Telco SD-WAN in ASEAN: Significant Development, but What’s Next?

A. Amir

Summary Bullets:

  • The SD-WAN market landscape in ASEAN has evolved. Many telcos have added SD-WAN as part of their enterprise ICT portfolio.
  • The ASEAN telcos could consider multi-vendor offerings and overlay-underlay integration as the next steps.

There are two types of telcos. The first type is telcos that are aware of the increase in SD-WAN demand and leverage the technology to drive their network services. This type often comes from a consumer heritage and is looking to expand into an adjacent market. In most cases, they are alternative providers. These telcos have accepted the fact that the MPLS market is on a downtrend and will continue to decline. They position SD-WAN as a value-add to complement their existing connectivity services. There are also cellular telcos with small/no revenue from the fixed-line services which see SD-WAN as a new market opportunity. These telcos have been aggressive in driving the market and leveraging their brand and connectivity advantages to differentiate against non-telco competitors. The second type is telcos that are also aware of the growing SD-WAN demand, but see it as a threat to their connectivity business. These are often the incumbent telcos with a large portion of revenue from legacy connectivity services. Most of them still believe that the declining MPLS revenue is because of competition, not due to lower market demand. These telcos also often do not have any SDN/NFV capabilities. Some of them offer the service quietly/selectively with a below-the-line marketing strategy.

The ASEAN Telcos and SD-WAN

Which type of telcos are the ASEAN carriers? Two years ago, apart from Singapore and the Philippines, telcos in other countries were still in the second type (seeing SD-WAN as a threat). For more, please see SD-WAN: What Are ASEAN Carriers Waiting For? (June 20, 2018). The SD-WAN market was dominated by system integrators and value-added resellers. However, today, the market landscape in the region has significantly changed. Most ASEAN telcos have evolved to the first type and added SD-WAN as part of their offerings. For example, in Thailand, AIS offers Cisco and Versa Networks solutions and has integrated 5G as part of its underlay network. True Business and CAT also offer SD-WAN services but with more limited features compared to AIS. In Indonesia, all three main providers have added SD-WAN capabilities and offer their respective services to enterprises. Telkom Indonesia offers its managed SD-WAN through telkomtelstra, Indosat Ooredoo has multi-tier offerings, and XL Axiata integrates its 4G as an underlay network. In Singapore and the Philippines, the telcos have enhanced their SD-WAN capabilities in the last two years. For example, Singtel has added various capabilities in its SD-WAN portfolio: e.g., Liquid-X service for centralized workload management across different technology domains (network, cloud, security). In the Philippines, PLDT has added Cisco on top of Zenlayer to deliver its SD-WAN services and is integrating 5G as part of the underlay networks, while rival Globe provides tiered services (Basic, Secure, Cloud, Connect+) to address the diverse market needs. However, Malaysia is still lagging far behind its neighbors. While Maxis and REDtone have launched their respective services, other major telcos are still deploying and/or productizing the solutions.

Market Outlook

The adoption in the region is still low, but more enterprises are planning to deploy SD-WAN to gain more agility and increased security for their network services. GlobalData IT Customer Insight 2020 reveals that 72.3% of 591 ASEAN enterprises interviewed are considering managed SD-WAN services in the next two years. This is driven by the increase in cloud migration, which is accelerated by the COVID-19 pandemic. As more workloads are moving from on-premises to cloud, the need for flexible and secure access for different applications across cloud providers becomes crucial. Businesses are also looking at better ways to improve network management and automation. SD-WAN will also feature in contracts where a company is looking to boost network capacity across an existing network, without increasing the price, and will therefore deploy more public IP links into the topology mix.

What’s Next for ASEAN Telcos

Most ASEAN telcos still use a single-vendor approach in their SD-WAN offerings, at least standardized. While network is more of a horizontal play, the requirements can still vary significantly across different enterprises. Offering a single-vendor SD-WAN may limit telcos’ capabilities to address the wider market segments. It can also hinder the ability to differentiate if the market’s alternatives come from the same vendor. There are several leading SD-WAN vendors with different strengths and value propositions. Telcos could consider expanding their SD-WAN ecosystem to offer wider options. Some vendors, like Cisco, offer a strong channel to market and familiar name. Fortinet has made significant inroads due to the security integration; VeloCloud is often credited for cloud integration and Versa for white box deployments. NetFoundry is also gaining some ground treating SD-WAN more as a Layer 7 technology.

Apart from telcos, there are other SD-WAN players such as system integrators and value-added resellers. Telcos could leverage their connectivity services to offer overlay-underlay integration to differentiate themselves against competitors. This includes L2/L3 interworking, local breakouts, zero-touch secure deployment, traffic routing, and peering. Telcos could also use their 5G as a fiber alternative to offer mobile branch as well as to increase network diversity and SLA. While there is an opportunity for telcos to differentiate more on the network level, they may also want to position as a managed service provider, shifting the value of the contract from connectivity to the way they can build, manage, and deploy ICT solutions.

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