Cost Benefit Analysis of SD-WAN

IT projects are taking a larger portion of the corporate budgets, sometimes getting above 50% of all expenditures of an organization.Therefore understandably, executives expect more comprehensive and well analyzed IT project proposals that offer clear value with strong supporting rationale.

Before any IT project moves forward, an organization needs to analyze and make a decision if the IT project has benefits that outweigh the costs and risks involved. The depth of the risk-benefit analysis of the project will depend on the importance and the size of the project. Even for smaller organizations, it is valuable to do a risk-benefit analysis, even if it may be not as thorough as the analysis of a larger organization.

It is important to identify the quantitative success criteria for the project as well as all the expected benefits and costs. From an SD-WAN project perspective, business outcomes may include items such as SD-WAN flexibility, capacity increase and reliability; reduction in network monthly operating costs and targeting TCO (Total Cost of Ownership) over an initial target time period; improve internet/cloud service quality; and amortize setup costs over the life of the project. For these purposes, establishing application performance measures before and after the SD-WAN migration and ensuring metrics are available to business and technology teams are critical.

Costs should include both direct and intangible costs. Opportunity cost is another factor that needs to be considered to understand what other potential projects will be shelved because of the SD-WAN rollout and what that may mean cost wise or in terms of lost opportunity. From the benefits perspective, alongside with the direct benefits, indirect benefits such as intangible benefits should also be considered in the overall analysis.

Once estimated dollar values are assigned to each cost and benefit identified, it is a simple tallying exercise to see if the project gets a green-light or not.

The project implementation can take several different alternative paths depending on who the solution vendor is, how much the organization will be handson involved in the management , implementation and operation of the project. For example certain SD-WAN vendors may require the SD-WAN gateways to be hosted by the vendor, some vendors may require you to host your own SD-WAN gateways, where some other vendors may offer both options.

The decision on these types of technical factors that depend on the vendor should be carefully considered as additional benefits will come with potential additional cost.

Benefits of an SD-WAN project:

SD-WAN solutions improve WAN connectivity performance, including branch-to-branch, branch-to-data center, as well as branch to Internet connectivity. The benefits of the network performance boost can translate into improved employee productivity, reduced staff time needed to troubleshoot and solve connectivity problems. Depending on the organization’s business, there will also be a value attributed to avoiding downtime. These benefits can be calculated on a per year basis.

One of the advantages of SD-WAN, is that it allows the configuration and management of connectivity between branches and the cloud as well as the connectivity between branches of a company to be simplified and automated with minimal supervision, that reduces operating costs and eliminates potentially costly downtime caused by human errors during configurations and operations of the WAN networks. This benefit should be calculated from the elimination of time required to monitor and configure the WAN networks.

Advanced SD-WAN solutions can also introduce dynamic bandwidth allocations based on applications flowing through the network. This translates into further increased efficient use of bandwidth, as SD-WAN appliances can dynamically shape the bandwidth and allocate reserved bandwidth to satisfy QoS requirements of the applications.

For certain organizations, the benefit of implementing an SD-WAN solution goes beyond the saved cost and boosted employee efficiency caused by increased network performance. The SD-WAN solution may play an important role in enabling certain capabilities. As an example a branch office may get the capability supporting a certain type of real-time application which would not be practically possible without SD-WAN. As an example, imagine an organization that is able to migrate to a pure cloud based IP-PBX voice solution which was not possible previously because of the lower reliability for the branch connectivity. The cost savings from moving from a hybrid on-premises based PBX solution that supports traditional PRI voice trunks to a cloud based SIP solution that eliminates any on-premise equipment and the need for traditional PRI based voice trunks. The operational cost savings for this can be easily converted into dollars for cost and benefit analysis of the SD-WAN project.

Similarly a wireless SD-WAN connectivity that leverages 4G 5G wireless or satellite broadband bonding may be enabling any of the vital internet applications, and therefore provide significant benefit for that location in scenarios where wired Internet alternatives do not exist. So the benefit of the SD-WAN installation at such a location can be as high as the full value of that location as it supports the existence of that branch.

Another benefit of SD-WAN is the improvement in the network security posture of the organization. SD-WAN solutions enable cloud based security solutions such as SASE and therefore can significantly improve the overall security of the company infrastructure. Because of the limited bandwidth of legacy networks, IT teams may have been forced to implement additional external direct internet network access links to route selected internet traffic to consume cloud services. This results in service duplication operating in parallel with the legacy network as well as potential security vulnerabilities. SD-WAN neatly organizes and manages all WAN resources in a secure manner.

There are some secondary benefits which may generate significant value in some scenarios. The dependency on a single ISP (Internet Service Provider) is significantly reduced and therefore enables a more competitive landscape for bandwidth since any bandwidth from any ISP can be easily mixed and matched with SD-WAN.

Cost of an SD-WAN project:

Like any other IT project, a change in infrastructure has the costs associated with the vendor solution as well as the cost of internal resources that need to be diverted for this project. There are certainly a wide range of ease of deployment and potential risk of downtime with an SD-WAN implementation, but for SD-WAN vendors that support zero-touch configuration as well as the support for “passthrough mode” enables an easy installation of the SD-WAN CPE unit without changing anything in the existing network as the first step. After this initial step additional WAN connections can be added into the design and later the legacy connectivity can be disabled if that was the plan, all with minimal to no downtime.

Beyond the vendor hardware costs (either in CAPEX or OPEX form), there may be some service fees for technical support. Some vendors may also charge based on GB usage, which makes the cost analysis a little more complicated.

As a function of the SD-WAN vendor selected, there may be technological risks associated with the solution itself, such as bugs, performance issues and others. To minimize these risks, it is important to do a strong technical due diligence and prefer vendors that have proven track record with the specific solution and technology. A smaller vendor still may provide a superior solution if that is their bread and butter.

Once the quantified list of benefits and costs are tallied together, the decision should be clear regarding greenlighting the SD-WAN project or not. Both for medium and large organizations and increasingly for small businesses, most SD-WAN cost benefit analysis show that SD-WAN provides a lot of value with quick return on investment with minimal risk.

Jay Akin, Mushroom Networks, Inc. 

Mushroom Networks is the provider of Broadband Bonding appliances that put your networks on auto-pilot. Application flows are intelligently routed around network problems such as latency, jitter and packet loss. Network problems are solved even before you can notice.


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