The global SD-WAN market for multinational enterprises is worth $3 billion, but accounts for just 5% of the total market, according to a new report from TeleGeography. 

The market research and consulting firm's latest "WAN Market Size Report" found that MPLS is worth $17 billion, or 29% of the global WAN market, and local loops connecting customer sites to direct internet access are worth $3.8 billion. Together, MPLS and access loops connecting to MPLS PoPs maintain 60% of the market for large multinational enterprise WANs. 

TeleGeography senior manager Greg Bryan said he approached the TeleGeography research with a bottom-up market size model to see how products contribute to the market size with "great specificity,"  broken down by geography and connectivity product sets.

"That caveat is important because I'm not saying that the global MPLS market is this or that. I'm saying that the market for these very large multinationals [is]," he explained. 

Bryan said the WAN market has diversified, and pricing differences within product sets vary considerably across geographies. Price ranges for MPLS are more extreme than for direct internet access and broadband, and internet prices across the globe are flatter than those for MPLS, affecting areas like the Middle East, North Africa, parts of East Asia, and China, where the MPLS market is expensive.

Bryan does anticipate MPLS revenue to drop.

"It is going to be replaced somewhat by SD-WAN and increased internet revenue as well," he said. "But those things are really at lower price points than MPLS. So we're gonna have to see how carriers and managed service providers kind of make up that revenue."

MPLS is diminishing but won't disappear

According to Bryan, the past few years have seen a "fairly steady" decline in the utilization of MPLS.

"The market might be shrinking," he said. "I'm not willing to say that yet, but it certainly is quite possible that that's going to be happening because MPLS is a pretty high-dollar product, especially in certain countries that aren't as competitive."

Bryan said MPLS has served as a sort of "cash cow" for the telco market. Local access loops are also revenue generators for telecom companies around the world, compared to alternatives like on-net direct internet access or broadband. In some geographic locations, Bryan added there's not sufficient local internet to replace MPLS, noting that China, for example, is particularly complicated because of geopolitical concerns.

"You're gonna see them stick with MPLS in a lot of other places, like in the developing world or just less competitive markets where there's not a robust suite of ISPs."

Bryan said, adding that MPLS will stick around even in developed markets because companies aren't willing to jump into the internet.

"MPLS isn't gonna disappear," Bryan said. "But it is certainly diminishing, I think that is without question."

A 'considerable shift' is coming, despite SD-WAN challenges

While MPLS still outperforms SD-WAN in the market, Bryan expects a “considerable shift” in the next few years as businesses demand better flexibility, reliability, and cloud access.

"I think the vast majority of multinational enterprises are going to adopt SD-WAN over the coming years," he said. "We would probably already be further along than we are if it weren't for the pandemic. The pandemic has increased demand for SD-WAN in some ways, but I think it slowed down anyone making big changes on their network."

Research from MEF shows that the SD-WAN market is on track to hit analyst expectations.

“The global SD-WAN services market should hit double-digit revenue growth in 2022,” MEF Principal Analyst Stan Hubbard previously told SDxCentral.

MEF survey results also highlighted SD-WAN adoption challenges, specifically in dealing with the complexity of operating and managing multi-vendor SD-WAN, integrating security options, and defining end-to-end service level agreements (SLAs). Hubbard said the situation is made worse by differing terminology, architectures, and performance metrics.

Bryan sees other challenges, too, like IT budgets and bandwidth. He said there's an opportunity for managed service providers "to hold their hand," offering enterprises a full service transition. But even then, rollouts "take a lot of time to get everyone up and running with a new technology."

"I think as vendors come up with a really good full stack of security, like the [secure access service edge] kind of framework integrated with the SD-WAN, then we'll really see things pick up so they can not worry about messing something up as they go to a new technology," he added.