The Economic Benefits of Virtual Edge Services

 min read

Enterprises have been relying on managed service providers for many years to manage their private MPLS networks and more recently SD-WAN networks, which are essential to most enterprise IT systems and digitization strategies. Currently, many managed service providers use physical network appliances to deploy managed services. For example, an MPLS router provides MPLS service, an SD-WAN router provides SD-WAN service, a firewall provides security services, and a WAN optimization appliance optimizes enterprise application services. Each time a new service is deployed the service provider must install a new physical appliance on a site, which requires a truck roll, configuration, and testing. Service providers must also keep a large inventory of many physical devices and track of different hardware versions and features. A new service might require a new type of device and a new vendor.

Network function virtualization (NFV) allows many virtual network functions (VNFs) to run on a single x86 physical device. This allows managed service providers to offer many edge services on a single physical platform. This helps reduce both CapEx and OpEx by decreasing hardware expenses, power, operations, and management expenses. In this paper we present the results of a business model that shows a virtual edge can reduce the total cost of ownership (TCO) by 39%. This is driven by a CapEx savings of 37% and an OpEx savings of 65%. Additionally, the virtual edge allows service providers to deploy services more quickly, which provides a 6% increase in revenue. The combined benefit of the TCO savings and revenue acceleration has dramatic impact of the bottom line profitability for a managed service provider. We show a 412% increase in cumulative cash flow over three years.

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