Just how much “enterprises” spend on wide area connectivity services no longer is a simple issue with a simple answer. Nor are the ways they choose to spend their money.
For starters, enterprise demand has shifted dramatically. Decades ago, WAN connectivity was largely a matter of businesses buying private line services from service providers, with some private enterprise WAN services built using a mix of dark fiber and lit services.
These days, WAN services are a wider mix of private networks owned directly by enterprises (for which no recurring fees are paid) and public services purchased from internet backbone providers, dominated by Ethernet-connected IP. SD-WAN is growing, as a percentage of WAN traffic.
Private networks now carry a huge share of global WAN traffic, for example. And a relative handful of global content providers generate a majority of global traffic, carrying most of that on their own private networks.
Some enterprises therefore build, own and operate their own global WANs, and do not buy WAN connectivity across their major routes. Others, including larger video streaming services, use edge caching as a substitute for WAN bandwidth.
For such reasons, the global capacity services market is perhaps less robust than you might think. In 2020, perhaps $16 billion was earned selling transport services in North America and Western Europe. Triple to estimate global transport revenues for telcos and IP backbone providers and you reach $48 billion.
MPLS, for example, increasingly is replaced by software-defined WANs.
Though $48 billion is a significant amount, global spending on telecom services tends to run about $1.25 trillion to $1.4 trillion, for end user spending of all sorts, including consumer and enterprise, mobile and fixed, according to IDC.
So WAN connectivity services sold by service providers is perhaps 3,5 percent to four percent of total global service provider revenue.
One also has to break enterprise connectivity spending into fixed and mobile recurring services (as opposed to device spending, for example), as well as local access versus wide area network spending. MPLS and SD-WAN, for example, might represent less than a quarter of total networking spend.
As we once counted local T-1 connections separately from WAN T-1 service, so enterprise broadband spending has to be separated into direct internet access (or other local access services) and then separate WAN spending.
Much of the revenue in the software-defined wide area network market is garnered by infrastructure providers, in the same way that most of the revenue in the Wi-Fi market likewise is earned by suppliers of networking gear, not recurring connectivity services.
That noted, many observers have expected a shift towards connectivity services over time. And though most estimates suggest a somewhat smallish market overall, there remains significant room for disagreement about evolution of the market, often perhaps exacerbated about whether one looks only at do-it-yourself infrastructure approaches or only at connectivity services, or both. A few estimates seem to be outliers, more connectivity revenue is possible.
One way of estimating impact is to assume that SD-WAN replaces other services currently purchased by enterprises, especially MPLS, but also including direct internet access.
The reason SD-WAN is a growth area is the increased amount of enterprise cloud computing and multi-cloud computing. That increases the appeal of simple SD-WAN connectivity that does not require nailed up point-to-point connections.
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