- New products, technologies, workflows and architectures used by ISPs as well as IT’s growing acceptance of managed services are laying the groundwork for expansion of SD-WAN managed services.
- Competition in the SD-WAN segment will increase as existing MSPs and resellers with MSP offerings enter the market.
SD-WAN is disrupting more than WAN services. It’s also the catalyst for the launch of a new round of managed services, which will have a significant impact on the SD-WAN competitive landscape. The clearly defined choice of how enterprises acquire products – via the channel versus managed services providers – is collapsing as MSPs launch new services based on the very same products being sold through the channel. It’s the rare case where a trend that’s great for buyers because of the flexibility it offers is also great for equipment vendors as they can sell more products, but there is a chance for hidden conflicts in the sales cycle.
Many of the hurdles MSPs once faced courting SD-WAN customers are subsiding. This is due not only to enterprises’ growing familiarity with managed services, but also to a confluence of products and processes which are minimizing problems like extremely slow service adds, moves and changes; limited co-managed facilities; and geographic coverage limitations for WAN services.
Nearly every Tier 1 and Tier 2 MSP now has a managed SD-WAN service offering, and a combined WAN/SD-WAN service is a compelling offering that traditional resellers cannot meet. Some ISPs plan to use an over-the-top managed SD-WAN to garner customers and then expand sales opportunities by migrating those customers to managed WAN services. MSPs with a WAN/SD-WAN offering can provide an integrated service offering with improved management, monitoring and troubleshooting for both the physical and virtual network. They can also aggregate WAN services from other service providers.
Meanwhile, VARs and integrators that traditionally fill a reseller or support role are now able to launch their own managed services offering – normally without the underlying WAN service – with the help of the equipment vendor. The approach involves either reselling an equipment vendor’s existing managed service or building its own managed service infrastructure. These traditional channel partners can either run a fully managed service on a subscription basis or resell the equipment to the customer while offering the management components as a service in a hybrid capital and subscription model.
However, the potential for vendor-provider conflict arises during customer engagement. In a typical channel sale, functions like deal registration and first-serve discounting give the first channel partner a significant pricing edge that naturally resolves channel conflict. However, MSPs usually aren’t resellers and don’t register deals. In the future, it’s quite likely that a reseller and MSP could be competing over the same customer with the same products and potentially similar services. MSPs will compete with the channel for enterprise dollars; the traditional channel conflict-resolution strategies won’t work. Channel players, already feeling the margin squeeze, will be further challenged to compete. This increase in competition goes both ways. Resellers are going to compete with MSPs in managed services.
Resellers have an advantage in that they already supply other IT products and services to their customers, and a managed SD-WAN service is an easy on-ramp to a well-rounded managed service offering. However, establishing a reliable managed service is difficult, so resellers should look for SD-WAN vendors with managed services they can resell.
MSPs have an advantage because they already have the infrastructure and experience to run managed services, and when paired with a WAN service – their own or an aggregated service – they offer unique technology and pricing options resellers cannot easily meet.
In the enterprise, how resellers and MSPs address the comparative benefits and drawbacks of each model along with product capabilities will be a determining factor in product and service selection.