/OTN

Site to internet

Time to market

SD-W

AN

Committed bandwidth

Committed high availability

Bandwidth Committed low latency

Committed fault resolve timeSite to cloud

Bandwidth on demand

Cloud to cloudService quality report

Access Metro

10M 500M 1G 10G 100G 200G+

Backbone

Price

$

$$

$$$

Bearing network

Differentiated product SLA committed network

Figure 2: Enterprise-enhanced SLAs connected to the corresponding bearing network

Source: Ovum


4. ConclusionNetwork service providers are under increasing pressure to provide services to enterprise customers to enable them to migrate to cloud services. Network providers also must traverse changes in demand for private line products and services. Enterprise customer spending is shifting out of MPLS VPN, legacy dedicated transport, and managed router services into dedicated internet, broadband access, and managed SD-WAN services.

Managed network services present a challenging growth market where entrants from many different industry sectors may converge and bid to lead these services. For providers of all types of network services, one key is differentiation. Network service providers can draw on strengths from other parts of the business – security, mobile wireless services, IT and cloud, equipment supply, and hardware/software support – to help bolster, keep, and even increase the core network sale.

When network service providers turn the spotlight on higher-level solutions, they understand the importance of their lower layers of network infrastructure. Agile, automated optical networks and private line services help power better network SLAs that deliver a powerful basis for service differentiation. That differentiation cuts across higher platform availability and better service performance, but also other important SLA factors such as time to market and time to repair.

AppendixMethodologyThe information contained in this report is based on current and prior primary and secondary research conducted by Ovum. Ovum analysts regularly interact with the world's leading service providers and produce research on the overall market and individual companies' products, services, and go-to-market strategies. Network service providers in this white paper are referenced for their product, platform, and service innovation; no relationship between individual service providers and Huawei is expressed or should be implied.

Further reading from OvumGlobal Enterprise Network Services Report, 2019–24 (December 2019)

Full MPLS Exit: The Cautious SD-WAN Path to All-internet WAN (April 2019)

MPLS: Dead, Alive, or on Life Support (March 2019)

Driving Innovation in the Optical Core with SDN (February 2014)

OVUM CONSULTING BECOMING OMDIAOmdia is a global technology research powerhouse, established following the merger of the research division of Informa Tech (Ovum, Heavy Reading, and Tractica) and the acquired IHS Markit technology research portfolio. Omdia will combine the expertise of more than 400 analysts and consultants across the entire technology spectrum, covering 150 markets.

Through our analysts worldwide, we offer expert analysis and strategic insight across the IT, telecoms, and media industries.

We create business advantage for our customers by providing actionable insight to support business planning, product development, and go-to-market initiatives.

Our unique combination of authoritative data, market analysis, and vertical industry expertise is designed to empower decision-making, helping our clients to profit from new technologies and capitalize on evolving business models.

Ovum is part of Informa Tech, a B2B Information Services business serving the Technology, Media, and Telecommunications sector. The Informa group is listed on the London Stock Exchange.

We hope that this analysis will help you make informed and imaginative business decisions. If you have further requirements, Ovum's consulting team may be able to help your company identify future trends and opportunities. Please contact us via

https://ovum.informa.com/contact/contact-us

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