How to make the business case for SD-WAN

Potential SD-WAN savings can be broken down into hard savings, such as reduced MPLS costs, as well as soft savings, such as ease of management

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Entegra Bank, a fast-growing financial institution based in the Blue Ridge Mountains of North Carolina, switched from MPLS links for its 22 branches to SD-WAN-based broadband and slashed its WAN connectivity bill by 50%, while increasing bandwidth an average of fivefold.

Loren Long, senior vice-president and CTO at the bank, says he had been eyeing both SD-WAN and broadband for some time, waiting for SD-WAN technology to mature and for rural broadband to improve in availability, dependability and security. After a positive experience with Silver Peak’s WAN optimization gear, “we felt confident to make that change,” he says.

In a typical SD-WAN scenario, branch office broadband would connect directly to the public Internet. But since this a bank with heightened security and compliance responsibilities, traffic from the branches is backhauled over an encrypted VPN to internal gateways, where a third-party security services provider monitors all traffic and enforces security policies.

In addition to the direct cost savings, Entegra has seen a number of other benefits. With SD-WAN technology, based on Silver Peak’s EdgeConnect appliances, Entegra is able to set bandwidth prioritization at the application level and manage traffic based on individual connections. Between the increase in raw bandwidth and optimized bandwidth utilization, applications perform better and employees are more productive.

SD-WAN provides flexibility and scalability to the business, which has recently expanded into nearby northern sections of Georgia and South Carolina. If Entegra opens a new branch, Long is able to provide connectivity within weeks, rather than the months it would have taken to set up MPLS links. And he has “eyes into the network,” allowing him to troubleshoot problems much more quickly.

The switch from MPLS to SD-WAN was a slam dunk for Entegra, which enjoys a perfect storm of circumstances, such as identical application requirements at each branch location and a relatively small and well-defined service area. For most companies, however, the business case for SD-WAN can get complicated when all the variables are factored in.

Calculating SD-WAN savings

According to IDC senior research analyst Brandon Butler, potential SD-WAN savings can be broken down into hard and soft savings. Hard savings come from new connectivity contracts, including reduction in the use of MPLS in favor of less expensive options, such as broadband or cellular.

Soft savings come from ensuring quality of service connections to cloud platforms or other hosted applications; centrally managing and ensuring comprehensive security across the WAN; ensuring high availability connections to WAN sites and ease of management related to use of a cloud-managed SD-WAN.

IDC just completed a comprehensive survey and found that nearly one quarter of respondents anticipate SD-WAN cost savings of 20-39%, but two-thirds of respondents expect to see more modest savings in the 5-19% range, says Butler.

Do savings offset SD-WAN costs?

There are new costs associated with SD-WAN that need to be figured into the equation, specifically those around procurement, implementation, deployment and professional services.

For example, Long says his Silver Peak appliances cost around $2,000 each, or around $44,000 for 22 branch offices. And the software licenses, which start at $199 a month per site, add up to around $50,000 a year. But those capex and opex expenses, spread over five years, are a great investment when compared against the WAN connectivity savings. 

Forrester analyst Andre Kindness says he has seen companies run into some unanticipated expenses associated with SD-WAN, as well as some unexpected benefits. Anyone planning an SD-WAN rollout needs to factor all of these plusses and minuses into the equation.

For example, if a company is backhauling MPLS branch office traffic to a central data center, then security requirements at the branch might be pretty low. If the company then begins sending unencrypted traffic from that branch across the public Internet, does that create a security hole which requires

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