WAN optimization services head down-market

As demand increases for WAN optimization as a managed service (see part one of this story), a market so far dominated by global carriers and large multinational enterprises has the potential to spread to competitive service providers and to small and medium businesses, analysts and vendors say.

Global carriers such as AT&T, Verizon, BT, Orange and T-Systems have already been offering WAN optimization as a managed service – using multiple techniques including caching and compression to maximize efficiency in wide area networks, freeing up bandwidth and improving application performance. But the technology also presents “a significant opportunity” for smaller players such as regional and nationwide competitive local exchange carriers, said Joe Skorupa, research vice president at Gartner. And the small and medium business market for such services has barely been tapped.

“It can absolutely be sold to small and medium businesses – we think that market is ripe,” Skorupa said, estimating that 20% of WAN optimization vendor Riverbed Technology’s current revenue comes from SMBs. “For example, regional architectural firms that share drawings and diagrams, regional medical practices, consulting and manufacturing organizations that may only have five to 15 locations. But they move a lot of information around.”

“It does require a more consultative sale,” he added. “It’s not the simple x-dollars-a-month for this much bandwidth. But it does allow [service providers] to get into a higher value relationship [with the customer].”

(Skorupa explained in more detail how service providers can tap this market in a Telephony podcast this week.)

Last October, Sprint Nextel introduced a “WAN Acceleration” offering based on equipment from Bluecoat Systems. Sprint uses a two-pronged approach to sell WAN optimization based on appeals to the chief information officer or chief financial officer – whoever is feeling greater pain. To the CFO, Sprint may suggest cutting costs by replacing a T-1 with an optimized WAN based on wireless access, an approach that’s being driven by convergence of multiple enterprise services onto a single network. To the CIO, the carrier may suggest application performance  protection or improvement, which is being driven by an increasing proliferation of Web-based applications and distributed workforces.