The cost breakdown of SD-WAN and MPLS

A presentation called “Catch the next wave of cost savings” that focused on SD-WAN deployment was held in April 2018, in Florida. The main takeaway from the presentation was that significant cost savings could be achieved by substituting MPLS with SD-WAN. The number that everyone agreed on was a realistic 40% saving. However, some bold predictions went up as 90%, which is possible but only in certain cases.
So, the question is, where exactly are these cost reductions made? Many business owners might be skeptical because they associate high price with high-quality networking solutions. How is it possible then to get both low-price and high-quality?

SD-WAN vs MPLS Cost Comparison

We’ll answer these questions as we break down the costs of SD-WAN and MPLS.

Price Per Mbps

It is a well-known fact that MPLS connections are much more expensive than the new alternatives, such as SD-WAN. Just how much more expensive are these legacy solutions?
If we take a look at the price per Mbps, MPLS is staggeringly more expensive. The copper connectivity packets that meet the requirements of most businesses (except for the largest enterprises) usually cost between $100 and $300 per Mbps per month. Moreover, this price is not showing a tendency of going down.

On the other hand, broadband connection prices fall anywhere between $5 and $15 per Mbps per month. Not only are they much less expensive, but the prices are on a steady trend of decreasing even further.
Moreover, users can also benefit from the competition between different providers, such as cable companies, wireless providers, as well as traditional service providers. As you can see, the possibility of making huge cost savings is large.

Private Lines Vs The Cloud

Another big reason why the traditional WAN connections are that expensive is that of a general lack of will and motivation to change things.
If we take a look at the environment on the market from the perspective of profits, the MPLS service providers naturally want to maintain their stream of revenue for as long as possible. Because of that, they are reluctant to accept the cloud-based SD-WAN and stubbornly stay on expensive private lines. Moreover, in many places, there exists a monopoly on the internet provider market, and these monopolies have no incentive to change.

However, this established market is rattled by the Global SD-WAN which moves connections from physical locations to the cloud. Therefore, organizations are no longer limited to only choosing local providers.

Reduced Infrastructure Costs

One thing that can increase your networking costs substantially is infrastructure, both initially and in the long run. Costs accumulate as you spend more and more money on hardware special data connections, which becomes a major problem during multi-site expansion.
SD-WAN greatly simplifies the infrastructure and, in that way, major cost savings are achieved. This is done by cutting down on hardware requirements and using existing infrastructure. Especially smaller businesses can benefit from this aspect, but larger businesses can save serious money as well.
Connectivity hardware is essential when deploying at a new site. This includes routers, WAN appliances, security, edge devices, and so on. Moreover, power, space, and maintenance requirements cause the prices to skyrocket as well.

SD-WAN achieves savings by substituting network edge devices with just one appliance. It combines routing, security, Ethernet, LTE, and broadband into one device. Thus, the setup costs are dramatically reduced.

Moreover, other solutions, such as MPLS, demand expensive infrastructure which increases dramatically in case of remote locations and makes small sites less economical. On the other hand, SD-WAN is compatible with all connectivity infrastructures, including Ethernet and cellular connections for small businesses.

Better Usage of Resources

When talking about resources in the context of networking solutions, both human and network solutions matter. For example, SD-WAN depends on centralized management which can greatly reduce IT requirements and travel requirements to visit remote locations.

SD-WAN also employs ZTE features, which stands for Zero Touch Provisioning. This means that deployment and maintenance can be completed with minimum IT requirements which cuts down both staff numbers and the time needed.

With SD-WAN it is also possible to issue patches and configurations from one site without any direct intervention. With legacy networking solutions such as MPLS, a service update would sometimes need days to reach remote locations because it had to be done physically. Today, the same process needs only several minutes.

Growth Costs

The natural desire for every business, both large and small, is to keep developing and growing. Growth means profit but in order to achieve it, first, you need to invest. Growth usually does not happen at one site but across different remote locations. SD-WAN can help reduce networking costs in this case.

For example, at first, new sites usually have a small number of employees. An MPLS or a point-to-point connection might be redundant and not cost-effective in this case. A simple broadband or an LTE connection could be deployed very fast and still meet the initial networking requirements.

Moreover, with SD-WAN you can connect remote locations even if they are using a different connection. This means that you do not need to invest in new infrastructure. You can also load-balance over multiple links and choose how much resources you will allocate to every application.

Therefore, SD-WAN provides cost-savings to businesses of all sizes, but this is especially noticeable for small business and businesses that are rapidly developing. However, large businesses profit as well, by having a better way of maximizing the efficiency of their existing resources.