Beyond the Hype – Planning for the Cost of SD-WAN, 5G and IoT

By Matt West

Director of Telecommunication Services, NPI

February 27, 2020

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What do SD-WAN, 5G, and IoT have in common? Two things come to mind. First, there is a lot of hype surrounding these technologies. The second thing is unknown costs.  Let’s start with the hype…

If you are a VP of Infrastructure and you haven’t made the switch to SD-WAN, bought your first 5G Smartphone, or delivered to your organization some metric from IoT, then you may feel like you’re lagging behind your peers. Is that really the case, though?

No – vendors are spending massive amounts to promote these technologies, which makes many believe they’re far behind the curve. But the reality suggests otherwise.

I recently attended an industry event where it was reported that only 12 to 15 percent of enterprises have replaced part or all of their legacy MPLS network with SD-WAN. Another 40 percent are planning a pilot implementation of SD-WAN technologies in the next 12-months.

It’s the same on the 5G front where each wireless carrier is touting their investment in 5G technology. Yet, when you peel back the hype, announcing that you have "launched" 5G in 14 markets may actually mean that 5G is available in an area the size of a few blocks within each of those markets. Unless your needs happen to overlap with the small areas where 5G is available, it is unlikely that you can make a business case for snapping up 5G-enabled smartphones.

As for the internet of things (IoT), data collected at that same industry event indicated there will be over 20 billion connected IoT devices by the year 2024. In reality, there are very few industries where IoT has received rapid adoption. In most cases, older technologies such as telemetry, RFID and satellite are the most common technologies used in delivering services and metrics.

So, why all the hype? There is little doubt that SD-WAN, 5G and IoT are emerging technologies that will explode over the next decade. Everyone wants a piece of the financial pie. Most startups and disruptors probably hope to simply garner enough "eyeballs" to make for an attractive buyout. Larger suppliers, integrators and the carriers themselves hope to establish early beachheads on which to catch the coming wave – and therein lies the savings opportunity and cost risk for enterprise buyers.

How Do You Plan for the Cost of SD-WAN, 5G and IoT in This Early Market Stage?

There are hundreds of ads for SD-WAN, 5G and IOT out there. What’s missing, however, are nods to the cost of these services. Have you seen an ad that says "Nationwide 100Mb access over 5G for $99.99?" Or "IoT temperature monitoring for as little as $0.99/location?" Of course not! The suppliers in these industries have very few published plans or rates for the services they are marketing.

SD-WAN is the furthest along, with most carriers having published schedule of charges for various types of CPE and service management. However, the same is not true for 5G and IoT and likely won't be available in the next 12 to 24 months. Even then, it will all be custom pricing with little or no transparency (and likely, little or no consistency…).

But that doesn’t mean you shouldn’t be analyzing the costs of these technologies and preparing for future spend (and savings).

Now is the time to conduct active research – namely vendor briefings with key internal user groups to explore how the technologies might benefit your organization. If there is a fit and a business case to be made, consider introducing a pilot. Then, scale the pilot to understand cost dynamics and analyze the business benefits garnered from the investment.

When we model out costs for SD-WAN for clients, they turn out to be similar to typical network costs with the SD-WAN appliance and associated orchestrations taking the place of routers, firewalls, accelerators and switches. 5G models out comparably to the typical wireless plans of 3G and 4G predecessors.

IoT is a bit unique. In a local environment, it may take the form of today's RFID systems, where IoT sensors communicate locally on one protocol and via some sort of gateway for eventual processing. The gateway could either be a 5G device or it could hang on a VLAN behind the SD-WAN appliance. Across campuses, IoT devices may communicate directly to the 5G network just like any other machine-to-machine type connection.

Regardless of the technology in question, suppliers will be keen to understand the application and apply ROI models that illustrate significant savings. Why? Because if you can show solid ROI, then there is less focus on what they charge for it. If an IoT temperature sensor saves the spoilage of $5,000 in food or avoids the scare of a broader health concern, does it really matter that it costs $250 a month? Not as long as that spoilage typically happens once every 19 months. This is the type of cost/benefit analysis that needs to be performed.

On the flipside, well-hyped technologies that haven’t been adopted at a mass scale are often territory where a good deal can be negotiated with your vendor. Capturing market share early is critical to their competitive positioning and profitability. Know how to use these levers at the negotiation table!