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TOP 3 GROWTH OPPORTUNITIES IN THE NETWORK

SERVICES INDUSTRY FOR 2021

– WHAT YOU NEED TO KNOW NOW

2 All rights reserved © Frost & Sullivan Top 3 Growth Opportunities the Network Services Industry for 2021

State of Global Network Services Industry

Networking is cool again! Software-defined networking (SDN), network function virtualization (NFV), and

software-defined Wide Area Network (SD-WAN) technologies are completely redefining the WAN space by

offering much-needed agility and flexibility to enterprise WANs. SDN enables bandwidth capacity to be

procured in real-time, while NFV enables network functions to do the same. The ability to deploy multiple key

network functions in virtual formats—routing, security, WAN optimization, session border controllers—is of

immense value to businesses in terms of reducing appliance sprawl, network scalability, and manageability.

SD-WAN enables abstraction of network services and application-aware routing of traffic on the most

optimized path.

As SDN, NFV, and SD-WAN technologies make deep inroads into enterprise WANs, enterprises are unlikely

to go back to the traditional, hardware-centric approach of deploying WANs. Furthermore, as the cloud

continues to be at the front and center of enterprise digital transformation plans, there is a heightened focus

on ensuring agile, secure & optimized network connectivity to connect hybrid and multi-cloud deployments.

The pandemic has further validated the power of connectivity services, as they ensured business continuity

by keeping the global workforce connected.

Service providers need to adapt to the fast-changing environment. SD-WAN is challenging the status quo of

private WAN services (MPLS & Ethernet). The pressure on network managers to optimize networks as

businesses adapt to the economic impact of the pandemic will increase the attractiveness of broadband and

wireless services with SD-WAN. Combining hybrid network services, offering managed services, and creating

packages of value-added services that include enterprise solutions such as VoIP, UC, and security, will help

retain customers.

All rights reserved © Frost & Sullivan 3 Top 3 Growth Opportunities the Network Services Industry for 2021

Hybrid Cloud and Multi-cloud Connectivity Needs

will drive demand for SD-WAN

• It is common for enterprises to use a multi-cloud

deployment for various workloads. As enterprise

applications are distributed across multiple

clouds, the traditional WAN architecture of

backhauling traffic to a hub site, and then

routing to the cloud, is inefficient and expensive.

SD-WAN enables enterprise IT to predefine

business policies through the SD-WAN

controller, to specify which cloud applications

are suitably accessed directly through the

internet versus backhauled to a hub site.

• Gen2 solutions are platform-centric,

encompassing a variety of network functions

such as WAN optimization, routing, and stateful

firewall. The platform-centric approach is

intertwined with the hybrid cloud/multi-cloud

trends in the enterprise market.Gen2 SD-WAN

addresses the multi-cloud connectivity needs of

enterprises by enabling users to define and

apply policies to seamlessly route application

traffic across multiple clouds.

PLATFORM-CENTRIC,

CLOUD-FIRST, SD-WAN

SOLUTIONS ARE GAINING

TRACTION

Businesses Will Continue to Embrace SD-

WAN as an integral part of their WAN

strategy

• Global SD-WAN market revenue crossed

the $1 billion mark in 2019, with revenue

and customer sites growing more than

100% from 2018 to 2019.

• The economic downturn due to COVID-19

will impact SD-WAN spending in the near

term. Highly distributed verticals such as

retail and manufacturing have been

impacted negatively by the pandemic,

which will slow market growth in the next

couple of years.

• As businesses reassess their technology

spend, Frost & Sullivan expects that SD-

WAN will emerge as a top choice for their

networking needs, which will contribute to

higher growth rates beyond 2022.

4 All rights reserved © Frost & Sullivan

MANAGED SD-WAN

CREATES BROADER

REVENUE OPPORTUNITIES

FOR SERVICE PROVIDERS

Top 3 Growth Opportunities the Network Services Industry for 2021

Global Managed SD-WAN revenues will

experience high double digit growth rates

• The global managed software-defined wide

area network (SD-WAN) services market is in

the growth phase of the product life cycle.

• Across industries, businesses are embracing

these services as an integral part of their

WAN transformation strategy, largely to gain

cost and operational efficiencies.

• Global market revenues for 2019 exceeded

$2.2 billion, with more than 350,000 SD-WAN

sites operational today.

• Currently, North America leads the revenue

and share of customer sites, followed by

Europe and Asia Pacific.

Rise in demand for managed SD-WAN will

provide upsell and cross-sell opportunities

• As SD-WAN deployments have increased in

the last three years, businesses have

realized that installing and managing multiple

SD-WAN sites is a complex process. It can

be daunting when it involves multiple

transport and access providers from across

the globe. A managed service provider with

the expertise and technology needed to

integrate disparate operations and

management systems from various access

providers can help address the complexity.

Hence, fully managed SD-WAN services

continue to gain traction.

• Managed SD-WAN presents service

providers with upsell opportunities for hosted

VoIP and UCaaS offerings while helping

retain customers

• The rise in remote working creates

opportunities for managed SD-WAN

providers to bundle business-grade

broadband/Internet and business wireless

services with SD-WAN to tap into the market

opportunity.

All rights reserved © Frost & Sullivan 5

NETWORK EDGE

COMPUTING, SD-WAN AND

5G

Top 3 Growth Opportunities the Network Services Industry for 2021

5G will fast-track SD-WAN Adoption

• SD-WAN facilitates automated, optimized, and

secure connectivity over 5G between

endpoints (users or things) and edge compute

nodes. The network slicing feature of 5G

enables an SD-WAN platform to request

virtualized slices on the network for different

applications, based on centrally defined

policies.

• SD-WAN vendors are looking to ship SD-WAN

appliances with integrated 5G support to tap

into edge computing and 5G trends, which will

open up more opportunities for service

providers to include wireless as part of their

managed SD-WAN offering.

The Rise of Edge Computing

The growth in IoT applications and the need

for faster processing of data for latency-

sensitive applications is driving the need for

edge computing. Edge computing addresses

the need for local computing power in close

proximity to endpoints. With edge computing,

network and computing resources are

configured at local sites to process the data,

thus limiting network-induced delays, reducing

network costs, and minimizing risks of data

loss or corruption.

The Growing Importance of 5G

5G plays a critical role in the success of edge

computing due to its high-speed and low-

latency bandwidth features. While the 5G

rollout began in 2018, the service is available

in limited cities today. 5G speeds are

comparable to that delivered over fiber with

data peak rate for download speeds reaching

20 Gbps. 5G also offers superior connection

density compared with LTE as it can support

close to 1 million connected devices.

6 All rights reserved © Frost & Sullivan Top 3 Growth Opportunities the Network Services Industry for 2021

What Lies Ahead – Future Outlook

The managed SD-WAN service increases customer stickiness for network services. The impact of SD-WAN

technology on the enterprise WAN can be compared to the impact that cloud computing had on the

enterprise IT over a decade ago when the first public cloud services became available. While there is no

debating that the cloud has changed the way businesses purchase and consume IT resources, the

consensus is that the hybrid cloud is the way to go. The underlying networks, despite being commoditized,

will remain a crucial part of the SD-WAN solution, thus ensuring the relevancy of service providers in the

enterprise SD-WAN journey.

Despite the threat that SD-WAN represents to MPLS revenues, service providers will need to embrace SD-

WAN to protect their transport revenues and ensure customer retention. In the process, there will be

opportunities for service providers to earn incremental revenues by offering value-added managed services

such as hybrid WAN services, hosted VoIP, UCaaS services, and security services.

The unprecedented growth in remote working trend will further create opportunities for service providers to

combine business-grade broadband networks and 4G/5G services with SD-WAN to tap into the market

opportunity. The software-defined architecture of cloud and networks enable companies to put applications

closer to the user, resulting in improved application availability and performance than possible with traditional

inflexible, hardware-centric networking architectures.

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Recommended Readings:

Global SD-Wan Vendor Market, 2020

COVID-19 Highlights the Business Case for Extending SD-WAN to Remote Workers

Assessment of the Global Threat Intelligence Platforms Market, Forecast to 2022

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