Global network service providers are responding to clients’ transformational WAN requirements to support greater agility and reliability for digital business initiatives. In its review and analysis of global network services providers, Gartner makes the following assumptions:
By 2025, 50% of new software-defined WAN (SD-WAN) purchases will be part of a single-vendor secure access service edge (SASE) offering, which is a major increase from 10% in 2022.
By the end of 2025, at least 30% of enterprises will employ software-defined cloud interconnect (SDCI) services to connect to public communication service providers (CSPs), which is an increase from approximately 10% in 2020.
By 2026, 70% of enterprises will have implemented software-defined wide-area networks (SD-WANs), compared with approximately 45% in 2021.
By 2026, 45% of the enterprise locations will use only internet services for their WAN connectivity.
Growing interest in services like managed SD-WAN and SASE are transforming the enterprise networking market. These are additional ways, rapidly deployed, that organizations can help improve the agility of providers’ network solutions and differentiate themselves to the enterprise audience.
Enhancements to flexible networking technologies, such as NoD and bring your own (BYO) access, offer greater support for self-service. They also offer the rapid accommodation of new endpoints and new applications (including cloud services and the Internet of Things [IoT]) while controlling the organization’s WAN expenditure.
Flexible sourcing approaches, such as network as a service (NaaS), are gaining interest, although offers are still emerging and should be closely examined against alternatives.
The growing use of internet services for WAN transport remains strong and has forced providers to reevaluate their own internet service offerings as well as the extent they partner to peer with local ISPs for greater geographic reach and differentiation.
Gartner has also observed an increased demand for Ethernet and wavelength services to effectively address regional requirements for data center connectivity and very high bandwidth circuits, which are integral to the hybrid solution.
Leader in this global Magic Quadrant for network services include: NTT, AT&T, Orange Business Services, Tata Communications, Vodafone, BT and Verizon.
Figure 1: Magic Quadrant for Network Services, Global
Source: Gartner (February 2023)
Some enterprises are moving to internet services for cost reasons as outdated WAN equipment requires the replacement of traditional branch routers, according to Gartner Analyst Danielle Young. Legacy equipment is often being replaced with SD-WAN appliances and solutions, which Young said is “causing a relook at the WAN overall.”
“SD-WAN provides dynamic path selection based on business or application policy, centralized policy and management of appliances, virtual private network, and zero-touch configuration,” she told SDxCentral.
SD-WAN products are WAN transport- and carrier-agnostic, and notably can create secure paths across all WAN connections, including private, public, and wireless. SD-WAN products can also be hardware- or software-based and either managed directly by enterprises or embedded in a managed service offering, Young noted.
“Most often, enterprises are migrating from private networks to create hybrid networks, which utilize a range of connectivity options depending on bandwidth, reliability, and necessity, including using more readily available internet services,” she said. “Security will need to be addressed regardless of WAN connectivity (private or internet-based); and can be addressed through a variety of different approaches.”
Gartner forecasts that the market for enterprise fixed data networking services in 2023 will be nearly $134 billion, an increase of approximately 2.6% from 2022 for a compound annual growth rate (CAGR) of 1.9% from 2021 through 2026. The number of global NSPs included in this research has decreased, and many more are operating in the broader market and did not meet all our inclusion criteria. In addition to large global providers, enterprises are increasingly willing to consider smaller or regional providers, including managed service providers, with little or no network infrastructure of their own, but who resell network services to their enterprise clients where needed.
Network Transport (“Underlay”) Trends:
WAN transport services (frequently called “underlay” services) continue to see rapid change, especially in terms of migrations and changes to primary connectivity. MPLS — the mainstay of enterprise networks for over two decades — is being augmented and often displaced by internet (transport) services. And while MPLS still brings benefits in terms of high availability and stable performance, it commands a slight premium in price to standard internet services. MPLS is still preferred as the primary link for the most critical locations and in places where internet performance is poor or variable, which includes emerging markets and those where the internet is heavily restricted, resulting in poor performance. The net result is a smaller number of higher-capacity MPLS lines being retained or deployed in new network designs.
Gartner has witnessed that many enterprises using a hybrid of internet and MPLS usually have more and larger internet lines than MPLS lines. Direct internet connectivity allows direct access to SaaS and general internet traffic and offers a wider variety of access types than MPLS, including dedicated internet access (DIA) over Ethernet, as well as broadband and cellular. DIA lines are typically priced similarly to MPLS lines of comparable capability, but can easily be sourced from multiple providers, while MPLS links generally need to be sourced from a single provider.
For global network deployments, traversing the internet brings additional challenges not found in national networks, including the risk of suboptimal routing and congestion as the traffic traverses multiple ISPs. There are a number of ways of overcoming this, including:
Sourcing all internet services from a single provider
Federations of ISPs that offer controlled routing among their members
Network-based SD-WAN gateways terminating the SD-WAN tunnels and passing the traffic over the provider’s backbone
Enhanced internet services that control routing in a way that is agnostic to ISPs and specific SD-WAN technology
Different providers have adopted different approaches from these options and may have multiple options available. Providers who have developed a differentiated internet approach include BT, Deutsche Telekom, NTT, Tata Communications and Vodafone.
Enterprises’ pace of adoption of cloud IT service delivery remains key to transforming their WAN architectures. Fortunately for enterprises, global NSPs have deployed a range of capabilities to address enterprises’ cloud connectivity needs (see How to Optimize Network Connectivity Into Public Cloud Providers The providers in this Magic Quadrant all offer CBCI service directly from their MPLS and Ethernet networks to the top three leading cloud service providers at a minimum. The key differentiators are with the connected specific cloud providers and cities, and the ability to add virtualized services (such as security) into the cloud connection points.
These CBCI services typically allow for the adjustment of capacity — and in some cases, the addition of new cloud endpoints — on demand under portal and/or API control. Such on-demand services may also be extended beyond cloud connectivity to larger enterprise locations and even used for the creation of extranet connections between enterprises. These “network on demand” services typically support bandwidth changes and policy modifications and allow multiple services such as internet and MPLS to be provisioned over a single access line and adjusted as required.
Access Technology Trends:
Traditional leased-line access, such as T1 or E1 lines, to internet services or MPLS are no longer proposed in new deals, except in very rare instances, such as in rural locations or some emerging markets. Pricing for these legacy service types is increasing, and in many cases, the services are reaching the end of their life (see Quick Answer Quick Answer: My Legacy Telecom Service Is Being Shut Down, So What Should I Do?) thereby forcing enterprises to be proactive in identifying new services and potentially new providers.
These legacy access lines have largely been replaced by optical Ethernet access to MPLS and internet, at 10 Mbps, 100 Mbps, 1 gigabit per second (Gbps) or 10 Gbps. The economics of Ethernet access remain attractive, resulting in a tenfold increase in speed, but typically increasing cost by only two to three times. In fact, in developed markets, enterprises now tend to purchase access lines with much higher speeds than they initially require, with the port capacity limited to their current needs. This allows them to easily and quickly upgrade capacity in response to changing requirements.
For smaller, less critical or remote locations, broadband (increasingly, “superfast broadband,” such as VDSL, cable modem or passive optical network [PON]) is the access technology of choice, despite having no SLAs or poorer SLAs than Ethernet access. In some geographies, including the U.S., internet providers have also introduced new access options labeled “business broadband” that offer only incremental SLA improvements compared with consumer offerings. When enterprises require large numbers of broadband connections, they can sometimes find that they are able to get better pricing than that offered by global service providers by sourcing broadband access directly or from aggregators. Many providers now support “bring your own broadband,” which refers to the service provider delivering managed services over broadband sourced by the enterprise.
Gartner is also seeing a renewed and growing demand for Ethernet WAN and wavelength services, in addition to the hybrid network needs. These services have started to regain traction as opportunities to meet very large bandwidth needs (100G) and be utilized more efficiently in a regional or metro environment to support local data centers. Although custom priced, overall pricing continues to decline as the supply of the underlying facilities are more readily available.
Finally, cellular connectivity (4G and emerging 5G) increasingly is being used for backup, rapid deployment or temporary locations, although it does not typically offer network performance or availability SLAs. As with broadband, enterprises may be able to get attractive deals for data-only mobile services themselves, which will then be managed by their global provider.
Network Overlay Trends:
New global network proposals are almost exclusively based on managed SD-WAN services with either a hybrid mix on MPLS and internet or all-internet-based underlay links. The global network providers have most commonly developed a portfolio of three to six SD-WAN vendors because the market is more fragmented and differentiated than the legacy CPE market it is replacing. In fact, Gartner believes that providers should support at least two SD-WAN vendors, offer strong integration and demonstrate a strong customer base. Providers that support a large number of SD-WAN vendors (10-plus) but have limited integration and fewer customers could present higher risks to the enterprise.
Some providers offer network-based SD-WAN gateways, allowing for easier migration to SD-WAN and improved scalability. Such gateways allow the network to use the internet for access and use the providers’ higher-quality backbones for the long haul, greatly improving reliability and performance. A similar outcome can be achieved by using stand-alone enhanced internet backbone services on ISP federations.
Managed SD-WAN services typically offer the option of local internet access (split tunneling) from every site, which is especially useful for access to SaaS applications, such as Microsoft Office 365. Perimeter security can be provided on-site or as a cloud-based service and is increasingly integrated into the WAN design that Gartner calls the secure access service edge (SASE).
An increasing number of global WANs incorporate managed application visibility, with some providers now offering application-level visibility by default. SD-WAN services, which operate based on application-level policies, also typically offer inherently higher levels of application visibility. WAN optimization is still deployed for some specific use cases where bandwidth is either limited (e.g., very small aperture terminal [VSAT]) or expensive (e.g., the Persian Gulf region).
Network functions such as edge routing, SD-WAN, security, WAN optimization and visibility can be delivered as on-site appliances. However, many providers prefer a uCPE VNF approach versus POP VNFs to support greater geographic breadth to the enterprise. Whether VNFs are running in NFV service nodes in the provider’s POPs or via on-premises uCPEs, which are essentially industry-standard servers deployed at the customers’ locations, either approach can support one or more virtual functions. This makes it easy to rapidly change the functions deployed in the network, which are also usually consumed as-a-service with a monthly subscription fee for each function. Some providers allow customers to run their own software, including edge compute applications, on these platforms. Ideally, a provider will offer both options to the enterprise.
All providers evaluated in this Magic Quadrant offer uCPE. The average number of unique uCPE vendors per provider remained the same at 2.6, and the average number of unique CPE-based VNF functions (typically consisting of SD-WAN, router, firewall and WAN optimization) has increased to 6.2. Many providers have added more vendors to a VNF, especially in the case of security. The average number of countries where uCPE and premises-based VNFs are offered is 144. In contrast, network-based VNFs are available in a much smaller number of countries (34 on average), although the number of average unique VNFs is similar to uCPE-based functions (5.9).
The network service providers are continuing to roll out managed SASE offerings as either best-of-breed dual vendor or single-vendor SASE solutions. This can eliminate the need to service chain and orchestrate SD-WAN functionality and several network security functions, thereby simplifying management and, often, offering better overall performance due to less complexity.
Automation and Operational Trends:
Global networks are also becoming more complex because transport is becoming a hybrid of MPLS and internet with cloud endpoints and a variety of backbone options. SD-WAN and NFV technologies add even more complexity. In addition, the internet, especially using broadband or cellular access, is an inherently less predictable service than MPLS. Visibility capabilities — sometimes referred to as performance analytics — can help by enabling enterprises to see the actual performance of their applications. Enhancements continue around performance reporting tools and portals, enabling the enterprise with improved visibility at the network application layers. And with a focus on continuing to enhance the customer experience, customer satisfaction with global NSPs is improving.
NSPs remain focused on improving their lead times, although they remain constrained by the lead times of third-party/local access providers. The increasing speeds of cellular services are making this technology more useful as a rapid deployment (interim) solution to bridge the gap of waiting for fixed connectivity. In addition, it provides a truly diverse backup option. However, the hype around 5G cellular replacing fixed connectivity should be treated with caution, due to maturity issues — especially lack of SLAs and coverage limitations (see Quick Answer: 3 Questions to Answer Before Buying Enterprise 5G).
Providers continue to improve their SLAs with more realistic objectives and more meaningful penalties for failing to meet those objectives. They are increasingly improving to include the right to cancel the contract in the event of chronic breach, ensure on-time delivery, require proactive notification, and complete timely change requests.
In a new trend Gartner has seen this year, many providers have begun adopting artificial intelligence for IT operations (AIOps) and network automation for service onboarding and customer experience improvements. AI is also being leveraged to simulate issues and provide predictive analytics for service improvement and reduced downtime or service degradation (see CSP Tech Trends for 2022: Implications for Network Infrastructure Providers).
Providers are increasingly focused on providing the managed network service “overlay” platform typically using SD-WAN, and optionally security (SASE), which can be delivered from cloud-native platforms or (less often) by using NFV/uCPE. The providers are more willing to support “bring your own access” and other flexible sourcing approaches for the “underlay” network transport components.
However, the majority of enterprises still buy most of their underlay services from their overlay provider, especially when using a hybrid underlay — that is, mixing MPLS and internet access. This integrated sourcing approach is the primary focus of this Magic Quadrant. Enterprises focused specifically on enterprise network operations services can consider most of the providers evaluated in this research, and also those in Magic Quadrant for Managed Network Services.
Most global network service providers are continuing to move toward a more platform-based approach using a software-driven, as-a-service model leveraging rich visibility and self-service via portals and APIs. A benefit of this approach is the ability to offer enterprises the opportunity for co-management where they can themselves manage aspects of the network, such as application and security policies, with benefits in terms of enhanced agility.
In addition, newer NaaS offerings offer a simplified consumption model with usage or subscription-based pricing, which may appeal from a sourcing perspective. However, NaaS appeals to only a small subset of enterprise customers that, among other things, don’t want to own hardware, perceive subscription-based pricing as optimal and have variable bandwidth needs (see What Is NaaS, and Should I Adopt It?).
Downward pressure on global network service prices remains steady during the pandemic, and managed services pricing has also remained steady, though it will be carefully watched as the economy fluctuates and the talent crunch remains in play. To address cost containment amid providers’ investment strategies, some are focusing on extending their own networks, especially internet services, while others rely heavily on expanded partnerships with local providers. Most providers are making greater use of carrier-neutral communication hubs, such as those operated by Equinix, to cost-effectively interconnect with multiple access, backbone and cloud providers.
These hubs, particularly when combined with NFV and/or SD-WAN, have dramatically reduced the level of investment required to be competitive in the global network service market. This has allowed smaller providers to offer solutions competitive with those of the largest providers. However, maintaining a consistent set of service features and user experiences across these different elements remains a challenge.
Managed Services Trends:
Most global WANs are delivered on a managed service basis, with the on-site devices, such as routers and security appliances, provided and managed by the service provider. Transport links are usually sourced from the managed service provider, but might also be separately sourced by the enterprise, which would then give the managed service provider operational responsibility for them. The U.S. is different because, although a substantial fraction of U.S.-headquartered multinationals do use managed network services, a significant number still manage their networks in-house and only source the network underlay from their global providers.
At the same time, networks are moving more to a co-managed reality because more network functions — such as SD-WAN application policies, security policies and NoD bandwidth — are controllable by the enterprise via the providers’ portals and APIs. In this case, responsibilities for various network management functions are divided between the provider and the enterprise. This is especially true when network perimeter security functions are integrated into the SD-WAN solution (SASE), where a separate organization will often control the security policies and actions.
Magic Quadrant for Network Services, Global, Published 22 February 2023 – ID G00766979 (Gartner subscription required to access)
Global technology market intelligence firm ABI Research expects the Network-as-a-Service (NaaS) [1.] market to expand significantly, reaching over $150 billion by 2030.
Note 1. NaaS is a secure, cost-effective subscription-based model that lets businesses of all sizes consume network infrastructure on-demand and as needed. It offers scale-up or scale-down flexibility that many businesses require to stay competitive in today’s unpredictable data traffic environment.
Networks have been commoditized over the last few years and the cost of connectivity has fallen. Value has shifted from network infrastructure to the services built on top of the network. Enterprises need scalable solutions that offer cloud-native agility, multi-cloud accessibility, and services that can dynamically fluctuate to support digital transformation. This has led to significant interest in the NaaS market, according to ABI Research.
Image Credit: Verizon
The firm’s blog promoting their NaaS report notes that telecom operators currently lack business models that allow them to build on their physical connectivity advantages to gain control of the NaaS market.
“Telcos must seize the opportunity to dominate the NaaS market, as revenue generated from connectivity provision will continue to decline. However, their investment strategy, business, operational, and ‘go-to-market’ models are not ready to deliver a competitive NaaS solution, explains Reece Hayden, Distributed & Edge Computing Analyst at ABI Research. “The market is immature and highly fragmented, but telco market revenue will exceed US$75 billion by 2030 if they act now and transform technology, culture, and structure to better align with the requirements of the NaaS market.”
Currently, telcos face NaaS competition from two key players. Interconnection providers (e.g., Megaport and Packet Fabric) have built their agile solutions from the ground up, focusing energy on virtualization and software specialization. At the same time, cloud infrastructure providers (e.g., Amazon AWS, Google GCP, and Microsoft Azure) continue to offer cloud-specific NaaS solutions.
“Telecom operators remain in the best position to lead the market as long as they recognize their service/innovation limitations, invest/restructure successfully, and focus their messaging appropriately,” according to Hayden.
Telcos must look to transform three areas. First, telcos must virtualize network infrastructure to deliver cloud-native services and continue to invest heavily to integrate automation (AIOps) throughout network services, including paying attention to 5G slice-as-a-service and other ‘value-add services’ which are critical to monetization.
Second, telecom operators must restructure business and operating models with a look toward openness and partnerships across the industry and reduce internal fragmentation to drive cross-business service continuity.
Third, telcos must look to develop a problem-solving culture and realign their ‘go-to-market’ strategy to better position themselves within the NaaS market. This involves developing vertical and enterprise size-specific sales strategies and establishing consultative processes that educate enterprises to bridge the ever-present gap between awareness and understanding. Telco executives should focus more on service provision and up/reskilling their workforce.
NaaS adoption will rapidly grow over the next eight years. ABI Research expects that by 2030, just under 90% of enterprises will have migrated at least 25% of their global network infrastructure to be consumed within a NaaS model. However, this process will not be organic, suppliers will have to drive education and consultative practices, as significant skepticism within SMEs and MNCs pervades the market. “To drive short-run sales, suppliers must educate and tailor their sales strategy to focus on first adopters (startups and SMEs) and specific verticals,” Hayden recommends.
The outlook in the NaaS market is hugely positive for telcos, especially given the rising demand from startups and SMEs. “But a lot still needs to be done to bridge technological, cultural, and structural gaps,” Hayden concludes. “Although it seems like an expensive and risky uphill battle, developing NaaS will be crucial to the long-term upside. But, if telcos miss this opportunity and drop the ball, interconnection providers and hyperscalers will be waiting and willing to catch it.”
These findings are from ABI Research’s Network-as-a Service: Business, Operational, and Technological Strategies for Telco Digital Service Transformation application analysis report. This report is part of the company’s Distributed and Edge Computing research service, which includes research, data, and ABI Insights. Based on extensive primary interviews, Application Analysis reports present an in-depth analysis of key market trends and factors for a specific application, which could focus on an individual market or geography.
ABI’s NaaS report does not include IT equipment and software vendors like Cisco, Dell Technologies, and Hewlett Packard Enterprise (HPE), which have been bolstering their own NaaS hardware and software stacks while established sales channels into most enterprises.
About ABI Research:
ABI Research is a global technology intelligence firm delivering actionable research and strategic guidance to technology leaders, innovators, and decision makers around the world. Our research focuses on the transformative technologies that are dramatically reshaping industries, economies, and workforces today.
Gartner forecasts that the market for enterprise data networking services in 2020 will be $157.5 billion, broadly unchanged from 2019 (see “Forecast: Enterprise Communications Services, Worldwide, 2017-2023, 4Q19 Update”).
The number of global NSPs included in this Gartner research has increased as more providers have met our revised inclusion criteria. In addition to large global providers, enterprises are increasingly willing to consider smaller providers, including managed service providers with little or no network infrastructure of their own (such as those featured in the “Market Guide for Managed SD-WAN Services”). Alternatively, enterprises may choose a combination of multiple regional providers.
Providers are increasingly focused on providing the managed service platform (e.g., managed SD-WAN and NFV/vCPE); however, they are also more open to “bring your own access” and other flexible sourcing approaches for the network transport components.
The global network service market continues to move toward a more software-driven, as-a-service model, with increasing levels of visibility and self-service via portals and APIs available to enterprise customers.
However, this means providers are reluctant to allow deviations from their standard offerings, because that will require deployment of a custom solution at a higher cost that could rapidly become obsolete in this fast-moving market.
The network buying discussion is gradually moving away from technologies toward outcomes and service levels. Providers continue to improve their SLAs with more-realistic objectives and more-meaningful penalties for failing to meet those objectives, increasingly including the right to cancel the service in the event of chronic breach. Installation lead times — a pain point for many enterprises with global networks — are starting to be covered by standard SLAs, and providers are striving to improve delivery times, although they remain frustrated by third-party/local access providers. The increasing speeds of cellular services are making this technology more useful as a rapid deployment (interim) solution. In addition, it provides a truly diverse backup option. However, the hype around 5G cellular replacing fixed connectivity should be treated with caution, due to maturity issues — especially coverage limitations.
Electronic quoting and ordering are increasingly widespread, with electronic bonding between the global providers and their local access providers. Self-service ordaining and/or provisioning, as well as the increased visibility of the service being delivered via portals continue to gain momentum. This is blurring the lines between managed services and self-management, to create a spectrum of co-management possibilities.
However, global networks are also becoming more complex, because transport becomes a hybrid of MPLS, internet and Ethernet; cloud endpoints are added; and SD-WAN and NFV technology are added. In addition, the internet, especially using broadband or cellular access, is an inherently less predictable service than MPLS. Visibility capabilities, sometimes referred to as performance analytics, can help by enabling enterprises see the actual performance of their applications.
Thanks to the continual investment in enhancing the customer experience, customer satisfaction with global NSPs is improving.
New global network proposals are predominantly for managed SD-WAN services based on a hybrid mix of MPLS and internet transport, with different applications using the most appropriate link type. Most providers support a small portfolio of SD-WAN vendors, because the market is more fragmented and differentiated than the router market it is replacing. Some providers offer network-based SD-WAN gateways, allowing traffic to use the internet for access, but use the providers’ higher-quality, long-haul backbones.
Enterprises’ adoption of cloud IT service delivery remains key to transforming their WAN architectures. Fortunately for enterprises, global NSPs have deployed a range of capabilities to address enterprises’ cloud connectivity needs (see “Five Key Factors to Prepare Your WAN for Multicloud Connectivity”).
The providers in this research offer carrier-based cloud interconnect from their MPLS and Ethernet networks to leading CSPs, such as Amazon, Microsoft and Google. Most offer connection to additional cloud providers as well. The key differentiators are the specific cloud providers and the cities connected, and the ability to add virtualized services (e.g., security) into the cloud connection points.
Managed SD-WAN services typically offer the option of local internet access (split tunneling) from every site, which is especially useful for access to SaaS applications, such as Microsoft Office 365. Perimeter security can be provided on-site or as a cloud-based service. An option for managed SD-WAN services is for the provider to deploy network-based SD-WAN gateways to facilitate interconnection between SD-WAN and non-SD-WAN networks, improve scalability and avoid the need for traffic to traverse long distances over the internet. Alternatively enhanced internet backbone services may be available to improve the performance of cloud service access over the internet and to improve end-to-end performance, when using the internet as a transport link.
An increasing number of global WANs incorporate managed application visibility and/or WAN optimization, with some providers now offering application-level visibility by default. SD-WAN services, which operate based on application-level policies, also typically offer inherently higher levels of application visibility.
Network functions, such as edge routing, SD-WAN, security, WAN optimization and visibility, can be delivered as on-site appliances. However, many providers prefer to offer these as VNFs, running in NFV service nodes in their POPs or in uCPEs, which are essentially industry-standard servers, deployed at the customers locations, supporting one or more virtual functions. This makes it easy to rapidly change the functions deployed in the network and is also usually consumed on an “as a service” basis with a monthly subscription fee for each function.
Ethernet WAN services (virtual private line and virtual private LAN services) remain more niche. They are principally used for data center interconnection; high-performance connections, including extranets (such as trading networks); or for sites that are geographically close (i.e., Metro Ethernet). Different combinations of these services can be used to obtain different service levels appropriate to each enterprise location.
Providers are starting to offer NoD services, where bandwidth can be adjusted via a portal or APIs. Some of these services support multiple services (e.g., MPLS and internet) on a single access line, and also allow dynamic control of cloud connectivity.
WAN access is evolving, with traditional leased-line access, such as T1 or E1 lines, no longer proposed in new deals, except when no other form of access is available, such as in rural locations or some emerging markets.
Pricing for these legacy service types is typically increasing, and, in some cases, the services are reaching the end of their life.
Traditional access lines have largely been replaced by optical Ethernet access at 10 Mbps, 100 Mbps, 1 Gbps or 10 Gbps. The scale economics of Ethernet access are very good, with each tenfold increase in speed, typically increasing cost by only two to three times. As a result, in developed markets, enterprises now tend to purchase access lines with much higher speeds than they initially require, with the port capacity limited to their current needs. This allows them to easily and quickly upgrade capacity in response to changing requirements.
For smaller, less critical or remote locations, broadband (increasingly, “superfast broadband,” such as very-high-speed DSL [VDSL], cable modem or passive optical network [PON]) is the access technology of choice, despite having no SLAs or poorer SLAs than Ethernet access. When enterprises require large numbers of broadband connections, they can sometimes find that they are able to get better pricing than that offered by global service providers by sourcing broadband access directly or from aggregators. Many providers now support “bring your own broadband.” This refers to the service provider delivering managed services over broadband sourced by the enterprise.
Finally, cellular connectivity (4G) and, in the future, 5G, is increasingly being used for backup, rapid deployment or temporary locations, although it does not offer SLAs. As with broadband, enterprises may be able to get attractive deals for data-only mobile services themselves, which will then be managed by their global provider.
Most global WANs are delivered on a managed service basis, with the on-site devices, such as routers, security appliances and WAN optimizers, provided and managed by the service provider. Transport links are usually sourced from the managed service provider, but might also be sourced by the enterprise, who would then give the managed service provider operational responsibility for them. Although more U.S.-headquartered multinationals are moving to managed network services, a significant number still manage their networks in-house and only source transport links from their global providers.
As more network functions, such as SD-WAN application policies or NoD bandwidth, are controllable via the providers’ portals and APIs, networks are moving more to a co-managed reality. In this case, responsibilities for various network management functions are divided between the provider and the enterprise.
Downward pressure on global network service prices is relentless (e.g., global MPLS services are undergoing unit price declines averaging 10% per year, although with strong regional variance). Gartner has produced research summarizing and predicting pricing trends for different services and geographies (see “Network Service Price Trends: What You Need to Know to Save Money on Your Next Contract Negotiation”). The response from providers varies, with some focusing on extending their own networks, while others are relying heavily on network-to-network interface (NNI) connections to partners to improve their regional coverage. Most providers are increasingly using carrier-neutral communications hubs, such as those operated by Equinix, to allow them to cost-effectively interconnect with multiple access, backbone and cloud providers.
These hubs, particularly when combined with NFV and/or SD-WAN, have dramatically reduced the level of investment required to be competitive in the global network service market. This has allowed smaller providers, including some of the more recent entrants to this Magic Quadrant, to offer solutions competitive with those of the largest providers. However, maintaining a consistent set of service features and user experiences across these different elements remains a challenge.
The network service market is undergoing a major transformation, with new generations of software-based network technologies enabling new services and new business models that are less focused on large-scale infrastructure. To reflect these trends, this Magic Quadrant focuses on transformational technologies and/or approaches that address the future needs of end users, as well as today’s market.
Gartner defines the global network service market as the provision of fixed corporate networking services with worldwide coverage.
Current global network services evaluated in this Magic Quadrant include:
- WAN Transport Services — These include Multiprotocol Label Switching (MPLS) service, Ethernet services and internet services, such as dedicated internet access (DIA), broadband and cellular.
- Carrier-Based Cloud Interconnect (CBCI) — This is a direct connection between a service provider’s enterprise network services, such as MPLS and/or Ethernet services, and the private connection option of one or more cloud service providers (CSPs). CBCI can be established directly between the network service provider (NSP) and the cloud provider or via a cloud exchange, such as Equinix Cloud Exchange.
- Managed WAN Services — These include managed software-defined WAN (SD-WAN). Although a minority of enterprises are renewing their managed router networks, most new managed global network deployments in 2019 were managed SD-WAN networks using a mix of MPLS and internet transport. This is a trend Gartner expects to continue. An option for managed SD-WAN services is for the provider to deploy network-based SD-WAN gateways to facilitate interconnection between SD-WAN and non-SD-WAN networks, improve scalability and avoid the need for traffic to traverse long distances over the internet.
Emerging global network services that will be evaluated include:
- Network On Demand (NoD) — NoD services from NSPs enable enterprises to make real-time changes to access/port bandwidth, change the WAN service types delivered over a network port and, in some cases, add and remove endpoints (e.g., connections to cloud providers). This occurs under software control, via the provider’s web portal or APIs.
- Network Function Virtualization (NFV) — NFV is an architecture to deliver multiple network functions, including routing, firewall, SD-WAN, WAN optimization, visibility and voice as software, termed virtual network functions (VNFs). NFV enables enterprises to rapidly (in minutes) deploy network functionality to locations where it is required. This functionality is the replacement for purpose-built hardware devices, such as routers, security devices or WAN optimizers. NFV can be implemented on universal customer premises equipment (uCPE; see below) or in NFV service nodes, located in the provider’s network, or in colocation facilities. NFV enables network functions to be activated on demand (and deactivated when no longer required) and consumed on an “as a service” basis. This can improve the agility and cost-effectiveness of the enterprise WAN.
- Virtual Customer Premises Equipment (vCPE) — This is the use of industry-standard x86 devices (uCPE), rather than function-specific appliances, to deliver enterprise network edge functions, including WAN edge routing, SD-WAN, WAN optimization, visibility and security functions (e.g., firewalls).
In addition, it is highly desirable for providers to offer related network services, including managed WAN optimization, managed application visibility, and managed, network-related security services. Integrators, virtual operators and carriers may be included, but only if they will bid for stand-alone WAN deals and provide and manage offerings that include the WAN connectivity.
During the past 12 months, Gartner has seen continued changes in enterprise requirements and buying criteria for global networks. Enterprises are placing an ever-growing emphasis on their need for greater agility and especially enabling their organization’s adoption of cloud services and the Internet of Things (IoT). They are increasingly willing to consider smaller providers and innovative services, particularly those that can be consumed on an as-a-service basis. Therefore, they are placing less emphasis on supplier size, network scale and the availability of large numbers of provider staff to deliver customized capabilities.
NSPs are taking advantage of the marketplaces created by carrier hubs, such as those provided by Equinix and Digital Reality. This enables them to source access that’s distance-insensitive, at the national or even regional level, reducing the need to deploy large numbers of network points of presence (POPs). POPs are increasingly acting as gateways between access and backbone network services of various types, and cloud providers. In addition, they are serving as locations where virtualized network services, such as security, can be applied.
Internet services, including broadband, DIA and cellular, are growing in importance as transport options, alongside the continued use of MPLS and Ethernet services. New services such as managed SD-WAN, NoD services, NFV and vCPE, which transform the enterprise networking market, are being deployed to improve the agility of providers’ network solutions. Many of these services require a platform-based approach to delivering services, increasing the trend to move away from customized solutions, toward standard, off-the-shelf managed services, consumed on an as-a-service basis.
We are seeing a distinct split in providers’ attitudes toward NFV and vCPE. Some providers are “doubling down” on the technology, making it their default edge device offering. Others are still focusing on appliances at the network edge, frequently accompanied by network-based NFV, especially for services such as security.
Although delivering against a strong technological roadmap is important, it is equally important that services be delivered with good operational performance to implement and sustain them.
The inclusion and exclusion criteria for this year’s Magic Quadrant (see Figure 1), although similar to prior years, have been adjusted to reflect these trends.
Figure 1. Magic Quadrant for Network Services
Source: Gartner (February 2020)
Digital business initiatives are placing increasing demands on the enterprise network, increasing the needs for bandwidth (between 20% and 30% annually), reliability and performance. Video, live and stored, is driving significant increases in bandwidth, whereas IoT typically requires greater reliability.
A growing proportion of enterprise applications are being delivered as cloud services — infrastructure as a service (IaaS), platform as a service (PaaS) and SaaS. This requires incorporation of cloud endpoints into the network and a burgeoning need for data center-to-cloud and cloud-to-cloud connectivity.
Above all, digital business requires that enterprise networks become significantly more agile, to allow the rapid accommodation of new endpoints, new applications and new network capabilities. However, enterprises continually need to do all of this, while optimizing their WAN expenditure.
To address these requirements service providers are deploying a range of new networking technologies. SD-WAN is now the default offering for new network deployments and major refreshes, while the virtualization of network edge functions, using NFV and vCPE, is gradually becoming more common. CBCI is also mainstream, complemented by emerging NoD services.
Growing use of the internet as a network transport option, together with cloud endpoints, is resulting in performance uncertainty, and is driving significant demand for application visibility services.
Fortunately, enterprises can choose from a wide selection of solution providers, most operating across multiple geographies. This breadth is allowing enterprises to choose between one, two or many providers to find the best solution for their specific needs. These decisions will be based on geographic requirements, the specific service required and the preferred sourcing approach (i.e., the enterprise’s desire to manage multiple networks from multiple providers). Competition continues to drive down unit prices for global networking services. However, in a market in which there are no meaningful price lists, enterprises still need to use competitive procurement practices and strong negotiations to obtain the best prices.