MPLS: Dead, Alive, or on Life Support?

10 October 2019 |  Mike Sapien, Chief Analyst, Ovum

Ovum foresees that MPLS will continue to operate in the background for many years to come.

Catalyst

With the ongoing adoption and promotion of software-defined wide-area networks (SD-WANs), Multiprotocol Label Switching (MPLS)-based virtual private network (VPN) services are now evolving from primary enterprise private WAN to becoming part of the enterprise networking mix. Some in the telecoms industry have suggested that MPLS is under attack and will quickly evaporate from the main stage of enterprise networking, as SD-WAN has taken center stage as the new hybrid-networking star within the enterprise market. But SD-WAN is still in the early adoption phase, and many implementations of SD-WAN include MPLS. Although there is a lot of noise about totally replacing MPLS with business internet services, Ovum sees few examples of that happening on a large scale. The rumors of MPLS's death have been greatly exaggerated, and it still seems to have some life left.

Ovum view

MPLS has a long history and very large installed base which will take many years to transition away from, no matter how viable or lucrative other offers become.
 

Cost is just one factor that enterprises consider when evaluating network services, as care must be taken about performance and reliability before moving away from MPLS-based VPN services - indeed, application performance usually trumps any cost savings. That comes into focus when a critical application becomes unavailable or end-user experience hits an unacceptable level. With current SD-WAN implementations, MPLS continues to play a role within the network mix for large enterprises (over 70% include MPLS according to recent provider interviews). Most smaller enterprise customers will continue to use dedicated and broadband business internet, and even wireless failover for WAN services. MPLS has, and will continue to be, too expensive for some smaller enterprise customers, but for many larger enterprises, multiple business internet circuits do not address performance and may not be good enough to meet requirements.

Wireless services will relieve some pressure as a complement to, or replacement of, MPLS. 4G LTE backup, and the promise of 5G broadband wireless, adds another wrinkle to hybrid networking for both primary and backup connectivity roles. Ovum believes that MPLS still has life remaining in its role with major WAN deployments for the large enterprise market, but this may only last for a few more years before revenue declines accelerate. Providers need to plan accordingly, and lead the migration to become part of the future solutions.

Key messages

  1. Most large network providers still see stable, single-digit-percent growth in MPLS services with growth in ports and bandwidth. But revenue is a different story.
  2. Enterprise customers currently have multiyear, long-term agreements for MPLS services that will slow down any large-scale replacement.
  3. Application performance must be met before enterprises can consider or evaluate any replacement of MPLS. Application performance trumps any cost savings.
  4. Large enterprise SD-WAN implementations continue to include MPLS as part of the mix. Providers report that 70-80% of SD-WAN implementations include MPLS services.
  5. Many competitors that do not have any MPLS base are promoting the replacement of MPLS while they continue to improve their offerings of reliability and performance.
  6. Wireless will also provide pressure to replace or complement MPLS with alternative solutions. 4G LTE backup, and the rise of 5G, adds yet another wrinkle to the hybrid networking mix.
  7. Providers can create offers to speed up or slow down MPLS replacement, but the service is moving toward taking a lesser role in networking.

Recommendations for service providers with an MPLS service

Many service providers have a long history with MPLS which should allow a complete review of their service portfolio, features, overall revenue, volume, port sizes, and customer breakdown. Analyzing the MPLS service trends for the past two years on volumes, customers, locations, and revenue will identify trends, demand, segmentation, and customer adoption/contraction. Advanced service providers with MPLS have already integrated MPLS into their hybrid and SD-WAN offers. These service providers, however, need to offer visibility, management and control features in an integrated portal to deliver better customer experience. On the other hand, more advanced providers have added different network options to their SD-WAN offerings, but likewise are slow to provide a single unified console to enable ease of management. Service providers with MPLS can reprice these services and integrate them with their SD-WAN services. In many cases, modifying the price of a traditional service will extend its lifespan. Another tactic for these service providers is to adopt a network evolution plan that leverages the MPLS backbone infrastructure to support other network services. Ovum sees many large carriers developing this strategy, which not only extends the MPLS service lifespan, but also provides improved performance for other network services. 

Recommendations for service providers without an MPLS service

Service providers without MPLS will need to provide business premium internet services with options that aggregate multiple network services and providers to ensure better performance. Having a single portal view for customers remains a requirement. Large cable providers that offer SD-WAN have improved their business internet services, and often incorporate third-party network services, including wireless backup, to improve the reliability and availability of WAN services, strengthening the offer to replace MPLS. The performance may not be the same, but it is getting closer and closer to meeting customers' critical applications, including VoIP services. Service providers need to document and promote the performance of their business internet and SD-WAN offering, including cost comparisons to allow for accurate comparison to an MPLS service, yet many providers fail to promote documented performance or stats to prove the performance, availability, and reliability of their service. Service providers also need to document performance and promote customer adoption of their hybrid networking and SD-WAN offerings. Showcasing enterprises that have successfully adopted their solutions in lieu of MPLS, and their decision-making process and criteria for doing so, would make a big difference in the rate of MPLS replacement. 

What the future of MPLS looks like

Ovum's IP VPN forecast as a reference

Figure 1: North America IP VPN forecast, volume 
Source: Ovum 
Ovum's IP VPN forecasts provide some insight into understanding MPLS near- and long-term service trends. MPLS is reaching its peak in volume. Ovum predicts that MPLS volumes will continue to rise for a few more years, but revenue has already started to decline in North America (see Figures 1 and 2), while Europe will be seeing this trend later. There is some life left, but revenue is declining in both regions. 
Ovum expects that service providers can extend the life of MPLS for a few more years by repricing and bundling services, but, after 2023, Ovum expects volumes to decline, accelerating MPLS revenue declines.
 
Figure 2: North America IP VPN forecast, revenue
Source: Ovum 

Insight from global carriers with MPLS

Judging from interviews with large carriers, there is still life left in MPLS-based services, but it is clearly in the mature stage. These carriers report that a large majority of current SD-WAN customers are pairing SD-WAN and MPLS. Ovum has informally surveyed these carriers, and many still report single-digit-percentage volume growth. They also report that a high volume (70-80%) of their managed SD-WAN deployments retain MPLS services. Although this was a small sampling, the trend among large carriers that have historically had MPLS as their workhorse network service seems to be consistent. The signs still point to product decline over the next few years.

MPLS will remain a network WAN staple for a few more years. This perspective is based on the review of Ovum's forecast of the North America and Europe regions, where there is a highly concentrated MPLS base. MPLS network infrastructure will remain the backbone of major carriers, supporting many other network services. MPLS network technology is part of major carriers' playbooks, paired with a range of access technologies providing the last mile. Ovum foresees that MPLS will continue to operate in the background for many years to come.

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