Network-as-a-service (NaaS) — the delivery of network infrastructure and services by third-parties to enterprises — is growing in popularity. The offerings include wide area networking (WAN) connectivity, data-center connectivity, and bandwidth on-demand.

The global NaaS market is expected to grow from $1.33 billion in 2016 to $9.65 billion by 2021, at a compound annual growth rate (CAGR) of 48.4 perent, according to a recent report by MarketsandMarkets.

This market opportunity is being targeted by all the usual suspects. These include regional and global telecom carriers such as AT&T, Telefonica, and Verizon — as well as countless ISPs and niche players —all eager to satisfy the price-conscious needs of enterprise customers for high-quality flexible services.

MPLS-based private networks, which have been the backbone of enterprise WANs, are being eclipsed by broadband. Traffic growth in enterprises along with cloud adoption and the rise of the Internet has exposed MPLS as a rigid and expensive technology — one that carriers can no longer afford to exclusively bet their futures on.

The software-defined wide area network (SD-WAN) model is making NaaS more prevalent, enabling service providers to re-tool their infrastructure to sell various hybrid WAN offerings to enterprise customers.

Three NaaS Drivers

In a nutshell, three factors are driving carriers’ adoption of NaaS — broadband, the cloud, and price.

Broadband as a ubiquitous method of Internet connectivity has been around for a long time. However, its unpredictable performance characteristics and lack of service level agreement (SLA) had oftentimes disqualified it from being considered as a primary transport for enterprise applications. That is changing. In recent years, high-speed broadband has reached maturity and reliability at an affordable price. NaaS solutions that incorporate broadband connectivity offer legitimate means of transporting most critical enterprise applications across the wide area network, alongside or at times replacing traditional MPLS circuits.

Over the past two decades, carriers have made major investments to build high-speed private networks for enterprise customers. MPLS largely dominated this market by providing reliable, SLA-bound and segmented means of connectivity.

More recently, the rise of cloud-based computing has changed the enterprise connectivity patterns from being primarily data center bound to being cloud and Internet bound. Carriers have scrambled to meet the needs of businesses connecting to popular cloud-based software-as-a-service (SaaS) applications, such as Microsoft Office 365, Salesforce.com, and Google Applications, as well as infrastructure-as-a-service (IaaS) cloud offerings, such as Amazon Web Services (AWS) and Microsoft Azure.

Traditional NaaS solutions address these cloud demands by offering specifically tailored cloud interconnects out of the MPLS core. New, innovative NaaS solutions offer seamless integration of broadband and cellular transports with direct or regional Internet breakouts for SaaS cloud applications leveraging technologies like SD-WAN. For IaaS, NaaS solutions offer an extension of the SD-WAN fabric directly into the public IaaS clouds.

Finally, as with most things, price is a big issue. NaaS solutions offer a healthy balance between strict-SLA MPLS services and high bandwidth broadband Internet. SD-WAN powered NaaS solutions can dramatically improve the overall user experience, often at a fraction of a cost. Primarily by incorporating diverse means of connectivity and leveraging application aware traffic engineering policies to steer traffic along SLA compliant paths.

Transport Independent Value Added Services

Traditionally, carriers tied capabilities and services to the type of underlying circuit technology used to connect customer sites. The three predominant choices were MPLS, Internet, and point-to-point circuits.

When carriers embrace SD-WAN and offer hybrid networking services, they can decouple capabilities and services from specific underlying circuit technologies. MPLS, Internet, point-to-point, and even 4G LTE and satellite connectivity can be abstracted, allowing carriers to deliver capabilities irrespective of which circuits are used to actually transport application traffic.

Billing and New Revenue Streams

To create more effective billing structures, carriers need greater visibility into application usage for site-to-site, site-to-data center, and site-to-cloud data communications. SD-WAN solutions can provide such visibility, enabling carriers to create tiered services relative to performance and uptime SLAs.

By drilling into application performance characteristics and bandwidth usage, carriers can improve on their existing capacity planning practices. Armed with this intelligence, they are better able to offer network/technology upgrades, such as switching from a single MPLS circuit to hybrid WAN or to multiple broadband circuits backed up by 4G cellular connectivity. This approach benefits both the carrier and customer.

New Support Capabilities

Traditional network architectures relied on individually provisioned and operated CPE devices (mostly routers), which required box-by-box care. This approach resulted in significant support challenges for carriers. NaaS approaches that leverage SD-WAN technology can give carriers much more efficient operational model.

That’s because SD-WAN can be viewed as a system, rather than a collection of individually operating elements. This approach simplifies and streamlines overall operations. It provides better visibility into application traffic flows, performance bottlenecks, circuit and device failures, and degraded network conditions. An SD-WAN fabric also offers tools to perform network-wide and device-level troubleshooting, and can be configured to take automated actions to remediate outages and performance brownouts.

NaaS represents a major shift for carriers, one that requires them to acquire new competencies for managing transport independent services. SD-WAN is increasingly playing a major role in this transition.