Despite all the buzz about software-defined wide-area networking (SD-WAN) cannibalizing the MPLS business, CenturyLink is seeing stronger-than-expected revenues from its MPLS offering. In fact, CenturyLink’s MPLS revenues are up nearly 5 percent year-over-year, the company said yesterday when it reported its third quarter 2017 earnings.
CenturyLink CEO Glen Post said the company has managed to grow its MPLS business because many of its SD-WAN customers are adding MPLS to their product portfolio. “Most customers, when they buy these products, they don’t just want a pure SD-WAN,” he said, according to a Seeking Alpha transcript. Instead, they typically combine MPLS with SD-WAN and then use a management tool to manage all the transport to their branch offices. “We still have a hybrid product that’s been very successful,” he added.
And now that CenturyLink has completed its acquisition of Level 3 (the deal closed Nov. 1), it is looking to add even more SD-WAN customers. Level 3 in June unveiled a managed SD-WAN service as part of its hybrid networking portfolio.
Jeff Storey, formerly CEO of Level 3 and now president and COO of CenturyLink, told investors that Level 3 did notice some companies were migrating from MPLS to SD-WAN. Before it had an SD-WAN product it would lose those customers. But now that it has an SD-WAN offering, the company can win business that it previously was forfeiting.
“One of the things we know absolutely is that our customers have a diverse set of networking needs, that there are data centers that they want to connect with dark fiber, that there are main locations that they want to connect with MPLS,” said Storey. “And there are small locations that they want to connect with SD-WAN.”
Catering to the Enterprise
Getting a better foothold in the enterprise market was a big factor in CenturyLink’s $34 billion acquisition of Level 3, and SD-WAN plays a big role in that.
CenturyLink has long said that it viewed SD-WAN as a supplement, rather than a replacement to MPLS. And now it believes that with Level 3 it can tap into an even bigger enterprise market as customers replace aging T-1 connections at branch sites with SD-WAN but keep or add MPLS connections at their core sites.