London: Overlay technology in a short span has become very significant in the enterprise telecom segment today. For instance, overlay networking such as SD-WAN has become, the de facto WAN technology in the enterprise telecoms market.
For instance, the SD-WAN market will witness higher growth and expected to scale to new heights, as per market estimates.
The SD-WAN tools and software market will touch $4.6 billion by 2023. This expected growth is because enterprises increasingly moving their IT and networking services to a cloud infrastructure, according to a Futuriom report.
According to Global Market Insights report, the SD-WAN market size exceeded $1 billion in 2019. Between 2020 and 2026, the market is expected to grow at a CAGR of over 60%. Growing needs among organisations to simplify network management are pushing the anticipated growth of the SD-WAN market.
Overlay technology is a combination of tunnelling technology, orchestration and control software to create the appearance of a single, unified network. That too, irrespective of the physical transport medium over which it is running.
However, this logical separation between the physical network assets and the controlling technology has created a potentially existential threat to network owning telecoms service providers (SPs) according to GlobalData.
Overlay technology was initially thought to be a threat to traditional network-owning telecoms services providers, according to Gary Barton, Principal Analyst – GlobalData.
“Because it was felt that the easy-to-use nature of the technology, combined with advanced self-service portals, would lead to more businesses adopting a self-serve approach,” said Barton.
In addition, Barton pointed out that MPLS (Multiprotocol Label Switching) would be stripped out in favour of the internet and, therefore, also damaging SP’s data revenues.
But that potentially existential threat is not that actual reality and things are somewhat different.
“MPLS is being replaced by the internet. A process accelerated by COVID-19, but overall bandwidth growth (primarily for internet services and cloud connectivity) has helped to mitigate the damage,” explained Barton.
Enterprises have not adopted a ‘DIY’ approach to network services en masse. They are instead seeking help to manage increasingly complex IT estates. However, this focus on IT has led them towards systems integrators rather than SPs.
And that’s where the overlay technology, in this case, the overlay networking comes into the picture. “Overlay networking has meant that the tried and trusted argument from SPs that owning the network means the highest quality of service has been undermined,” said Barton.
“The response of network operators has been to go ‘digital’, and, in some cases, even completely abandon their network underlay assets,” he added.
Global network operators such as BT and Telefonica have created new ‘DigiCo’ internal divisions. These new internal divisions separate the telecoms services from the network-owning and operating parts of the business. SPs have sold off-network assets in favour of becoming ‘platform’ companies.
The other emerging puzzle piece is hyperscaler network services such as Microsoft’s Azure WAN proposition. These hyperscale cloud companies have built networks to connect their many datacentres and are now selling global network services.
“SPs need to begin to adapt a best-fit approach to provisioning network services – even when that means favouring the competitor’s network infrastructure. A proprietary, ‘our network first’ approach is not in line with a growing expectation from enterprises of a best-fit approach,” concluded Barton.