SDN Overlays Vs Underlay: 3 Benefits And When To Use In 2025

Software-defined networking (SDN) has transformed how organizations manage their data flows, shifting control from hardware to programmable software layers. A central debate in SDN design revolves around network overlays: are they a mandatory component for achieving SDN’s promises of agility and scalability, or can robust underlay networks deliver the goods on their own? This question influences everything from deployment costs to operational efficiency.

Foundations of SDN Architecture

At its core, SDN separates the control plane—responsible for decision-making—from the data plane, which handles packet forwarding. This decoupling enables centralized management through controllers that push policies across the network via open protocols like OpenFlow.

The physical infrastructure forms the bedrock, often termed the underlay network. It consists of switches, routers, and cabling that provide raw connectivity. SDN enhances this by adding intelligence, but the question arises: does true SDN require virtualized layers on top?

• Control Layer: Centralized software orchestrates traffic rules.
• Data Layer: Hardware forwards packets based on instructions.
• Interfaces: Southbound APIs connect controllers to devices; northbound APIs enable app integration.

Without overlays, SDN relies purely on programming the underlay, optimizing existing hardware for dynamic behavior.

Defining Underlay and Overlay Networks

To grasp the debate, distinguish between underlay and overlay paradigms.

The underlay network is the tangible foundation: IP-routed fabrics with protocols like BGP or OSPF ensuring reliable packet delivery. It’s stable, predictable, and leverages proven hardware capabilities.

Conversely, an overlay network is a virtual construct atop the underlay. It encapsulates traffic in tunnels (e.g., VXLAN, GRE), creating logical topologies independent of physical constraints. Overlays enable features like multi-tenancy and workload migration without altering the base infrastructure.

Overlays shine in cloud environments, where physical changes are impractical, but underlays suffice for stable, on-premises setups.

Core Components Driving SDN Decisions

SDN architectures typically incorporate several elements, with overlays as one option among many.

• Controllers: SDN brains like ONOS or OpenDaylight translate high-level policies into device configurations.
• Enforcement Points: Switches and routers that apply rules, either natively or via overlay gateways.
• Telemetry Tools: Analytics for monitoring performance and automating adjustments.

In overlay-free designs, controllers directly program underlay devices, ideal for environments prioritizing low latency. Adding overlays introduces encapsulation overhead but unlocks segmentation and mobility.

Benefits of Deploying Overlays in SDN

Overlays aren’t superfluous; they address specific pain points in traditional networking.

First, they facilitate network virtualization. Multiple isolated tenants share the same underlay, crucial for service providers or multi-tenant data centers. VXLAN, for instance, extends Layer 2 domains across Layer 3 boundaries.

Second, overlays enhance mobility. Virtual machines or containers migrate seamlessly without IP reconfiguration, supporting DevOps workflows.

Third, they bolster security. Encrypted tunnels (e.g., IPsec overlays) protect traffic, while micro-segmentation limits breach propagation.

Consider hybrid clouds: overlays bridge on-premises and public clouds, creating unified fabrics. A 2023 NIST report highlights overlays’ role in zero-trust models, enabling granular policy enforcement.

Advantages of Underlay-Only SDN Approaches

Not every SDN deployment needs overlays. Pure underlay strategies offer compelling upsides.

Performance Edge: No encapsulation means lower latency and higher throughput. Hardware ASICs process native packets faster than tunneled ones.

Simplicity: Fewer layers reduce complexity. Managing a single underlay with SDN controllers avoids overlay orchestration challenges.

Cost Savings: Eliminates need for overlay-capable endpoints or gateways, leveraging existing investments.

In campus or enterprise WANs, SDN on underlay excels for traffic engineering via segment routing (SR), optimizing paths without virtualization overhead. The Open Networking Foundation notes that underlay SDN scales to terabit speeds in white-box switches.

Challenges and Trade-offs

Overlays introduce hurdles: MTU fragmentation, head-of-line blocking, and doubled state (underlay + overlay). Troubleshooting spans layers, complicating diagnostics.

Underlay-only risks rigidity: scaling segmentation requires VLAN sprawl or BGP complexity, potentially overwhelming control planes.

Hybrid models emerge as pragmatic, using overlays selectively—e.g., for guest networks—while keeping critical paths native.

Real-World Use Cases and Examples

Enterprise Data Centers: Underlay SDN with EVPN for leaf-spine fabrics handles east-west traffic efficiently, as seen in Cisco ACI deployments.

Telco 5G: Overlays via SRv6 enable network slicing, virtualizing slices for IoT, URLLC, and eMBB.

Edge Computing: HCI platforms like those from Scale Computing use lightweight overlays for segmentation across sites without full redesigns.

SD-WAN: Hub-and-spoke overlays simplify branch connectivity, contrasting full-mesh underlay complexity.

Implementation Strategies for Success

Choosing demands assessing workload, skills, and tools.

1. Assess Needs: Prioritize mobility? Go overlay. Latency-critical? Stick to underlay.
2. Test Thoroughly: Simulate with tools like Mininet.
3. Integrate Gradually: Start with SDN controller on underlay, layer overlays as required.
4. Monitor Actively: Use eBPF for visibility across planes.

Standards like ETSI NFV ensure interoperability.

Future Directions in SDN Networking

Intent-based networking (IBN) abstracts further, with AI optimizing underlay/overlay dynamically. P4-programmable data planes blur lines, allowing custom protocols without overlays.

5G and edge push hybrid: underlay for speed, overlays for slicing. By 2026, Gartner predicts 70% of enterprises will blend both.

Frequently Asked Questions

Can SDN function without any overlays?

Yes, many implementations enhance underlay directly via OpenFlow or P4, ideal for low-latency scenarios.

What are popular overlay protocols?

VXLAN for L2 extension, Geneve for flexibility, WireGuard for secure meshes.

Is overlay overhead significant?

Typically 5-10% CPU and 50-100 bytes per packet; mitigated by hardware offload.

How do SD-WAN and SDN overlays relate?

SD-WAN often uses overlays for WAN abstraction, building on SDN principles.

What’s best for cloud-native apps?

Overlays like Calico or Cilium for Kubernetes pod networking.