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© 2016 by The Enterprise Strategy Group, Inc.

Dan Conde, Analyst

SD-WAN Economics 101

PREPARED BY ESG FOR

What you’ll get out of today’s webinar

• Gain a better understanding of the key elements of SD-WAN that deliver performance, simplicity, and optimal access to on-premise applications and cloud services.

• Examine the components of SD-WAN and provide a review of the key financial benefits, basic cost savings and the hidden operational benefits that SD-WAN brings to businesses.

About ESG• ESG is an IT analyst, research, and strategy company.

• Our firm was founded in 1999 with headquarters in Milford, MA / an analyst and client relations presence in Silicon Valley, CA.

• ESG conducts research with and for IT vendors, IT professionals, business professionals, and channel partners.

• We maintain ongoing analyst coverage in cloud computing, networking, storage, data protection, cybersecurity, data management and analytics, application development and deployment, enterprise mobility, and channels.

• Capabilities include: Analyst services, market research, technical performance testing, economic validation, consulting, and custom content.

Situation in past with Wide Area Networks

• Networks are designed to access the data center

• Networks were based on MPLS, leased lines

• Apps were delivered from the data center only, and little access to internet

What is changing

• Access to the internet is more prevalent

• Network are available from more sources: broadband, LTE in addition to MPLS, DSL

ChallengesESG Research shows these are the top branch office challenges:

• Slow speeds• Cost of WAN bandwidth• Too much data to move on WAN

• Simplify the network• Reduce operational expenses• Reduce bandwidth costs

A new approach can help

What can a modern WAN do for you?

Reduce telecom costs

32% of organizations say that cost of bandwidth has been a challenge

Most bandwidth use at the branch will continue to increase with video, VoIP and other media

How does one cap spending while addressing new needs?

Simplify the network

What can I eliminate? I have a variety of equipment at the branch and at the data center (head end)

• Routers?• Layer 7 firewalls?• WAN Optimizers?• VPN devices?

Reduce Operational Expenses

• ICOM Budget – installation, configuration, operation and management

• Each truck roll is expensive -Troubleshooting and provisioning often requires in-person visit

Who can benefit?• Enterprises can benefit• Service providers can benefit

Enterprises simplify their WAN infrastructure

Service providers can create multi-tenant WANs

Five VeloCloud Customer Case Studies

• ESG developed the TCO whitepaper based on 5 VeloCloud customer case studies

• 4 Enterprise customers and 1 service provider • Analysis included CAPEX and OPEX costs savings

Details of the benefitsLet’s drill down into the benefits with an example.

Being ready for future workloads

Providing better service

Device Consolidation

Branch costs can exceed $340,000plus support costs

Instead, purchase a single device, and use virtualized services.Fewer devices – less to worry about

• Take the right path depending on the traffic

• VoIP traffic takes a low-latency path

• YouTube traffic takes a high bandwidth but less reliable path

Dynamic multi-path

• Performance, configuration and status are critical

• One view to provide awareness and appropriate control

Visibility into WAN

• Troubleshooting previously required a truck roll

• Centralized cloud network architecture means VeloCloud worries about the network control and management plane

Troubleshooting - simplified

How to get there: A story of a 250 branch deployment

Let’s see how savings in three areas can help with this hypothetical company

Today

• 1 MPLS port – but running out of capacity• I pay $600 for one 3 Mbps port• Cost per Mbps - $200

Keep with the status quo – buy more MPLS

Pay for more MPLS network ports – 2x $600No savings from modern methodsTotal bandwidth- $1,200At least your per Mbps costs stay the same and is predictable - $200

Use old MPLS, add broadband

Keep one MPLS port - $600 / monthDon’t add any new MPLS portsAdd a new broadband (cable) - $75 / monthVeloCloud subscription - < $100/monthTotal bandwidth: $675 for 23 Mbps and $29/Mbps

Remove MPLS, use dual broadband

Dual broadband link – from two providers -$150 totalVeloCloud subscription - $50/monthTotal bandwidth: $150 for 40 Mbps and $3.75/Mbps

Infrastructure and Ease of Installation, Mgmt Savings –Illustrative example

Infrastructure (average cost per branch)

Legacy VeloCloud Notes

Headend cost per branch* $160 0 Datacenter Headend with high availability

Branch devices cost $900 0 Router, router module, Firewall, VPN, WPC, Mgmt

OperationalPer branch

Legacy VeloCloud

Network Managementlicense and support

$1080 0

Support cost $300 0

MPLS connector cost* $120 0

*does not include branch truck rolls and associated savings

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

Current With VeloCloud

WAN Costs for a 250 branch deployment

Bandwidth Operating Expenses (ICOM) Network Infrastructure

3x Total Cost of Ownership Savings with SD-WAN

3x

Summary

There are several paths to adoptionChoose your schedule, contracts, future needsIt is not a wholesale change – gradual adoption is possible

Changing from CapEx to OpEx affects the budgeting structure.

Make the costs variable and not follow an up-front investment that’s depreciated.

Accounting benefits

Questions?