Demand for software-defined wide area networks (SD-WAN) is booming as enterprises put all their data in the cloud, but it is being held back by supply chain issues and vendor lock-in. A new approach using universal customer premises equipment (uCPE) to separate hardware from software could help address enterprise demands moving forward.
Enterprise customers are demanding SD-WAN on a massive scale: research by Omdia predicts that managed SD-WAN revenues will surpass managed router revenues by 2027. It’s been driven mainly by the majority of enterprises today putting most workloads in the cloud, though every enterprise nonetheless retains some on-premises and private cloud.
But the boom in SD-WAN has not been without its own challenges. Supply chain disruptions have made it harder to get hold of customer premises equipment (CPE), and vendors have also been reluctant to separate software from hardware. So, what can be done?
A new approach that leverages universal CPE (uCPE) could make it easier to obtain hardware, and in turn create more choice for enterprise customers. The challenge for telcos however is acquiring and deploying this uCPE. It’s all making operators place more emphasis on a disaggregated model. According to Marc-Olivier Moratto, Product Manager at Orange Wholesale International, “The supply chain constraints caused by the pandemic made it difficult to secure a steady supply of SD-WAN and firewall appliances to serve enterprise customers. Some large enterprise service providers even target lead times of 400 days to get something as simple as a Cisco integrated service router.”.
Typically, B2B operators deploy SD-WAN equipment at their enterprise customers’ premises. This means managing installation of the physical router at the customer’s premises, having gone through the various steps of getting the equipment shipped, often from overseas, then dealing with customs, and then having the human workers available locally to install the equipment. If the operator doesn’t have its own local resources, it needs to find a local partner to perform the installation. So the cross-border factor can be problematic.
Beyond that, there are various types of SD-WAN, there is no one-size-fits-all approach. So, depending on the customer’s specific needs, the operator might have to deal with multiple SD-WAN manufacturers and equipment, each of which has its own processes, installation types, maintenance and operational techniques. The availability of types of CPE was also impacted by the supply chain disruptions of the past few years. The complexity mounts up. Installing customer premises equipment (CPE) is a multi-layered exercise.
The whole equation of sourcing and installing CPE on customer sites became a snowball of issues that made it harder for operators to do. There’s the financial side of the logistics issue, with operators sometimes needing to pay out for storing physical equipment, and then paying to have it transported where it needs to go.
uCPE could make life simpler for operators. uCPE refers to generic hardware equipment that supports a range of software functions. It’s typically a standard commercial off the shelf (COTS) or “white box” device supplied by a server manufacturer. uCPE’s primary application is the much in-demand SD-WAN, and it’s also particularly well-suited to firewall applications.
With uCPE, the sourcing issue could potentially get simpler. It means sites only require one type of hardware, reducing time and resources needed for installation, and also means simplified inventory management. It doesn’t however remove the need for onsite installation and equipment maintenance.
There could be a new, viable way forward however. Telecom operators could remove a large proportion of the complexity in the SD-WAN hardware issue by allowing their connectivity providers to provide uCPE at a local level.
A wholesale telco could integrate delivery of the uCPE hardware and middleware into its service, and provide the operator with a complete underlay service that comprises national and/or international connectivity, plus the hardware and middleware – the uCPE element – that is able to support firewall, SD-WAN software, or both.
How would it work? As with any other outsourced managed service really. The wholesaler manages implementation of the uCPE on the B2B Telco customer’s premises, and that B2B operator then installs its VNF on the uCPE themselves. They could add multiple virtual functions to the same uCPE hardware, generating additional savings, as well as savings on energy usage and even physical space savings on the customer’s site.
According to research by Omdia, “A key obstacle to growth in the uCPE market is reluctance of SD-WAN and firewall vendors to price their virtualized network functions (VNFs) at sufficient discount to their appliances. Vendors fear that disaggregation of software (VNFs) from hardware (uCPE) will reduce the stickiness of their customers; they see the appliance-based business model as less risky than a 12-month software subscription.”
uCPE provided by wholesale connectivity providers could be an interesting new way forward, and operators could benefit in a variety of ways:
It’s an interesting development, and one that shows potential. According to IDC, the uCPE hardware market is expected to grow from a base of $524 million in 2021 to $992 million in 2026, at a CAGR of 13.6%. It could be the right time for wholesale telcos to get involved.
