Carriers vs. aggregators: How to select the optimal mix of network transport providers

Enabled by SD-WAN, internet-first networking strategies are now the order of the day for wide-area connectivity and have been for some time. While MPLS used to be the de facto choice for enterprise-grade network transport, companies today are using internet-based transport technologies such as dedicated internet access, business broadband, cellular broadband as well as other niche network technologies like microwave.

Best practices call for companies to work with multiple suppliers to get competitive prices, maximize service coverage, and secure better service delivery performance. But which suppliers should an enterprise select? How do you figure out the best fit for an enterprise’s needs, and what are some of the challenges and gotchas of a multi-supplier portfolio approach?

For enterprises, the landscape of suppliers providing network transport services can be bewildering. Bad choices can lead to a raft of issues:

• Significantly higher costs, including surprise add-ons, than an enterprise should be paying;
• Poorer service performance;
• Flaky support;
• Frustrations with the coverage and implementation of services; and
• Inflexible, punitive commercial arrangements and financial commitments if you want to make changes or move away from an underperforming supplier.

Suppliers all have subtle and not-so-subtle differences in capability and technology options, service coverage, conditions around what and how they deliver their services, and their sweet spots on pricing. To make evaluations even harder, these variables are continually changing as suppliers adjust their sales and contracting strategies, react to success in the marketplace, and shift their technology focus. At the same time, enterprises have to consider elements such as their SLA preferences, appetite and capacity for financial commitments, and implementation timeframe.

For enterprises, the primary supplier choices are either “carriers” or “aggregators.” There are also some alternatives associated with managed solutions, such as bundled SD-WAN and transport, but these are not how most enterprises acquire their network services.

Simply put, “carriers” are the more traditional, infrastructure-owning telecom providers. For example, in the U.S. this would include AT&T, Lumen and Verizon. “Aggregators” don’t own core infrastructure and instead leverage partnerships (or commercial arrangements) with other suppliers to provide underlying circuits. They act as a consolidating interface to the enterprise for things such as billing and service management.

It gets more complicated because the underlying providers that aggregators use may include not only the carriers and some infrastructure owners dedicated to the wholesale market, but also other aggregators, some of whom provide wholesale services exclusively (vs. enterprise retail services). Hence, there can be multiple intermediary layers above the provider of the physical connectivity and before the supplier you are getting a bill from. Moreover, carriers also act as default aggregators and often use the same suppliers as the aggregators, including the aggregators themselves. It is rare that a carrier can service all of an enterprise’s connectivity requirements on their own, particularly for the last mile, due to constraints on their infrastructure or limitations on where they can operate competitively, or even legally operate.

Spoiler alert: The problem is that there is no single best choice. Here are some tips for selecting an optimal mix of network transport providers.

Be rigorous in assessing what the enterprise needs

Aggregators and carriers each have different strengths and weaknesses, and in turn each supplier will have a greater or lesser fit with an enterprise’s needs based on the enterprise’s custom requirements. Those custom needs are largely dictated by the geography of circuits in scope, bandwidth required, strategy around diversity, and the technology mix. This is the specific demand set you need to base your supplier assessment on.

Assessments need rigor in truly understanding the enterprise’s demand set, how it might change, and how offered circuit coverage and pricing best satisfies the need. One common problem seen is haphazard modeling of the supplier mix scenarios and just how they can affect costs. A portfolio of suppliers can be 30% to 40% lower total cost than a single supplier, but not if you inadvertently pick the wrong mix. Overtly, favored suppliers can look attractive until detailed modeling exposes limited positive impact on the benefits case. Also, without scrutiny of the wider commercial offer, some suppliers’ headline pricing can come with hidden commitments and constraints that over time negate any first glance cost advantage. Unless you’ve explicitly called out such risk areas in your sourcing process, and checked responses, you may be setting your enterprise up for some unpleasant surprises late on in the contracting process.

Understand the limitations of aggregators

Sometimes smaller aggregators may not be able to genuinely stand up to a large-scale enterprise’s RFP requirements. They can appear to be the most compliant in responding to RFP requirements, but under scrutiny may be found wanting in terms of their true alignment with the proposed commitments. That isn’t to dismiss them; dependent on the demand set, they can be very useful additions to a portfolio as long as limitations are understood. Conversely, more established scale aggregators, generally but not always, tend to more openly highlight the areas they can’t meet and, because they are more reliant on third-party contracts that they can’t easily control, may also have less flexibility to accommodate custom asks particularly later in the selection process.

Expect some hiccups during negotiations

Also be prepared for potential challenges in the negotiation phase. Carriers more often, again not always, have disconnects between their bid teams and their contracting teams. Regularly, even if you’ve called requirements out, suppliers will inadvertently or blatantly renege on commitments made during an RFP process. Overcoming this obstacle depends on well documented commitments to the RFP and to feedback and improvement coaching. It is also important to identify the evasive but pseudo compliant responses and challenge cleverly written replies that, in reality, don’t fit the need. Honorable suppliers who stick to their commitments should also be cherished. Here, the quality and persistence of your bid or account teams can make a major difference and should be another factor in your assessment. On the other hand, bid or account teams who fudge answers or don’t readily acknowledge earlier commitments are a red flag.

To this end, deep-dive Q&A and presentation sessions during the negotiations phase can be valuable in gauging a supplier’s fit. It’s another valuable opportunity to clarify and enhance commitments, share a supplier’s relative strengths and weaknesses, and dynamically work at optimizing their offer. Usually, the focus areas differ by supplier across scope of services, support and SLAs, financial and commercial arrangements, and contract terms. As with RFPs and other feedback, written preparation is key and will pay huge dividends.

Be wary of outdated perceptions

Nowadays, perceived historical views that aggregators offered the benefit of one “throat to choke,” or that carriers have more robust support, don’t always apply. One throat to choke can be very sub-optimal (it doesn’t come free of cost) and can actually reduce flexibility and responsiveness. Also, some aggregators have developed more robust operations structures or even point of presence (POP) architectures via carrier hotels to enhance their services. Several aggregators provide passive network CPE in-cost for better, more proactive monitoring of the last mile. Carriers themselves have improved their competitiveness, sometimes via targeting and trying to leverage on-net circuit provision, which they hope will bring greater long-term retention.

To sum up, network transport is more important than ever in today’s software-driven network overlay environment. Enterprises can achieve high levels of network performance and return on expenditure by utilizing a portfolio of Internet-based network service providers. Selecting the optimal mix of suppliers from a pool of candidates requires deep industry knowledge, insight and experience, plus a rigorous sourcing process to properly vet supplier capabilities and solution economics.