Since cloud computing introduced the concept of consumption-based pricing, businesses have dabbled with the idea of buying networks connecting to cloud in an on-demand manner. Leading network service providers offer bandwidth on demand on several of the existing transport services (Ethernet, MPLS, DIA, and wireless), which allows enterprises to scale up or down as per their application needs. On-demand bandwidth offerings from leading service providers (including NetBond from AT&T, Secure Cloud Interconnect from Verizon, and Cloud Connect from Lumen) are used by many organizations for cloud connectivity, as the network service is truly integrated and optimized for easy, on-click connectivity to applications hosted in multiple clouds. Bandwidth on demand was the first instance of a Network-as-a-Service (NaaS) model nearly a decade ago.
The concept of NaaS has evolved significantly since then with deeper integration of software-defined networking (SDN) and network function virtualization (NFV) technologies in service provider networks. SDN enables true network flexibility and scalability, and NFV allows related network functions (routers, firewalls, VPN concentrators, WAN optimization devices, session border controllers and others) to be deployed as software. Hence, NaaS in its current form allows businesses to buy network hardware, software and services in a subscription model. It is important to note that NaaS is very different from the as-a-service model of cloud, where the underlying platforms are built to be shared and can truly flex on demand. In the NaaS model, the hardware is dedicated to a particular client and particular sites.
Therefore, the NaaS model is like consumer or residential communication services offered by cable system operators or service providers, for which you can subscribe to multiple services (voice, internet, video, wireless, security) for a subscription fee with an annual or multi-year contract. Unlike in the consumer market, enterprise networks need flexible bandwidth capabilities and access to robust network services that rely on much more complex and capital-intensive network equipment.
While NaaS shifts enterprise spend from a CAPEX to an OPEX model, it is important to note that the true consumption-based model applies only to the bandwidth that can be flexed up or down as needed. Everything else an enterprise buys in a NaaS model – hardware, virtual instances, managed services, network services – incurs a recurring charge for all active devices and functions. Depending on the terms of the contract, there is some flexibility built in for pricing change as customers add/drop devices after a certain period.
Many industry articles inaccurately conflate the terms subscription-based and consumption-based when talking about NaaS. In the residential space, technically, users can buy a compatible internet router and eliminate the equipment rental fee, but not so easily on the enterprise side. In the NaaS model, the fee recurs monthly throughout the agreed-upon period, which typically allows enough time for the provider to amortize the equipment cost. As with residential video services that you can buy for a month or year, for example, virtual network services incur a recurring charge no matter how long you use it.
Read this ISG white paper Demystifying Network-as-a-Service (NaaS): More Like Consumer Communication Services, Less Like Cloud Services to better understand the NaaS market and its role in enabling enterprise digital transformation.
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