Omdia shares its survey results on exactly what enterprises need from telco networks.
By Sandra Oboyle Principal Analyst, Omdia
The key business drivers and applications of private lines
Enterprises in all verticals are becoming more application-driven. And they rely on their networks to support those applications, as well as content data and business transactions.
Enterprise business critical communications and operations, and the digital economy as a whole, are underpinned by always-on, high-performance, secure, and ultra-fast networks. Large organizations require private networks with committed bandwidth, high network availability, high reliability, and guaranteed low latency for business-critical applications.
In the first half of 2020, Omdia surveyed companies ranging in size from 25 to more than 10,000 employees across Western Europe and Russia, the Middle East, Africa, Asia/Pacific, and Latin America. Omdia analysts interviewed network and IT executives from the healthcare, transport, financial services, and manufacturing sectors. They shared their private line requirements, experiences, and concerns.
What the survey showed
- Enterprises are re-evaluating their networks to meet heightened performance expectations.
- Dedicated, secure network connectivity is critical to link data centers, private and public cloud, and key enterprise sites.
Enterprise network transformation
The nature of networks and IT operations is shifting. Digital transformation is driving data center and business expansion, and new applications are being added to networks, including more video conferencing usage. This is reflected in the top five business priorities for global enterprises, as shown in Figure 1.
To be successful, IT and network systems must be solid and resilient, but also agile and flexible enough to cope with new digital demands and a faster pace of business change.
With the move to cloud-centric applications, enterprise networks must ensure applications are delivered with a consistently high level of performance and end-to-end security.
Many enterprises turn to high-performance secure private networks and hybrid private and public clouds to transform IT infrastructure. As new enterprise applications and services move to the cloud, customers are more sensitive to latency as well as data security, control, compliance, and the confidentiality of sensitive business data.
Figure 1: Primary drivers of network spending 2018-2020
Source: Omdia survey 1,800 multinational enterprises
While large enterprises cannot abandon their data centers, they’re still shifting rapidly to hybrid cloud strategies to take advantage of cloud economics. Governments are evaluating similar IT modernization. These initiatives for large organizations have a common thread: moving from an on-site focus to hybrid premises, while a cloud environment requires a high-performance and highly secure network.
Cloud connectivity drives demand for optical private lines
Private-line networks enable enterprises to run critical business applications securely, protect confidential data, and meet regulatory and compliance requirements.
Many enterprises use wide area network (WAN) services from network providers to connect their headquarters, data centers, offices, factories, warehouses, and branch sites. WAN services can be costly and slow to provision, and they can lack the scalability and bandwidth required to support new enterprise applications.
Enterprises are re-architecting their existing WANs with high-performance network backbones between their enterprise sites, cloud locations, and data center sites. They’re increasingly using optical lines to build private-line networks for very high-speed and secure transport among major sites and data centers to create private clouds and to achieve secure connections to public clouds.
In a multi-cloud situation where an enterprise may use multiple public cloud services, managing secure connectivity and assuring high performance is a priority. Hybrid cloud presents a similar challenge: Enterprises need to manage computing, applications, services and connectivity securely across a mix of on-premises infrastructure, private cloud services, and public cloud.
The most important features for cloud connectivity are high availability, high bandwidth/port speeds, and committed bandwidth. Optical private lines and Layer 1 connectivity are in demand for data center connectivity because they support high bandwidth, dedicated connectivity for guaranteed bandwidth, and higher availability SLAs.
Market demand for optical private lines in enterprise verticals
Financial services companies, manufacturers, OTT enterprises, and cloud providers are among the leading adopters of optical private-line services, as shown in Figure 2.
Governments and the financial sector have high requirements on network availability and security via dedicated private lines. Financial trading has an additional stringent low-latency requirement: for high-frequency trading, every millisecond – even every microsecond – can make a difference.
Given the choice between lower-cost shared network resources and premium dedicated resources, the financial industry tends to choose premium services. The financial services industry easily justifies services that are high bandwidth and low-latency and that keep traffic on-net end-to-end.
Figure 2: Optical private line deployment by vertical sector
Source: Omdia private line enterprise survey, February 2020
Key enterprise purchase criteria for private lines
High availability and bandwidth: In the digital economy, downtime is lost revenue. Therefore, availability is a top priority for enterprises, as shown in Figure 3. Government and financial services companies demand the highest-availability network performance. These sectors will pay a premium for a high-quality service, with guarantees on availability, failover protection, and low-latency public safety and financial trading networks.
Security: Clients concerned about protecting their data want private-line networks because they are inherently secure. End-to-end private lines ensure the physical isolation of dedicated resources, with no comingled traffic.
SLA performance and real-time visibility: Enterprises expect to be able to monitor network performance in terms of availability, bandwidth usage, latency, and other metrics in real time. Service providers need to offer a one-stop, self-service portal where customers can access SLAs, receive quotes, place orders, adjust bandwidth, monitor real-time KPIs, and view billing and maintenance schedules.
Low latency: Latency is a leading differentiator for high-bandwidth services. Customers have heightened latency requirements, and discerning customers want to know not just average latency, but deterministic latency performance for both primary and failover routes.
Bandwidth flexibility: Long-term traffic planning can be complex. This challenge is amplified in the cloud era, where enterprises may have unpredictable bandwidth needs. Enterprises benefit from partners that offer burstable or adjustable bandwidth, making their services more flexible.
Figure 3: Leading enterprise criteria for private lines
Source: Omdia private line enterprise survey, February 2020
Key recommendations
- Service providers should offer new premium performance SLAs for private-line services. These include high availability guarantees and differentiated latency options, and precise SLA monitoring and reporting through self-service customer portals. More flexible private line bandwidth in smaller increments and at different price points would also provide value to enterprise customers.
- Enterprises across all sectors are interested in minimizing business risk through higher network availability, committed bandwidth, guarantees for low-latency SLAs, and built-in network security. Service providers need to consider the next generation of optical private lines for enterprises that deliver a premium user experience for business-critical cloud applications, backed by competitive performance SLAs.
- Service providers can offer a wider range of pricing options and smaller bandwidth increments for optical private lines as a way to differentiate their enterprise network services’ portfolios. This would make optical private lines more attractive to a broader set of organizations to connect their sites, cloud locations, and data centers.
