AT&T: SD-WAN needed for SMB customers, but VPN not going away

Overview:

AT&T told investment analysts this week that software-defined WAN (SD-WAN) technology would be a key part of its portfolio down the road, especially for small and medium-size businesses.  AT&T CEO Randall Stephenson offered insight into AT&T’s SD-WAN strategy on its Q1-2017 earnings call on Wednesday.

Most of the call, especially the prepared remarks, was devoted to AT&T’s wireless operations, 5G availability, DirecTV and DirecTV Now, and the Time Warner acquisition (“moving along as scheduled”).  Yet AT&T did talk about strategic business services during the Q & A session of the call.  In response to a question from David W. Barden – Bank of America Merrill Lynch about SD-WANs, CEO Stephenson said:

“On the SD-WAN, yeah, it’s real. It tends to be real down-market (SMB), David, and you should assume that we’re developing capability ourselves, because it’s a viable offer down-market. We’re seeing some effect from it. It’s not material yet, but we think it’s a legitimate capability. We need to be there; we need to have it. And so up-market (large enterprise customers), the traditional VPN capability is always, we think, is going to be the enduring capability. But down-market (SMB), we’re going to have to be prepared to compete with this kind of offering.”

Background:

AT&T hasn’t released its own SD-WAN solution yet, but the mega service provider said on October 5, 2016:

“For a customer with similarity across sites and looking to deploy SD-WAN at all locations, the AT&T SD-WAN premises-based, over the top solution (?) may be the best fit. The premises-based, over the top solution will be avaFor a customer with similarity across sites and looking to deploy SD-WAN at all locations, the AT&T SD-WAN premises-based, over the top solution (?) may be the best fit. The premises-based, over the top solution will be available later this year.”

–>It wasn’t and there’s still no definite availability date!

That same day, AT&T revealed it was collaborating with SD-WAN vendor VeloCloud with the aim of releasing a solution sometime in 2017.  AT&T’s said its SD-WAN service will let customers manage application performance and bandwidth by allowing them to set parameters for routing data traffic across different access types.

AT&T will continue to market traditional MPLS-based VPN services to its large enterprise customer base. “Up market, the traditional VPN capability is going to be the enduring capability,” as per Stephenson quote above.

A network-based system could build off a customer’s existing MPLS, Carrier Ethernet or wireless connections.  Customers could use SD-WAN to manage their various wired and wireless Internet connections from third parties.

“For SD-WAN solutions, AT&T is the first provider in the industry to announce both an over-the-top solution as well as a network-based SD-WAN solution, which couples smart SD-WAN CPE with a smart MPLS network,” wrote a VeloCloud spokesmen to SDxCentral. “A typical SD-WAN solution is deployed in an over-the-top manner, i.e., SD-WAN CPE is deployed at every customer site, and tunnels are established over the network transport links among sites,” he added.

Comment:  AT&T hasn’t announced availability of any SD-WAN service so the VeloCloud spokesman is less than honest!  AT&T has touted its SD-WAN over the top option (whatever that means), but hasn’t delivered it yet to paying customers.  Nonetheless, the VeloCloud website lists AT&T as a “managed service provider partner”:

“AT&T SD-WAN efficiently routes data traffic across a wide area network, choosing the access type for the best network performance. AT&T provides options in the SD-WAN category: a network-based option that enables virtually seamless connectivity across multiple site types, and provides an easy transition for customers with existing AT&T VPN services; an over-the-top premises-based option for businesses that want to deploy SD-WAN at all sites.”

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Being able to provide VPN capabilities along with Carrier Ethernet has been a key factor in how AT&T has retained its profile as one of the largest domestic U.S. and international Ethernet providers.

SD-WAN may represent a future capability for AT&T’s business unit, particularly as a next-gen strategic service.  That’s despite a challenging environment where businesses are not aggressively spending capital on business services.

Weaker Demand for Business Services:

AT&T CFO John Stephens said on the earnings call that interest in business services was not as strong as the company initially forecast.

“In the business segment, we saw weaker demand than we expected,” Stephens said. “U.S. business investment as percentage of gross domestic product (GDP) continues to be low.”  Stephens added that “growth expectations in the economy have been rising, but we have yet to see that translate into economic gains or demand.”

Author Note:

A weak economy is a huge problem for network providers offering business services as spending on same is constrained by lower revenues.  Another issue for SD-WAN is that many SMBs are choosing cloud computing and storage, rather than expanding their VPNs or looking for another solution to connect their branch offices and headquarters sites.  Such a network topology change augers well for cloud network access solutions (like AT&T Netbond or Equinix Cloud Exchange), but not for SD-WANs.

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References:

http://about.att.com/story/att_unveils_sd_wan_hybrid_networking_strategy.html

http://searchsdn.techtarget.com/news/450400584/ATT-joins-long-list-of-SD-WAN-service-providers

https://www.sdxcentral.com/articles/news/att-chooses-velocloud-deliver-sd-wan/2016/10/

https://www.sdxcentral.com/articles/news/att-brewing-house-sd-wan-velocloud-help/2017/04/

http://www.fiercetelecom.com/telecom/at-t-says-sd-wan-will-help-it-stay-competitive-smaller-business-market

https://opennetworkingusergroup.com/wp-content/uploads/2015/05/ONUG-SD-WAN-WG-Whitepaper_Final1.pdf

https://www.sdxcentral.com/sd-wan/definitions/software-defined-sdn-wan/

https://networkingnerd.net/2017/04/21/the-future-of-sdn-is-up-in-the-air/

4 thoughts on “AT&T: SD-WAN needed for SMB customers, but VPN not going away

  1. Interesting article on SD-WAN as a Service:

    Rather than utilize expensive MPLS or private fiber, TELoIP’s SD-WAN infrastructure operates on 100% public internet with virtual machines in data centers across North America. Keep in mind that in their SD-WAN cloud they use only public internet and not their own private fiber. Pat explained this ensures carrier diversity and independence, and he elaborated that in order to truly gain the power of the internet, you need diverse carriers with multiple connections.
    http://tinyurl.com/lyjpxvu

    NOTE: THERE ARE NO STANDARDS FOR SD-WAN, SO EACH IMPLEMENTATION IS A SINGLE VENDOR SOLUTION WITH NO INTER-OPERABILITY & NO INTER-NETWORKING AMONGST SD-WAN SERVICE PROVIDERS.
    At the Open Network Summit last month, ONF Exec Director Dan Pitt said that none of the service providers ONF has talked with want to standardize SD-WANs as they don’t want to test for multi-vendor interoperability!

  2. As far as I can tell, the level of interop among the various manufacturers of optical transport gear is the same as with SD-WANs. You just never hear of a WAN link that has a Cisco 15454 link at one end and Ciena at the other. With SD-WAN it seems like most of what you’re paying for is the service and not the endpoint gear. So if some SMB wants to switch to a different SD-WAN supplier, they might need to sink their end-point investment, but how much $$ is that?

    The trail of SD-WAN articles from the bread crumbs in your post was pretty useful, so thanks for that.

    -jim

  3. Jim, thanks for your comments and acknowledgement. Optical transport gear (OTN or SDH/SONET) is interoperable based on DWDM vendor adherence to the ITU-T OTN grid (for wavelengths) & recommendations (for framing & transport and/or SDH/Sonet standards. That’s been the case even though optical network providers usually use only one vendor of DWDM transceivers which interoperate with OEO Optical switches and SONET/SDH cross connects.

    SD-WAN is a completely different story as it requires multiple different types of equipment (edge node, Gateway, Controller, Management entity, Orchestrator, Analytics Engine, etc) which is all from a single vendor.

    Do you think the Internet would work if there was ONLY a single IP router vendor? With no internetworking between ISPs? Well, that’s the situation with SD-WANs, but few except me dare to expose that reality!

    At least the ONUG is trying to set a defacto standard for an “open API” that would facilitate internetworking between SD-WAN islands as per comment I posted earlier today (May 1, 2017)

  4. From ONUG – Moving to an open SD-WAN API:
    “The ongoing efforts of the Open SD-WAN Exchange (OSE) working group is exactly focusing on defining an API at this level. The goal of the enterprise consumer of SD-WAN solutions is to achieve interoperability between these islands of SD-WAN networks. The API will enable a consistent business intent defined in an uber service definition layer to be implemented across different SD-WAN islands. Each domain specific orchestrator or controller will use lower level APIs to interface to their individual SD-WAN nodes. Enterprises desire the ability to leverage multiple SD-WAN solutions both for second sourcing as well as enabling interoperability in merger and acquisition situations.”
    https://opennetworkingusergroup.com/moving-towards-an-sd-wan-api/
    ……………………………………………………………….
    Also see: Why SD-WAN is Critical to Your Business
    http://opennetworkingusergroup.com/why-sd-wan-is-critical-to-your-business/
    ……………………………………………………………….
    Today (May 1, 2017) Cisco announced they will acquire SD-WAN vendor Viptela: https://www.streetinsider.com/Corporate+News/Cisco+Systems+%28CSCO%29+Confirms+it+will+Acquire+Start-Up+Viptela+for+%24610M/12841169.html

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