Nemertes Impact Analysis:

Privately held Pareto Networks' "Branch on Demand" WAN-as-a-service allowing rapid expansion and contraction of WAN edges, underscores the cautious post-recession return to branch growth.

Overall branch growth will be a meager 1.75% in 2011. Branch on Demand is aimed at reducing the WAN costs of smaller and temporary branches. Pareto provides a multi-function branch box (lease cost rolled into fee, no capital expense). Via the box, building a VPN over available broadband to Pareto's cloud, the service provides managed routing, switching, and layered services including firewall, IP address management, and quality of service (QoS) management. A similar device in the data center connects the Pareto cloud to the company WAN.

Impacts:

Enterprises: At $228 per site, per year, Pareto is betting they can manage your WAN edge more cheaply than you; you need to evaluate this.

Vendors/Service Providers: Like privately held Virtela's recent optimization cloud, Pareto is bringing cloud thinking - lightweight, pay as you go (albeit on an annual, not daily or hourly basis), no capex - to the WAN. You need to look at similar models.

Investor: Carriers, including Sprint (NASDAQ:S) and AT&T (NYSE:T), will see offerings like this that capitalize on consumer broadband eat away at managed WAN contracts. Broadband providers such as Comcast (NASDAQ:CMCSA) will benefit.

John E. Burke, Principal Research Analyst

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