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All the Ways SD-WAN Reduces Costs


Everyone acknowledges that SD-WAN can save money. As the chart shows, more than half of IT leaders expect a 25-50% return on investment (ROI) from SD-WAN, but most people only talk about the savings gained from moving from moving MPLS circuits to IP or broadband circuits. While this transition does yield significant savings - in most cases more than 50% savings -- it is only one category out of several. Depending on the number of sites connected with MPLS circuits, and the cost of the replacement circuits, this immediate savings from transitioning to IP based circuits can be large.

At Hughes, when we help move our customers from MPLS lines to the best-practice IP networks, we often see savings on the order of 60-70%.

But every business has a different mix of lines and different options for the transition, so the savings will vary. Something else to note is that these broadband circuits regularly deliver an order magnitude of more bandwidth than the MPLS circuits they are replacing, so the cost per Mbps delivered will improve drastically in all cases.

Beyond the circuit costs, there are several other ways an SD-WAN solution reduces costs. The next area of explicit savings is in right-sizing circuits for the site they are supporting.

In many cases, the site has to over-provision the circuit to allow for the inherent variability in bandwidth for IP-based circuits. With SD-WAN, especially solutions like the Hughes Managed SD-WAN service that integrate WAN Optimization, this need to over-provision is removed.

Again, depending on the site and the circuits available, being able to right-size a circuit from a 50 Mbps line to a 25 Mbps can often save $20 per month or more per site per line. These monthly cost savings on circuits drop right to the organization’s bottom line, continuing IT’s trend of delivering more bang for every dollar.

The next area of hard or explicit savings is in the SD-WAN overlay cost structure.

Many SD-WAN providers charge for their service based on the volume of traffic transiting their SD-WAN service. This is usually done by assigning an additional cost based on the size of the circuit connecting to the SD-WAN service. A 10Mbps line costs X, and a 25 Mbps line costs 2X. These costs add up for a large network.

Another way to save money with your SD-WAN solution is to choose a solution, like our Hughes Managed SD-WAN, that charges a low flat fee for its monthly use instead of a usage based fee. The savings could be $30-50 per month per site.

Moving into the soft or inferred savings, the largest impact is likely to be on the IT service desk.

By comparing the two, you’ll see that between MPLS vs. SD-WAN, SD-WAN, with its dual circuits and intelligent path control, routes traffic away from network issues, keeping the business running smoothly. With its automated management control, it reduces the likelihood of human error in updates or site changes. Both of these features significantly reduce site calls to the service desk, saving as much as 3.75% of total WAN costs.

The last area of soft savings is the savings to IT management. SD-WAN, with its centralized control and automated management functions, removes the need for highly specialized network engineers to make system changes, and reduces the level of effort needed to deploy and maintain the network. These savings provide up to a further 1.5% of total WAN costs.

In summary, remember the cost areas impacted by the move to SD-WAN:

  1. Savings from transition to lower cost IP-based circuits
  2. Savings from right-sizing circuits
  3. Savings from reduced SD-WAN overlay costs
  4. Savings from IT service desk reduction
  5. Savings from IT management reduction

When considering the move to SD-WAN, be sure you've answered the critical questions within why SD-WAN? Once moving forward and investigating the cost of SD-WAN, make sure you consider all of the above factors in calculating a Total Cost of Ownership (TCO), and not just the hardware and software costs. Often you will find enough TCO savings to actually pay for the SD-WAN upgrade within a couple of years.