How to reduce 2023 network costs: The cloud

Sometimes, budget pressures mean you just have to cut costs. Sometimes, cutting costs in one area can give you some financial elbow room to fund something in another. A fifth of all CIOs tell me that they have a mandate to cut network costs in 2023, and another third say they’d be open to doing that if they could fund something else with the savings. Most admit that they don’t have a really good idea of how to accomplish their goal without creating a risk that would potentially overwhelm benefits.

Cutting CAPEX is popular in theory.  Of 87 enterprises with cost-cutting interest, 55 said they thought their capital budgets would be an attractive place to start. That’s not changed much over the last five years, but what has changed is how enterprises think they could cut CAPEX. It used to be that they believed cost reductions could be achieved with new technologies like hosted router software or white-box devices, but this year they reported concerns that integration costs and risks were too high.

Leasing gear or routers-as-a-service, which got a decent amount of attention this year, hasn’t yielded much in the way of results, and interest in this approach has waned significantly, to the point where only seven enterprises were contemplating even getting quotes on that sort of deal. In fact, of the 19 enterprises that looked into the concept in 2022, 14 said that the long-term cost impact wasn’t favorable. Substituting expenses for capital purchases doesn’t seem to pay off for companies that have no real cash-flow issues.

OPEX vs CAPEX

Then what will we see in 2023 for cost management?  Of our 55 CAPEX-reducing candidates, 37 still said that discounts and discount vendors were their preference for next year. The others all opted for white-box devices that were bundled with network software by the provider, and, interestingly, 30 of this group were focusing on data-center switching. White-box routers were less interesting to enterprises, in contrast to service providers, who liked white-box routers better even than pushing for discounts.

The problem enterprises have with white-box routers may be that they aren’t offered by vendors that enterprises know. It’s hard to get reliable what-if information, but 48 of the 55 enterprises interested in CAPEX reduction said they would be interested in assessing white-box technology if it came from a vendor they knew and included both hardware and software. This may be the opportunity Broadcom wants to address with VMware.

Operating expenditures, which include technical support costs and carrier-service charges, are a second obvious candidate for cost reduction. Of the 87 enterprises who told me they were interested on significant cost reduction in 2023, 80 said that reducing OPEX was as important or more important than CAPEX reduction. But all 80 said that they had already taken steps to cut both tech support costs and carrier service costs, the latter by getting competitive bids. As a result, only 17 of the OPEX-conscious group had any ideas on how they could impact costs in this area.

Try SASE or SD-WAN

Of that 17, only four thought that the answer was AI, which most thought was interesting but unproven. Twelve were thinking about some form of virtual networking, meaning either using cloud networking and SASE or SD-WAN to replace VPNs. If I pressed the enterprises who didn’t have an OPEX-cutting strategy in mind, 21 had looked at either SASE or SD-WAN for other reasons, and simply hadn’t thought about the technologies as a way of managing carrier-service costs. This illustrates an important point: network planners often get tunnel vision, ignoring benefits beyond the specific drivers for a procurement.

It’s also true that enterprises are reluctant to abandon traditional technologies and vendors. Three-quarters of all SD-WAN product and managed service customers I’ve interacted with have limited the technology to sites where MPLS was either too expensive or unavailable. Pulling MPLS VPNs out of a site where it’s in use is something very few have even considered, but it could save a lot of money—on the average, over 45% versus MPLS VPNs. Taking advantage of the current trend of loading SD-WAN into an app that can be run on any user device could make SD-WAN a remote-worker solution, saving even more.

As long as we’re considering a different network model for enterprises, how about VPNs to the branch? If remote workers need to be tightly coupled to the local office that they’d normally call home, they can also use a secure add-on VPN to connect workers to their local office. Companies have a variety of ways of adding a mobile or WFH worker to the corporate VPN, including buying a VPN client device or even an SD-WAN instance for each such worker. Instead, think about using a simple add-on VPN to a worker device, connecting the worker to the local office or, if necessary, back to the company HQ. For many applications, all you need is an IPsec VPN, but a business-focused VPN is even more secure. Either option will require some technical expertise to select and set up.

Don’t be confused by personal VPN products here. There is a number of business VPNs available that can be installed on a workers’ devices and make a connection to any other IP-addressed location. Often remote workers will need access to data stored in their offices rather than in headquarters, and these VPNs can make that connection, then let traffic jump onto the company VPN through the offices’ connections. Do some research to find features like encryption, and of course look for a low price (some are free) and good vendor reputation. Enterprises that adopt this strategy can save as much as a third on their WFH and mobile-worker network costs.

Use the cloud to cut VPN costs

Another good cost-management strategy is to exploit the “cloud network”. The cloud is transforming networking as well as computing. With cloud-hosted applications, application connections are made to the cloud or internet-to-cloud, and then back to the data center. If remote office locations and mobile workers access applications via a cloud front-end, a significant amount of traffic might move off the company VPN.  This can allow companies to downsize VPN connections, to substitute an internet-based SD-WAN VPN for MPLS, or even to completely eliminate VPN access in some locations. Enterprises who tried or evaluated this approach reported total savings ranging from as little as 5% to as much as 50%, so run the numbers carefully.

Technologies can help manage costs, but one really great budget strategy isn’t about technology as much as organizational budget efficiency. CIO organizations report that their budgets still separate computing and networking, and often separate the cloud from both. This division is one reason enterprises often neglect to exploit a technology like SASE or cloud networking as a network cost-management strategy—they’ve tacked the item into the security or cloud budget where network cost goals aren’t considered.

It’s popular to talk about cloud-first, which some take to mean that everything should be moved to the cloud. That’s not going to happen in the near term, and for many enterprises it won’t happen at all. What is already happening is that the cloud is changing how we connect to workers, partners, and customers. That’s a network change as well as a computing change, and that means that every network plan should first consider how cloud adoption will impact a network, its cost, and its technology model. Only when the cloud is considered should any changes in network strategy be undertaken. That may be the most important lesson we can learn in 2022, and apply in 2023, and one I’ll talk about more in the future.