MPLS vs SD-WAN in Today's Enterprise Networks

Global enterprises have the challenge of choosing between legacy MPLS networks and more modern SD-WAN technology. Every day, we help businesses make such a choice at IPTP Networks. In this article, we break down both technologies in simple terms and help you decide which solution is best for your business.

It is important to realize that SD-WAN can reduce network expenses by 30-50%[1] while at the same time improving connectivity. And that MPLS is still better suited for some applications that depend on guaranteed performance. Today, most organizations use both technology solutions in combination.

Current State of the Network Market

Today, 69%[2] of companies have deployed SD-WAN, 37%[2] in a production environment and 32%[2] in a pilot/exploratory one. The SD-WAN market, which today accounts for some $5 billion, should grow to a $21.7 billion[3] to $66.2 billion[4] range in 2030. At the same time, new MPLS links introduction reduces at a 24% annual rate[5].

Why is this happening? Three main reasons. First, most business applications now run in the cloud. Second, employees work from many different locations, not just offices. Third, companies need to change their networks quickly when business needs change. MPLS cannot do this at a reasonable price.

What is MPLS and how does it work?

MPLS, or Multiprotocol Label Switching, can be defined as a dedicated transmission path. In transmitting data through MPLS, dedicated paths are used that have been set aside exclusively for your organization.

MPLS works by adding labels to data packets. The labels tell the backbone routers exactly where to send each packet, similar to adding an address label to a package. This method has worked successfully over the last 20 years, showing its ability to provide predictable performance. Banks use MPLS in ATM(Asynchronous Transfer Mode) networks. Hospitals use it for sending important patient data. Also, any application that is unable to tolerate delays often uses MPLS.

The tech creates paths known as Label-Switched Paths, or LSPs. The paths resemble specific lanes on a highway. Thus, your data always travels on the same path or either in case of redundant channels on the automaticaly re-routed path, thus ensuring consistency in speed and reliability. Network providers monitor such paths at all times and fix issues immediately, as they own the whole network.

What is SD-WAN, and how does it work?

SD-WAN stands for Software-Defined Wide Area Network. Instead of depending on one expensive private link, like MPLS, SD-WAN makes use of multiple internet links at the same time. It can combine traditional broadband, 4G/5G cellular links, and even MPLS into an integrated intelligent network.

Functionality is made possible via software. SD-WAN continuously monitors all the available connections and sends every bit of information through the best possible path at all times. In case of connection loss, information automatically reroutes itself to a different connection. Users remain unaware of any disruption.

It is possible to think of SD-WAN as a next-gen GPS for data. The same way a GPS system determines the best path based on real-time traffic, SD-WAN determines the best network path based on the existing conditions. In addition, it has the ability to split long video calls into numerous links to guarantee quality.

SD-WAN has inherent security capabilities. The data gets encrypted automatically. The firewalls are in place at every office location in the network. The security hardware at every office location is, therefore, eliminated, making the administrative procedure less expensive and simpler.

The Actual Cost

MPLS typically costs $50-100[8] per Mbps each month. In expensive locations, prices go much higher. A 10 Mbps MPLS connection costs about $392 monthly in New York but $1,448 monthly in Mumbai[9]. For a 100-site company, MPLS can easily cost $2-5 million per year.

SD-WAN costs much less. A complete SD-WAN setup costs $200-800 per site monthly, including equipment, software, and management. Regular internet connections cost only $1.50-15 per Mbps[7]. This means the same 100-site company might spend $500,000-1,500,000 per year instead of millions.

Forrester research reveals an ROI of 300%[10], and IDC cites an ROI of 402%[11], illustrating that legitimate businesses can reap huge returns from SD-WAN within three to five years. Businesses with more than 1,000 locations often see cost savings in the same year. Medium-sized businesses with 100-500 locations typically see 10-20% savings in the first year, which can grow to 30-45% by the third year.

However, there are underlying costs to consider. With MPLS, for example, you can be penalized for terminating the contract too early. There are some contracts where you have to pay the complete outstanding value in case you terminate. With SD-WAN, you require stable internet links from various providers at every location. You must also invest in training your IT staff on the new technology.

The biggest cost of MPLS is often called the “local loop,” which refers to the connection from one’s office to the service provider’s network. The local connection itself represents 45-70% of the total MPLS cost[12]. In remote areas, getting the connection can be very expensive or in some cases, impossible.

Performance and Reliability Comparison

MPLS guarantees consistent performance. When you purchase a 10 Mbps MPLS circuit guaranteed to have 20 ms latency, that exactly is what you get. The supplier makes a commitment in a contract to provide at this performance level and pays penalties if they default on the commitment. This consistency matters to applications as straightforward as voice telephony, video conferencing, and trading platforms.

SD-WAN efficiency varies based on internet links employed. A high-grade broadband link always provides a 15-millisecond latency; however, such latency can increase to 100 milliseconds and higher in peak usage cases. In any case, SD-WAN compensates for such variability by utilizing several links. In cases of any slowing down of one link, traffic gets shifted to a faster link.

Real-world results show SD-WAN can match MPLS performance for most applications. Video calls work fine. File transfers complete quickly. Cloud applications often work better on SD-WAN because data goes directly to the cloud instead of through your data center first.

For ultra-critical applications, MPLS still wins. Stock trading systems that need consistent sub-10ms latency stay on MPLS. Core banking systems processing millions of transactions keep using MPLS. But these represent maybe 10-20% of most companies’ network traffic.

Security Considerations

MPLS provides security through isolation. Your data travels on private circuits that other companies cannot access. However, MPLS doesn’t encrypt data automatically. If someone could physically access the network cables, they could potentially read your data. Most companies add their own encryption on top of MPLS.

SD-WAN makes encryption a core feature and allows to manage security in a centralized way. It encrypts data units before sending them over the internet. The modern SD-WAN uses IPsec or similar protocols, which are supported and approved by banking organizations and other government agencies. The system also includes firewalls, intrusion detection systems, and other security features in all locations.

Some industries have regulations requiring private networks. Banks following FFIEC guidelines need to document how they secure customer data[13]. Healthcare organizations following HIPAA have similar requirements. These companies often keep MPLS for regulated data while using SD-WAN for everything else.

The security model differs too. MPLS centralizes security at data centers – all traffic goes through central firewalls and security systems. SD-WAN distributes security to each location. This works better for cloud applications but requires more complex security policies.

Choosing the Right Choice for Your Business

There is no one answer that fits all companies. The right option depends on your specific situation. Here are the key things you should consider.

Implement SD-WAN in environments that have several cloud applications, remote workers, or branches. It is especially beneficial for companies undergoing high growth or needing to be flexible. When cost efficiency has to be the highest priority, implementing SD-WAN can greatly reduce costs. Companies having knowledgeable IT staff that can handle new technology tend to do well in implementing SD-WAN.

MPLS needs to be chosen when applications require guaranteed performance. Regulated industries that have strict compliance needs often require MPLS. In cases where an organization cannot tolerate any network outages, MPLS provides better guarantees. Organizations with limited IT resources will likely prefer the ease that MPLS offers.

Most businesses today adopt a hybrid model. They maintain MPLS for mission-critical applications and use SD-WAN for everything else. This model gives the dependability of MPLS where required, combined with the financial savings of SD-WAN for the rest. A typical split could be 20% MPLS for mission-critical applications and 80% SD-WAN for general traffic.

The Future of Enterprise Networking

The networking market is moving towards a model that is referred to as SASE, or Secure Access Service Edge. This model brings together SD-WAN and cloud security services. Instead of buying SD-WAN and security products separately, organizations get a bundled solution that includes both. Gartner predicts 60% of new SD-WAN purchases to include SASE by 2026[14].

5G networks will change the game too. 5G provides another high-speed connection option for SD-WAN. This helps in locations where good internet is hard to get. Some companies already use 5G as their primary connection for temporary sites or vehicles.

Artificial intelligence makes SD-WAN smarter every year. AI can predict network problems before they happen. It automatically adjusts settings for best performance. Some systems even fix problems without human intervention.

MPLS will not disappear completely. The MPLS market still has a 4-6% annual growth rate in managed services[15]. Some applications will always require guaranteed performance. MPLS, though, will become a premium service and not be the default option.

IPTP Networks’ Role

At IPTP Networks, we have helped a variety of businesses make this shift. What our experience has taught us is that success stems from applying technology to business needs, not blindly following trends.
We were an SD-WAN solutions enabler and provide for many years, our solution combines the flexibility of SD-WAN with the performance and security enterprises expect. We understand that changing one’s network is a big decision, and we are dedicated to making this process as easy as possible.

With 228 points of presence worldwide, 72 datacenters, and connectivity through 100+ terrestrial and submarine cable systems, we offer both MPLS with our private backbone and modern SD-WAN services. We connect to 52 internet exchanges with over 1000 peering ports, ensuring optimal SD-WAN performance through diverse internet paths.

We’ve helped thousands of enterprises navigate this transition. Our 3000+ clients trust us, our 200+ network experts worldwide analyze each situation individually. Some clients need pure MPLS for their trading systems. Others move entirely to SD-WAN for their cloud-first architecture. Others find the optimal balance somewhere in between.

Conclusion

From MPLS to SD-WAN marks a monumental shift in enterprise networking, which provides innumerable advantages. These range from massive cost reductions of 30% to 50%, enhanced access to cloud services, and added agility.

The technology is mature, the savings are proven, and the business benefits are clear. Even conservative companies can start with hybrid approaches that preserve MPLS where needed while capturing SD-WAN benefits elsewhere.

IPTP Networks, as your trusted tech partner, is ready to help you make sound decisions. We have the right tech and knowledge you need to ensure the success of your network transformation. Whether you choose an end-to-end migration to SD-WAN or prefer a phased hybrid approach, we have options to suit your preference.

References

1. https://www.commandlink.com/how-are-organizations-adopting-sd-wan-and-mpls-technologies/
2. https://twc-it-solutions.com/blog/industry-statistics/sd-wan-statistics/
3. https://www.verifiedmarketresearch.com/product/sd-wan-market/
4. https://www.marketsandmarkets.com/Market-Reports/software-defined-wan-market-53110642.html
5. https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/seizing-the-core-connectivity-opportunity-in-b2b-telecom
6. https://www.cisco.com/site/us/en/learn/topics/networking/what-is-the-difference-between-sd-wan-and-mpls.html
7. https://www.mushroomnetworks.com/blog/what-is-the-cost-of-mpls/
8. https://www.networkworld.com/article/741048/why-does-mpls-cost-so-much-more-than-internet-connectivity.html
9. https://blog.telegeography.com/how-the-cost-of-network-ownership-can-change-over-time
10. https://www.fortinet.com/blog/business-and-technology/forrester-study-shows-roi-fortinet-secure-sd-wan-enterprise-deployments
11. https://www.cisco.com/c/en/us/solutions/enterprise-networks/sd-wan/idc-business-value-white-paper.html
12. https://blog.telegeography.com/wan-pricing-mythbusters-is-local-access-50-or-more-of-the-wan
13. https://technologyblog.rsmus.com/it-infrastructure/risk-impact-of-sd-wan-to-financial-institutions/
14. https://www.channelfutures.com/sdn-sd-wan/fortinet-cisco-top-gartner-sd-wan-magic-quadrant
15. https://www.marketresearchfuture.com/reports/mpls-market-22700