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Still into you: MPLS and the sunk costs fallacy

Bob Kukic

Senior Solutions Engineer

MPLS (Multi-protocol Label Switching) was invented in the 90s, with the first commercial implementations rolling out in the early 21^st century. And for many large enterprises, it brought huge benefits. By pre-determining each data packet’s route across the network (in a sense, bringing the older telephony model of fixed circuits to the wild world of IP) it gave a range of existing data protocols—ATM, Frame Relay—the reliability of a fixed-line over a shared network. For those who remember the OSI 7-layer model, MPLS sits between layers 2 and 3, separating the forwarding method from the underlying data protocol.

The drawback of MPLS is that it was (and remains) expensive. Yet many companies beyond the SME stage are holding onto their MPLS setups. Because while MPLS is reliable, carries assured Service Level Agreements, and is innately secure, it represents a major ongoing operational expenditure, with carefully negotiated budgetary approvals and supplier relationships. Time and energy have been invested in MPLS—and swapping something that works for something different isn’t something CFOs like to do.

This is the “Sunk Cost Fallacy” of economics, and it’s harming many larger enterprises today. This article explains how sunk costs should be seen, and in the process how older MPLS and newer managed SD-WAN solutions can work together.

Years back, psychologists discovered people value what they already have more than they should. Think about it. That cracked mug, an old pair of shoes that let in water. Most people have one of these things in their closet they can’t bear to part with.

This is a sunk cost. Something you’ve spent resources on (whether love or money) that you can never get back. Because you’re still thinking about what it cost you, you’re determined to get the most out of it. You might even repair it (at a greater cost than buying new) or continue using it long after it’s worn out.

This is fine with a treasured leather jacket or favorite pair of shoes. It makes less sense when it’s an item you have no emotional attachment to, like a $2m MPLS deployment.

However, the answer to SD-WAN vs. MPLS isn’t as simple as “junk the old stuff and start over”. Let’s look at where your favorite old MPLS is still useful, and where SD-WAN should be taking over.

Multi-protocol Label Switching isn’t a communications protocol like IP—as the name suggests, it’s a “wrapper” capable of handling several formats for data exchange, most of them names of a similar vintage including T1, ATM, Frame Relay, and DSL.

Whatever the access technology, MPLS sends it across a network the same way you’d plan a long car journey: picking out convenient stopping points and working out the best route between them. Once these “paths” are decided, they’re semi-permanent—data crosses the network based on the path label it’s been assigned, rather than finding its own path like IP.

Especially in times when bandwidth was pricier, this has advantages when you have large volumes of data. By limiting the routes it can take, MPLS makes efficient use of connections between two points. Meaning it’s robust, reliable, and available. Just not always very affordable … and needing critical thinking about provisioning each circuit to work most efficiently.

There are many industries where critical resources are housed in remote locations. Agriculture. Oil exploration. Transport. When your main asset is a diamond mine, it makes sense to have your people working close to it.

Yet such locations can be underserved by the broadband internet providers and local mobile vendors who might offer an alternative to MPLS. In some regions, even where there is coverage, it’s asymmetrical: in much of South America, for example, ISP bandwidth is designed for streaming media going one way to the home. Even if it’s only a kilometer away, the local office park might not have the right kind of access or even the right kind of ISP.

It’s situations like these where MPLS still makes sense. Your oilfield may have a 30-year earn-out timeline; that remote operation is going to need reliable service for decades to come. If it’s already on MPLS and the location has poor business broadband availability, it makes sense to keep things that way—at least for now—before considering a replacement.

If MPLS is the briskly efficient executive in an expensive suit, SD-WAN is the relaxed Silicon Valley guy in a T-shirt. It’s a means of applying Software-Defined Networking—a virtual network for your organization, safe and secure but leveraging the public internet rather than a dedicated infrastructure—to the traditional Wide Area Network, or WAN.

By creating a virtual network that can span your entire business, and running it on IP networks like the internet itself, an SD-WAN can reach anywhere there’s a web connection. It doesn’t matter whether that connection is fixed fiber, ADSL in the old Telco copper cage, or 5G mobile: SD-WAN can use it.

This of course makes SD-WAN cost-effective and flexible. But this comes at a cost: if the underlay is a patchy ISP service, even the most optimized applications and data will work slowly or intermittently. However, with bandwidth available to users increasing every day, and technologies that smooth over the gaps getting better all the time, millions of people today are using global SD-WAN for their most critical business applications—and like it.

If you’re in a growth sector where changing market conditions need you to stay nimble, a move to SD-WAN right now makes more sense. Because the high upfront cost and inflexible nature of MPLS will be a burden when you have to open ten offices next year or hire 500 people in Asia to take advantage of a new opportunity. And many businesses today are turning to the cloud for even mission-critical work—an application that SD-WAN suits perfectly.

Because while it takes time and investment to set up a complete MPLS network, fast-improving internet connections are already in place for billions of people in almost all nations—and that’s the infrastructure an SD-WAN makes use of. Another benefit is that new technologies coming into the market—increased penetration of 5G, fiber-to-the-office, business broadband via an ISP—won’t sideswipe your investment in SD-WAN; in fact, they’ll increase its value.

An SD-WAN gets better the more bandwidth and connectivity its users have. As the internet becomes part of life for most of the world’s population, your SD-WAN can connect them—not just at the office, but at their homes, vehicles, and their favorite coffee shop.

So, the critical question: does one of the situations above completely describe your business?

Of course, it doesn’t.

All larger enterprises will have a mix of sites—remote locations, branch offices, bustling HQs in the capital city. This means the best solution is often a mix, too.

MPLS retains value for the enterprise’s large fixed locations with dedicated hardware connecting them—if local ISPs are behind the curve on service provision. And MPLS traffic routed correctly, is extremely fast and efficient. So for mission-critical applications between big offices, keep MPLS if you’ve got it—but as the underlay for SD-WAN. Yes, an SD-WAN can run on MPLS, just as ATM or Frame Relay can.

But for the less predictable parts of your organization—not just smaller offices in many towns, but also the people who have to work from home or remotely—push for SD-WAN as soon as feasible. It’s flexible enough to work for even the fastest-shifting business landscapes. And with many people enjoying high-speed internet from home, it’s easy and cheap to roll out across your organization, wherever your people are.

So: MPLS and SD-WAN aren’t either-or. Both can work effectively for different parts of your business—over the public internet for smaller, fast-moving teams, and over your existing MPLS for large remote locations. And with XCA (Cloud Acceleration) capable of improving even the most far-flung SD-WANs, even big differences throughout can be resolved, presenting a unified service to your people.

Ultimately, it’s all about the underlay. And great underlay is what Expereo does best. That’s how MPLS and SD-WAN can work together—eking the most benefit out of the older technology as you gradually introduce the new.

While we’re big fans of SD-WAN at Expereo, we recognize the MPLS remains a viable part of the mix for many of our customers. That’s why we’re a Managed Service Provider, with expertise in making different technologies work together for the greatest benefit.

For many companies with more than a couple of hundred employees, the sensible strategy is to keep critical applications on whatever infrastructure works best—and for now, that solution may be MPLS. But at the same time look to spread the flexibility of SD-WAN across your whole organization, using MPLS as its underlay where it makes sense. This ensures business continuity, while constantly increasing your return on investment.

With Expereo, sunk costs won’t drag you down; they can actually help you stay afloat and remain competitive. Best of all, we’re a truly global SD-WAN provider and ready to help.

If you’re in the market for a managed service that makes the most of your existing investments, let’s talk. Or learn more about SD-WAN here.