In times of economic uncertainty, the main priority of an enterprise is to sustain operations in the most economical and simplified way possible. Network-as-a-Service (NaaS) deployment models are the perfect solution to this challenge for enterprise Wi-Fi connectivity. A virtualized NaaS model means cloud-based software takes precedence over physical on-premises management, with management and maintenance responsibilities outsourced to a Managed Service Provider (MSP) or sometimes the equipment vendor directly. Enterprises typically “pay as they go” for access to NaaS, ensuring that wastage is minimized and expenses align with their business needs. Although they're skeptical now, ABI Research forecasts that more than 9 in 10 enterprises will use this usage-based consumption model for at least a quarter of their network services by 2030. But why are an increasing number of enterprises turning to NaaS, and what do infrastructure vendors stand to gain from this new service model?
What Attracts Enterprises to NaaS?
For enterprises, the business case for NaaS migration boils down to greater network flexibility and the elimination of Capital Expenditure (CAPEX). More specifically, the merits, from an operations standpoint, of a cloud-native NaaS model include the following:
- Smaller financial risk as NaaS eradicates the CAPEX requirements and replaces them with predictable payment cycles.
- Reduced on-premises and in-house Information Technology (IT) management due to the virtualized nature of NaaS.
- Improved site portability and network elasticity.
- Scalable Wi-Fi infrastructure that can be upgraded remotely via cloud-enabled software.
- Rented, pay-as-you-go model reduces provisioning time for new sites and enables downscaling or upscaling when needed.
- Dynamically allocate network resources to match traffic demand.
These benefits ease the digital transformation process for enterprises. And financially, NaaS translates to an Operational Expenditure (OPEX)-based deployment model whereby fixed investment costs and staffing costs (for IT management) are significantly reduced for enterprise adopters.
It’s also essential for enterprises to identify the three main drawbacks of a NaaS service model for Wi-Fi: long-term agreements, vendor lock-in, and loss of talent. Partnering with a NaaS provider usually means you agree to use their network services long-term, with financial penalties being the only way to get out. Adding to this, infrastructure vendors often choose to keep their ecosystem tightly constrained, making it impossible to have interoperability with other brand products. This will prevent enterprises from using alternative solutions during supply chain disruptions. Finally, adopting NaaS and outsourcing networking responsibilities means enterprises forfeit their in-house IT skills, which are challenging to rebuild once lost.
NaaS from the Infrastructure Vendor Point of View
Like enterprises, infrastructure vendors stand to gain several benefits from using the NaaS service model. These benefits are outlined below:
- Vendors can expand long-term revenue per client by bundling multiple services together.
- New customer segments will be carved out because NaaS models are more economical for Small and Medium Businesses (SMBs).
- NaaS contracts include fixed payment schedules, making it easier for vendors to predict revenue streams.
- The customer-brand relationship is strengthened as vendor lock-in means the enterprise relies on the vendor for support, maintenance, and managed services. This, in turn, can justify higher costs.
While pay-as-you-go is the most common NaaS deployment model, equipment vendors always have the option to align their model to the specific demands of their ecosystem partners or end customers. This will result in some vendors opting for pay-per-use or pay-as-you-grow contracts. In other cases, vendors will offer both options or the ability to transition ownership of IT/OT management from MSP/infrastructure vendor to enterprise down the line.
Going forward, Wi-Fi infrastructure vendors looking to introduce NaaS must be wary of a few downsides, namely managing cash flow, the potential for lost business, and the need for new skillsets. When planning for a NaaS solution, vendors must estimate the entire initial cost of the design, hardware, installation, and continual maintenance. Unfortunately, these costs may all take years to recoup.
Another problem is the potential of a client losing its financial positioning, which could result in lost revenue, considering the longevity of NaaS contracts. Lastly, equipment vendors will also feel the pressure to revamp their capabilities, necessitating hiring new tech experts and stretching existing departments.
Determining Factors for Equipment Vendors
Enterprises face various challenges, such as tighter budgets, labor shortages, and the need for network agility. These factors are spurring increased demand for as-a-Service models, with NaaS at the forefront. To take advantage of the opportunities presented by NaaS, ABI Research recommends that telco equipment vendors take the following actions:
- Highlight Where Significant Value Lies: Vendors must closely monitor the qualities that attract enterprises to NaaS (scalability and lower financial risk). These qualities should take center stage in product offerings/marketing. Concurrently, vendors must stay cautious not to scare prospective clients away with long-term vendor lock-in or losing in-house IT talent.
- Alleviate Customer Concerns about Interoperability: Telco equipment providers should invest in or collaborate with platforms based on open standards. Given recent supply chain woes, enterprises are skeptical about doing business with a single vendor in the long term. This results in greater demand for NaaS solutions that can function across multiple vendors, as customers want to be sure they can weather another potential storm by sourcing from other providers.
- Join Forces with Reliable Vendors: Bringing additional value to NaaS requires telco equipment vendors to work with other vendors that complement them. When weighing options, the main criteria are technology experience, pricing, and long-term vision of the potential partner.
- Evaluate Various NaaS Delivery Models: There’s no consensus on which NaaS delivery model works best. Equipment vendors must have an open mind, basing their delivery model on their portfolio, partnership ecosystem, and unique enterprise demands. Ideally, vendors should offer enterprises a range of options, including transition opportunities, to reduce the perceived risk associated with a monthly-based consumption model.
- Create Ancillary Value with Useful Technologies: Artificial Intelligence (AI)/Machine Learning (ML) should be strongly considered as it creates further value for the NaaS product in the form of real-time analytics. Other technologies to possibly incorporate include a unified policy engine (to ensure authorized access), an Application Programming Interface (API) (for easier behavior modifications), and advanced security features.
This content came from ABI Research's Residential and Enterprise Wireless LAN Business and Service Model Analysis report, which is part of the company's Wi-Fi, Bluetooth & Wireless Connectivity and Wi-Fi & WLAN Technologies & Markets research services. To get a feel for the report, read our accompanying Research Highlight Helping Wi-Fi Vendors Piece Together a Capable LAN Business and Service Model. Just register a free account with us to access it!