Despite the importance to all service providers of “knowing your market”, reliable sources for market size and shape for Enterprise Wide Area Networking on a global basis are few and far between. That’s why here at Brodynt we were fascinated by a report published late last year by the data-driven WAN analysts from TeleGeography.
For many years the TeleGeography team have been compiling pricing data from multiple carriers and collecting end-user data directly from WAN managers. They have now combined this with key data from world’s largest 5000 companies by revenue (the Global 5000 database) to produce bottom-up estimates of the size of the Global WAN market, split by region and split by technology.
Global Wan Market: MPLS still with a firm grip
In a nutshell, the Global WAN Market totalled around $76Bn in 2020. MPLS port charges are still around 43% of the market, with DIA port charges around 16%. Access costs are still a large chunk at 38% but broadband is negligible in market value terms despite being around 15% of the total site volumes. SD-WAN (which it seems occupies 98% of the news around WAN) accounts for just over 2% of the market value – the cost to the customer is still very much in the underlay.
Therefore, what can service providers learn from the data within this report? Well, the real insight into the market comes from the more detailed estimates of the number of sites and the global revenues by technology in each region. Global WANs are sticky by nature, the cost and risk to a corporate of changing global supplier drives by far the majority to re-sign with their incumbent provider – unless they can see a significant reduction in cost. This can only come from a transformation of the underlay technologies – a move away from MPLS-based transport to internet-based transport, something enabled by established technology such as SD-WAN and emerging technology such as SASE. Despite the price attraction of a move from MPLS to Broadband – performance, service and separacy challenges mean most MPLS sites outside of national branch networks are likely to move to DIA.
TeleGeography’s modelling suggests that over 75% of the value of the market today is still associated with MPLS – ports and access circuits. This is the real addressable market for new suppliers fuelled by SD-WAN and SASE solutions, saving the end users money by moving to DIA, which typically has lower port prices and greater “on-net” availability. For example, shifting all of the current MPLS ports to DIA solutions would offer a potential collective saving to the enterprise end users in excess of $20Bn. However, the relative regional economics of the prices of these technologies can give focus as to where to look first to have the biggest financial impact.
Analyzing WAN market from the geographic stand point
Over 50% of the world’s MPLS sites are in Western Europe and USA/Canada, however these regions have the lowest pricing for MPLS port and access giving a conservative differential between MPLS connected sites and those connected via DIA. DIA based solutions here average around 25% cheaper than MPLS, meaning that these 50% of the MPLS-connected volume would deliver only 15% of the potential savings from moving to DIA. The highest pricing differentials are found in Middle East/North Africa, and Sub-Saharan Africa where DIA connected sites typically cost 60% less than MPLS connected, with the latter being expensive. These regions cover 6% of MPLS sites but have the possibility to offer over 50% of the potential $20Bn saving from moving to DIA.
Next we have East Asia and South Asia, home to 20% of MPLS ports where DIA-based solutions are 30% to 40% lower cost than MPLS, hence Asia would deliver 26% of the potential saving. At the other end of the scale, we find Oceana and Latin America – regions where the average prices for DIA-connected sites are less than 15% below those for MPLS – home to 14% of the world’s MPLS sites, but offering only 4% of the addressable customer savings.
Whilst the global WAN you are bidding may have a majority of sites in Western Europe and UAS/Canada and you have a great story supporting move to cloud and access to internet-based apps such as O365 via SD-WAN or SASE, underlay costs will still dominate your bid pricing. Your ability to get a good quality DIA-based underlay in Middle East, Africa and across Asia will impact significantly on your pricing compared to traditional MPLS-based alternatives.
How can Brodynt help?
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