Demystifying Networkas-a-Service (NaaS):
More like Consumer
Communication Services
Less Like Cloud Services
Licensed for Verizon to distribute

NOVEMBER 2022

Introduction
Since cloud computing introduced the concept ofconsumption-based pricing, businesses have dabbled
with the idea of buying networks connecting to cloud inan on-demand manner. Leading network service providers
offer bandwidth on demand for several of the existingtransport services (Ethernet, MPLS, DIA, and wireless),allowing enterprises to scale up or scale 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 sincethen 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 NFVallows related network functions (routers, firewalls, VPN
concentrators, WAN optimization devices, session bordercontrollers 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 asa-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 particularclient and particular sites.

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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 multiyear contract. Unlike in the consumer market, enterprisenetworks need flexible bandwidth capabilities and accessto robust network services that rely on much more
complex and capital-intensive network equipment.
While NaaS shifts enterprise spend from a CAPEX toan OPEX model, it is important to note that the true
consumption-based model applies only for the bandwidththat can be flexed up or down as needed. Everything elsethat an enterprise buys in a NaaS model – hardware,
virtual instances, managed services, network services– incur a recurring charge for all active devices andfunctions. Depending on the terms of the contract,
there is some flexibility built in for pricing change ascustomers add/drop devices after a certain period.
Many industry articles inaccurately use the terms
subscription-based and consumption-based
interchangeably when talking about NaaS. In theresidential space, technically, users can buy acompatible 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 theagreed-upon period, which typically allows enough time
for the provider to amortize the equipment cost. As withresidential video services that you can buy for a month oryear, for example, virtual network services incur a recurring
charge no matter how long you use it.

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NaaS Enablers vs. NaaS Providers
Network service providers or traditional telcos, managed
service providers and system integrators that can
combine network hardware, software, management, andorchestration platforms to support network connectivity
and related network functions in a subscription model
are best positioned to succeed in the NaaS market. For
example, NaaS at a branch location would mean offering
network hardware (e.g., router, switches, SD-WAN device,
firewall, uCPE), software (e.g., virtual firewall, router, or
any other virtual network function), connectivity (public
or private, wireline and wireless services), deployment
and on-going management and maintenance, for a fixedmonthly recurring charge. It could be argued that NaaS
is a glorified form of custom managed service, with thecustomer paying a subscription fee for the entire service.
As enterprises show interest in NaaS to achieve greater
agility, optimize technology spend and compensate forskilled IT staff shortage, several companies have jumped
on the NaaS bandwagon to market their offerings.
Companies in the NaaS market fall into two categories:

NaaS Enablers
Networking and security solution vendors such as HPEAruba, Cisco, Juniper, Fortinet, Palo Alto Networks, andothers that provide network infrastructure elements
could fall into this category. While some of these vendors
market and offer just the infrastructure components (suchas LAN/WAN/cloud hardware and software) wrappedwith a common management platform for a monthly
subscription fee, ISG does not consider this to be a true
NaaS offering. For the NaaS concept to deliver on its
promise, carriers and managed service providers need tohave infrastructure solution partners that act as enablersof NaaS. Some vendors combine broadband services
through partnerships with the LAN/WAN hardware andCopyrights. © 2022 Information Services Group, Inc. All Rights Reserved.

act as a single point of contact. However, enterprise WAN
needs are much broader and more complex and requirea NaaS provider that can offer and manage private andpublic, wireline and wireless network services.

NaaS Providers
Network service providers (AT&T, Verizon, Lumen, etc.)
and managed service providers (Comcast- Masergy,
MetTel, etc.) make up this category. These providers
have invested in SDN and NFV platforms and are able
to provide network services that can scale up and scale
down as needed, along with network functions (e.g., virtual
firewall or router) that can be deployed as needed. System
integrators such as IBM could also compete in this spaceas they are able to combine the various components of
NaaS and offer it as a single service. Service providers also
are able to deploy, manage and orchestrate end-to-end
multi-vendor solutions in LAN/WAN environments for asingle monthly subscription fee. While some vendors candeliver on technology and pricing expected from NaaS,
service providers are critical to delivering on the network
operations part, which is a big component of NaaS.
Abstracting the management layer to orchestrate multivendor solutions to provide a unified service experienceis a critical component of network operations, and service
providers deliver on that. Service providers also are
integrating artificial intelligence (AI) and machine learning(ML) tools to deliver on the promise of application-awareor intent-based networking. Intent-based networking aims
to automate routine network operation tasks, set policies,
measure network performance against set targets andrespond and rectify the networks as needed. Solutions
available today can predict and notify events. Providers
are incorporating robotic process automation (RPA) toeliminate manual intervention and direct the WAN to
self-correct.

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Business Benefits from NaaS
Shift from CAPEX to OPEX model
The subscription-based billing model of NaaS offers
enterprises freedom from investing large amounts of
their technology budget in network hardware and staticconnectivity services. With NFV at its core, network
functions can be instantiated quickly on a premises-based
x86 white box or in the cloud. NaaS also allows businesses
to procure bandwidth on demand for certain locations
where usage is limited to certain hours of the day orcertain days of the week. Theoretically, NaaS can combine
digital supply chain elements such as hardware, software,connectivity, and managed services into one offeringwith enterprises paying a monthly recurring charge forit. However, it is important to note that, unlike the cloud,consumption or usage-based billing does not apply to
the whole gamut of NaaS offerings. In fact, bandwidth on
demand is the only feature to which consumption-based
billing applies.

Address shortage of skilled
network and IT staff
Enterprise applications are increasingly distributed
across hybrid-cloud environments consisting of on-prem,
colocation, edge and cloud datacenters. Pre-COVID,
network managers had to worry about connecting
users that were predominantly based in office locations
to distributed applications. Post-COVID, with mostorganizations embracing a hybrid-work model, network
managers now have the new task of efficiently andsecurely connecting distributed workforces to distributed
applications. Almost every organization is struggling
to upskill its network and IT staff to keep up with the
new technology trends, even while maintaining existing
infrastructure. NaaS, when managed network services
are integral to the offering, takes the network deployment
and management complexity and allows internal IT staff
to focus on other strategic activities.

Keep up with technology trends

Faster time-to-market

As enterprises take a cloud-first approach to their ITtransformation initiatives, they realize the critical role of
networks. However, many businesses are struggling tokeep pace with the rapid pace of technology change.
SDN, NFV, SD-WAN and secure access service edge
(SASE) are technologies (and frameworks) that havegained mainstream attention in the last five to seven years.
Furthermore, deployment and management of global
networks are complex and time-consuming. NaaS allows
businesses to better manage the technology lifecycle astrends change in the LAN and WAN space, while procuring
them in an OPEX model (and eliminating the vendor
lock-in challenge that comes with the traditional CAPEX
model). NaaS will also play a crucial role in Industry 4.0
transformations in which IoT, edge computing, AI and ML
solutions are the core. Moving a NaaS model with clear
service level objectives can result in considerable costsavings and operational efficiency.

As organizations look to expand globally and bring new
local sites online quickly, it may not always be evident
which global regions make business sense without testing
the markets. With NaaS, businesses can test new markets
inexpensively before investing CAPEX on branch locations.
The COVID-19 pandemic has further highlighted thelimitations of hardware-centric branch architectures. The
fact that large portions of the workforce had to transition
almost overnight to a remote working environment
has escalated the challenges of shipping, deploying,configuring and managing physical network appliances.
With NaaS, businesses can efficiently and securely
connect remote employees to cloud/edge data centers
for a monthly fee.

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Licensed for Verizon to distribute3Factors to Keep in Mind when Evaluatinga NaaS Model
Subscription-based billing sounds
simpler than it isAs enticing as it sounds to move from a CAPEX to an
OPEX model, subscription-based billing for network
services can be complex. In the traditional model, thenetwork hardware is purchased with a one-time fee oramortized over a three-to-seven-year contract. Take forexample the monthly subscription model prevalent in
consumer services. The internet router fee is built into themonthly fixed fee, a line item that can be eliminated if theconsumer purchases the equipment upfront. But mostconsumers do not choose that approach and continue tolease the equipment. If you think of an enterprise scenario
consisting of several different pieces of equipment, theleasing costs can add up, and they continue to show up
on the bill for the entire contract period.
NFV-based virtual network services can eliminate withNaaS models using minimal physical hardware in the
future. At least that is the goal of moving to a NaaS model.
Currently, the NaaS model contains quite a bit of hardware
leasing, with discounts on hardware charges clearly written
into the contracts. NaaS contracts also tend to run longer
than traditional contracts as cost savings (both from aprovider perspective in terms of operational efficiencies
and from the enterprise perspective in terms of reduced
total cost of ownership) do not start to show until three
years later. Service providers that are willing to take overthe client environment are willing to make the investment
necessary to transform the network to meet the client’s
business objectives, and they are willing to take on thefinancial risks of some equipment encumbrance andpenalties associated with not meeting the outcome-based
SLAs. The willingness to take on the management andfinancial and regulatory complexities of a global network
comes at a price.

Compatibility issues with existing
infrastructure
The challenge of embracing new models is managing
the existing infrastructure. Considering that most

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organizations are considering agile, software-centric WANs
only in the recent times, optimizing existing investment
will be critical for network decision-makers. Companies
will need to either wait till the next technology refresh
cycle or choose to work with a limited number of vendorsthat already have a presence in their WAN environment.

Enterprise network teams will need torelinquish all control the network
The shortage of skilled network and IT staff is real. But
if you speak to anyone who is in the role, you will realize
letting go of their control over the network is much harderthan it seems. In our experience, companies are willing tolose some technical control that goes along with a moveto the public cloud but are hesitant to release it when theequipment sits inside their own facility. In the NaaS model,
while network decision-makers have the option to define
service level objectives, it is completely up to the provider
how it delivers on those objectives. Organizations needto actively include the internal team in the NaaS process
as people care about and engage in efforts where/when
they genuinely feel responsible for the outcome. Setting
expectations will prove foundational and the time
nvested will accelerate decision-making.

NaaS and SASE
While NaaS is an evolving model with varying
definitions, it is helpful to understand how SASE fits
into the discussion. Secure access service edge, orSASE, is a framework that addresses the need for acentralized, cloud-delivered, software-defined security
architecture when the applications and users are highly
distributed. Enterprise security needs are too complex todepend solely on a cloud-based model. A hybrid model
consisting of an on-prem and cloud-delivered approachto networking and security is more ideal to address
businesses’ needs. Since SASE is already hosted,
managed, and delivered as-a-service, it can beelegantly rolled up within the plethora of services
a NaaS model offers.

Licensed for Verizon to distribute4Conclusion
NaaS can bring great flexibility to your organization interms of how you consume and pay for enterprise LAN
and WAN solutions and services. While the shift fromCAPEX to OPEX is a big change, the entire model canquickly become unappealing without proper involvement
and buy-in from network, IT and finance departments indefining the outcomes. Since NaaS is not a "plug and play"technology, nor is it a one-page service agreement
to order, the question of "why NaaS?" is highly critical.
Since enterprise networks contain a great deal of
hardware, the NaaS model may not immediately yield thelower costs expected while shifting to an OPEX model.

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However, the freedom that comes with the model in termsof being locked into vendor contracts for hardware andmaintenance is something to consider. As NFV-based
services gain popularity, the value of NaaS will become
clearer as white box-based virtual services attract lower
penalties over time. NaaS contracts are typically longer
than traditional contracts since hardware costs takelonger to amortize. With these longer terms, cultural
fit is paramount when selecting a provider; spend timeensuring alignment is right for the long haul. NaaS canbe a key enabler for your digital transformation goals if you
understand exactly what you are signing up for in termsof technology, pricing, and service outcomes.

Licensed for Verizon to distribute5About the author
Roopa Honnachari
Director
ISG

Roopa is ISG’s subject matter expert in next-generation intelligent services such as SD-WAN, SDN,
NFV, Cloud and Edge Networking, and established WAN services such as MPLS VPN, Ethernet,
DIA and Waves. As part of the Network and Software Advisory team, Roopa assists clients intransformation initiatives around networking, security and enterprise solutions.
Roopa has been involved in global consulting engagements that are grounded in complex network
and Information Technology transformation. Roopa has orchestrated transformations including
SD-WAN, SDN, NFV based virtual network services, cloud services, UCaaS, and SIP trunking.
Roopa’s strong research background and in-depth knowledge on telecom technologies has helped
her be part of engagements that that include strategy assessments, RFP development, contract
negotiations, transformation, and change management.

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Licensed for Verizon to distribute6Summary Facts

Headquarters

Revenue

Employee Strength

New York$133.6B in 2021

118,400 employees
as of December 31, 2021

Service Portfolio

Network Strength

Verizon offers voice, data and video services
and solutions on its award-winning networks
and platforms, delivering on customers’
demand for mobility, reliable network
connectivity, security and control.

Over 1M miles of global
fiber with $176.3B invested
in our network since 2000

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Licensed for Verizon to distribute7

Verizon NaaS Solutions
The Verizon NaaS Solutions platform is a programmable, modernized network that delivers end-to-end services in amuch more agile, resilient, and cloud-centric way than traditional network infrastructures. Without a doubt the future of
the enterprise is digital, which requires integrating disconnected systems, incorporating newer technologies to add newfunctionality, and relying on actionable insights to deliver an enhanced customer experience. Verizon calls this EnterpriseIntelligence. NaaS is one of the four areas (Verizon Private 5G, Verizon 5G Edge, 5G edge solutions, being others) Verizon
focuses on to deliver Enterprise Intelligence.
Verizon’s NaaS platform delivers on an integrated connectivity and network services providing a programmable/virtualized
network environment from the core to the edge. It also enables secure communications between users, apps, and otherresources. The company leverages the best of breed and disruptor partners to create services such as SD WAN, SD LAN,
Digital Enablement Platform, and SASE. The platform offers 360-degree digital service management experience
via automation, orchestration, APIs, and closed loop assurance.
For the NaaS concept to deliver on its promise, carriers and managed service providers need to have infrastructure
solution partners that act as enablers of NaaS. While some vendors can deliver on technology and pricing expectedfrom NaaS, service providers are critical to delivering on the network operations part, which is a big component of NaaS.
Service providers such as Verizon can deploy, manage, and orchestrate end-to-end multi-vendor solutions in LAN/
WAN environments under a single NaaS Solutions contract and Service Level Agreement structure. Abstracting themanagement layer to orchestrate multi-vendor solutions to provide a unified service experience is a critical componentof network operations. Verizon delivers on the service experience part in a superior manner.
As described in the whitepaper, the whole process of contracting for NaaS from ordering to management to billingto service level agreements can be more complex than traditional networking. Verizon has simplified the process bycreating five pre-defined standardized NaaS Solution service bundles based on site types—highly available site, large,
medium, small, and x-small sites. The bundles include transport, access, appliance (CPE or uCPE) redundancy, SD-WAN
and SD-LAN switches, of varying configurations for different sizes of sites. The SLAs are also standardized for each of
the site types and feature progressive site availability SLAs up to 100% for highly available. ISG believes that the unified
commercial contract and site-based SLA is a great step toward making the NaaS solution contracting process more
appealing to enterprises.
Since enterprise networks contain a great deal of hardware, the NaaS model may not immediately yield the lower costs
expected while shifting to an OPEX model. However, the freedom and business agility that comes with the model interms of being locked into vendor contracts for hardware and maintenance is something to consider. With a range ofhybrid networking choices and pretested virtual network solution bundles built on OpenStack, ® Verizon can provide acompetitive and holistic NaaS delivery approach, reducing complexity and improving integrated visibility for businesses.
For more information, visit https://www.verizon.com/business/solutions/digital-transformation/network-as-a-service/

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ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A
trusted business partner to more than 800 clients, including more than 75 of the world’s top 100 enterprises,
ISG is committed to helping corporations, public sector organizations, and service and technology providers
achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network
carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,300 digital-readyprofessionals operating in more than 20 countries— a global team known for its innovative thinking, market
influence, deep industry and technology expertise, and world-class research and analytical capabilities basedon the industry’s most comprehensive marketplace data.For more information, visit www.isg-one.com.
For more information, visit www.isg-one.com.

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