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January 22, 2024

Why network as-a-service is what CSPs and businesses need now | Cognizant

Like the cloud before it, NaaS is changing how enterprises buy network services, unlocking value for enterprises and CSPs alike.

Just as the cloud made computing resources easily available to enterprises, a similar thing is happening to networks. Network-as-a-service (NaaS) is an emerging way for businesses to acquire network services via the cloud. This negates the need for having a physical network and all the other network componentry—routers, firewalls, switches, etc.—that has traditionally made managing an enterprise wide-area network complex, costly and labor-intensive.

NaaS is even more essential with the rise in remote and hybrid work and the ever-growing complexity of networks in a multi-cloud business world. Both make it even more difficult and time-consuming to provide updates and install patches, provision new network services or locations and resolve issues, especially with no end-to-end visibility.

The fact is the traditional approach of consuming network services has just become too much for enterprises and communication services providers (CSPs) to handle. But so far, CSPs have been slow to take advantage of this new way of providing network services—and the new revenue sources NaaS offers. By waiting, they are missing out on key opportunities to serve businesses in the very ways they need today. According to one researcher, the global NaaS market is $18.7 billion today and is projected to grow to $155.17 billion by 2030, a CAGR of 35.3% during the forecast period.

To participate in the up-and-coming NaaS market, CSPs need to understand the benefits NaaS can offer them and their customers, as well as the additional revenue streams it can open for the future.

Why it’s the right time for NaaS

CSPs are facing an array of challenges in today’s market. Customer attrition, pricing pressure and disruptive market entrants have spurred a decline in wireline (vs. wireless) revenue in the past few years. Margins are also falling, thanks to high legacy network maintenance costs and operational inefficiencies. Meanwhile, customer satisfaction levels are declining due to complex and outdated buying processes, high quote-to-bill cycle times and low perceived business value of the network.

CSPs have taken a predominantly reactionary approach to these challenges. To retain and grow wireline revenue and improve margins, they’ve focused on bundled services, siloed investments in network automation, cost-cutting using artificial intelligence/machine learning (AI/ML) and cloud techniques, and new standalone network product offerings, such as SD-WAN, cloud and security, and broadband services. However, overall wireline revenue has continued to decline or remained flat for most CSPs.

This puts CSPs at a critical juncture: either continue making tactical improvements or reinvent their business model by transforming themselves into a customer-centric and business outcomes-based network provider.

The power of NaaS

CSPs can achieve the latter with NaaS because it provides them with a way to offer enterprise network solutions tied to business outcomes and service-level agreements that create a win-win for both businesses and the CSP itself. With NaaS, businesses get a cloud-based, scalable, secure and flexible network on-demand. The network is available anytime and anywhere and supports spikes in network capacity and availability in real time. This makes it possible to ramp up or down based on changes in network demands.

Businesses can choose to pay for network services based on a subscription-based network consumption model (e.g., pay as you go) that reduces both capital and operational expenditures and frees up cash flow. Moreover, they get a more predictable and transparent network, which reduces labor costs and frees up employees to focus on strategic work.

NaaS also offers a simpler network buying experience. In addition to self-service capabilities, (e.g., self-ordering), NaaS involves a single contract, simplified SLAs, shorter lead times (same day to a few weeks), on-demand change management and centralized billing, thereby enabling a unified experience for the enterprise.

Understanding CSP benefits

However, NaaS and its business impact is still not well-understood by CSPs, OEMs, network equipment providers or cloud service providers, especially given that the NaaS model is in the early stages of evolution.

As CSPs assess the viability of the opportunities NaaS provides, the first step is understanding how NaaS can not only help them reinvent their business model but also transform and thrive with their wireline business.

Benefits include:

  • New revenue streams with improved margins. CSPs can generate revenue not just from traditional network services but also from value-added NaaS services. Such services include access (e.g., edge router), core network (e.g., Ethernet), security (e.g., firewall), managed services (e.g., end-to-end network outsourcing), support (e.g., network support), multi-cloud (e.g., connecting multiple cloud providers) and industry-specific solutions.

  • Operational efficiency. With NaaS, CSPs can enable a self-service-oriented customer experience (CX), quote-to-cash automation, digital contracting, zero-touch provisioning, generative AI/ML-enabled billing and support, and modernization of operations and business support systems.

  • Improved customer satisfaction. NaaS enables CSPs to offer a modern CX (e.g., two-day delivery) with a self-service portal, shorter quote-to-cash cycle time, on-demand change management and real-time status of purchase orders, network health and consumption information.

Based on our extensive experience with leading CSPs, we have created a NaaS framework that highlights the key learnings and customer benefits of the NaaS model.

Figure 1

The future for CSPs is NaaS

While there is still much uncertainty among CSPs regarding NaaS, it is undoubtedly the way to the future.

NaaS provides win-win value propositions to enterprises and CSPs. For enterprises, it provides scalable, flexible, reliable and secure network solutions in a pay-as-you-go model. For CSPs, it provides a path to business growth by strengthening core network revenue with core and value-added NaaS services.

To learn more, read our blog on Why NaaS is still at the starting line.

Peter Prakash

AVP, Cognizant Consulting, CMT

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Naresh Nirmal

Sr. Director, Cognizant Consulting, CMT

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Pankaj Galdhar

Consulting Manager, Cognizant Consulting, CMT

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Vinson Patterson

Sr. Consultant, Cognizant Consulting, CMT

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