In 2020, Multapplied conducted a study to examine the economic impact of Multapplied SD-WAN on our channel partners’ business.
SD-WAN ROI in the first 12 months
ROI over 48 months
To uncover the financial benefits of selling Multapplied SD-WAN, the team analyzed the sales performance of Multapplied partners and modeled that growth over a 48-month period. Multapplied partners include managed service providers, internet service providers, and telecommunications providers. For the economic impact study, we reviewed a sub-set of our partners that belong to two distinct groups:
- The first group had less than 14 months of experience selling Multapplied SD-WAN.
- The second group had over three years of experience selling Multapplied SD-WAN.
Data points resulting from this study include revenue, costs, payback month, the annual return on investment (ROI), and net present value (NPV). The team used analyst reports to obtain data with respect to SD-WAN ROI, costs, benefits, and risks and constructed a financial model to demonstrate the findings. Multapplied also conducted extensive research into the SD-WAN market.
SD-WAN Market Growth
The SD-WAN market continues to be one of the fastest-growing segments of the network infrastructure market. Growing at a 30.8% compound annual growth rate (CAGR), SD-WAN presents a great opportunity for managed service providers to expand their offerings and win a share of a $5.25 billion market.
Mainstream or big brand SD-WAN solutions on the market are not conducive to profitable managed services. Lack of flexibility, vendor lock-in, proprietary hardware, and bandwidth-based pricing are just some of the ways traditional SD-WAN vendors make it hard for managed service providers to make a profit. In addition, market saturation drives down selling prices and reduces differentiation when multiple value-added resellers (VARs), IT firms, or consulting groups in a territory start selling the same platform.
Multapplied SD-WAN is entirely channel partner focused. Our white-label or OEM model ensures that channel partners can own, brand, and control a high-performance SD-WAN platform that profitably grows their business.
Multapplied SD-WAN Economic Impact Study
To determine the impact of Multapplied SD-WAN on a partner’s business, the team first examined the costs involved. Multapplied licenses are priced as typical software-as-a-service (SaaS) licenses on a month-to-month basis, but partners typically sell term contracts.
Among the costs, we included things like the one time, upfront setup fee paid by each new channel partner to Multapplied; and the monthly cost of Multapplied SD-WAN licenses to the channel partner. We also applied a conservative discount rate to calculate the four-year net present value (NPV).
We also analyzed the partner benefits of the Multapplied SD-WAN business model. However, some important benefits could not be accounted for in the scope of the research. If accounted for, the following additional benefits would boost SD-WAN ROI even further:
- Partners can dictate their own terms. (For the purposes of this study, we assume they sell 24-month contract terms. This is a conservative assumption since most partners sell 36-month contract terms.)
- Partners gain incremental revenue by bundling SD-WAN with partner managed services. (We did not include the positive impact of increased Partner revenue driven by better delivery and managed SD-WAN networks.)
- Partners can white label Multapplied SD-WAN to create competitive differentiation and control their own end-user pricing. (We didn’t include the brand, differentiation benefits nor the potential to create custom bundled services.)
- Multapplied never charges additional costs for bandwidth. (In contrast, competitor SD-WAN ranges from $150 to $700 per month, depending on bandwidth licensing.)
Findings of Multapplied SD-WAN Economic Impact Study
Based on our conservative assumptions, Multapplied SD-WAN has the following economic impact on partners:
- Payback in Year One
- 143% SD-WAN ROI in Year One, 2,645% SD-WAN ROI through Year Four
- Over $700K in cumulative cash flow through Year Four
As one partner said, “Multapplied’s technology and business model generates real revenue and substantial margin. Within 12 months of selling Multapplied SD-WAN, we recouped all our startup costs, including all infrastructure.”
Overall, the research clearly demonstrates the value of Multapplied SD-WAN to service providers.
Advice to Service Providers Considering SD-WAN
Partners evaluating any SD-WAN vendor should have a realistic estimation of the number of sites that can be sold in the first year. Reaching 50 sites generates payback and positive cash flow in year one based on Multapplied’s MSRP pricing to partners.
Sales training and sales targets should be established prior to the launch phase of bringing SD-WAN to market. Consistent sales growth requires that sales teams understand SD-WAN value propositions and can communicate how SD-WAN can be used to enable the quality and performance of existing managed services and support SLAs that are in place.
Month over month sales results can vary dramatically, especially in the first 14 months. During the later years, churn will also have an impact on the net number of sites sold at the end of each month.
Bundling and packaging SD-WAN should be considered. While not included in this analysis, bundling SD-WAN with other hosted, managed services as a “managed on-ramp” makes partner services stickier and creates additional revenue pull-through for greater SD-WAN ROI.
End-user pricing is also crucial. Partners must establish a high enough price while remaining competitive in their markets in order to deliver solid SD-WAN ROI.
Contact us for information on Multapplied SD-WAN or download a copy of the complete economic impact research study.