Enterprise Network Sourcing & Price: Cost Considerations for WAN Design Brianna Boudreau Senior Analyst

Basic WAN Sourcing Questions What services are available and where? How much do they cost and how are these rates changing over time? How can I optimize my WAN sourcing to get the best network for my needs at the lowest cost? Impact of Geography on total cost Impact of provider selection on total cost Impact of technology selection on total cost

Global Enterprise Networks Surveyed provider community on what products are available in 166 global hub cities

What Services Are Available? Global Availability of Enterprise Network Products, 2015 Ethernet services (EVPN, EoMPLS, EoSDH) growing fastest though, all over 10% CAGR threshold over last 4 years

Where Are They Available?

Who Can I Buy It From? Top 10 International IP VPN Service Providers in Key Business Centers, 2015

What is it going to cost?

Prices Vary by Geography Median 10 Mbps Best Efforts VPN Port Prices, Q1 2016

Prices Fall, At Varying Rates Median 10 Mbps Best Efforts VPN Port Prices, Q1 2013-Q1 2016

Performance May Not Be Cheap VPN 10 Mbps Prices by Carrier in London, Q1 2016 Carriers charge an average of 22% more for CoS1 traffic over CoS 1. Premiums for CoS1 traffic in London extended up to 70%.

Annual Network Port Charge by CoS Configuration, Q1 2016 Cost vs. Performance Annual Network Port Charge by CoS Configuration, Q1 2016 Higher CoS = 30% CoS1, 30% CoS2, 40% CoS3. Base Model = 10% CoS1, 20% CoS2, 70% CoS3

Prices Vary Widely By Product Median 10 Mbps Network Port Prices by Product, Q1 2016

Business Broadband Saves Big Money (Where Appropriate) Price Multiple Between 10 Mbps Business Broadband and VPN Solution, Q1 2016 Price Multiple between 10 Mbps Business Broadband and 10 Mbps VPN + Local Access circuit

Prices Range, So Provider Choice Matters New York 10 Mbps, Best Efforts VPN Pricing, Q1 2013-Q1 2016

Local Access Can Be Expensive 10 Mbps Metro Access Prices, H2 2015 10 Mbps 0-5 km Discuss: greenfield buildings vs. built out office buildings, distance bands, carrier positioning

WAN Benchmarking Scenario What do different WAN configurations cost? How does my provider choice affect my WAN TCO? What product choices will save me the most money? What balance do I strike between cost and performance?

Our Hypothetical Network Scenario analysis based on hypothetical global network 37 sites – 10 in Asia, 10 in Europe, 6 in LatAm, 10 in the US, and 1 in Africa

Our Hypothetical Network Mix of Low and High Capacity Sites with Leased Line & Ethernet Access Capacities range from 2-1,000 Mbps. Most common are 2 and 100 Mbps CoS mix: 10% voice/video, 20% Business Critical, 70% Best Efforts Ethernet access preferred over lease line, except at low capacities.

Single Product Strategies Annual Port Charge by Enterprise Network Product, Q1 2016 Network costs for using a single product type (all Providers, median rates) – this excludes Access and CPE data Ordering may be simple, but not tailored for specific needs (and your network probably doesn’t have 1-size fits all needs)

Provider Selection & Network TCO Annual Total Network Cost by Carrier Coverage, Q1 2016 Two methods of global network sourcing. One stop shopping from a global provider with most cities on-net. Managing multiple providers across countries or regions Single provider strategy often comes with a price premium. Regional providers may be cheaper, but requirement more vendor management. Access as a wildcard – Global providers may have access procurement advantages, but are savings passed on to the consumer?

Hybrid Networks Options Technology Matters Hybrid Networks Options All MPLS may be the past; MPLS, layer 2 & IP hybrids are the future Layer 2 VPN for high capacity sites IP connections for high cost sites or augmenting MPLS with DIA or broadband Layer 2 point-to-point for inter-office/DC connections

Internet Offload to DIA Further savings can be had when shifting capacity to DIA For sites 10 Mbps and higher, we shifted 50% of each site’s capacity from VPN/EVPN to DIA service (savings offset somewhat by additional CPE spend) Recall from earlier, Business Broadband as a substitute rather than DIA can lead to even deeper savings

Internet Offload to Business Broadband BB at all sites below FastE, except Africa. MPLS kept at key, high capacity sites.

Share of WAN Spend by Site, MPLS Configuration Site Optimization Share of WAN Spend by Site, MPLS Configuration

Site Optimization Majority of Sites Focused on 31 least expensive sites – set port pricing from Median to Low and access pricing from Median to 25th percentile This models provider choice and negotiation focused on a wide variety of sites From base model – Savings of $638,043 or 30%

Site Optimization Most Expensive Sites Focused on 6 most expensive sites – set port pricing from Median to Low and access pricing from Median to 25th percentile. This models provider choice and negotiation focused on getting a good deal at a few select locations Savings over base model - – Savings of $661,726 or 31 percent Savings over focusing on 31 least expensive sites approx $24k

Change in WAN TCO Over Time Median CoS3 VPN WAN TCO, Q1 2013-Q1 2016

Key Takeaways Sourcing Technology Negotiations Provider coverage, port prices and access prices differ significantly around the world Working with global or regional providers can have a significant impact on network cost. Technology IP VPN services are widely available. Ethernet availability is growing. Numerous alternatives including Ethernet, DIA, and broadband can lower TCO, even while keeping MPLS as a key part of the network Negotiations Optimizing a few key sites can reduce network costs Prices will fall over your contract term. Review them annually if possible!

Evaluation and Materials Take this time to go the conference app http://itps2016.sched.org find this class, and fill out evaluation. If you need the PowerPoint, it’s on your thumbdrive