NFV: Set to Break the Big Box Brands
The relationship between existing vendors of network equipment and telecom network operators is set to change dramatically if operators' visions of the future are realized. Network functions virtualization (NFV) involves taking telecom network functions -- traditionally delivered in proprietary devices -- virtualizing them and running across shared common off-the-shelf (COTS) servers, storage devices and Ethernet switches. It is a vision backed by many of the world's biggest telcos -- a group that represents many, many billions of dollars of annual capex -- and that makes it very hard for network equipment providers to ignore.
Operators have seen how cloud computing, virtualization and new approaches to running global cloud-based service operations have revolutionized enterprise networking and computing. They want to use the same technologies to drive down their own capex and opex, and to change the way they manage their service businesses.
It will take time -- many years, in fact -- for the physical changes to the infrastructure to become embedded; these changes will happen incrementally. But the physical changes will be just the start of the process. There will also be changes in the way operators interact with vendors and the way they buy solutions from them. NFV has the potential to lead to a new wave of market fragmentation. Over the last 10 years, observers of the operations/business support system (OSS/BSS) market have witnessed a tremendous amount of consolidation. Many smaller OSS/BSS providers have failed or have been acquired, but the widespread migration of network functions onto virtualized infrastructures opens up an opportunity for any company with clever people writing code to develop solutions that can be deployed on standard platforms. There will be a proliferation of innovative start-ups claiming that they can build a better piece of software, which is easy for telcos to try. There is tremendous potential for a new wave of innovation and fragmentation.
Where does this leave the old guard? Well, for a start, operators will expect all the independent software providers, network equipment providers and anyone else they work with to integrate their solutions with the telecom operators' virtualization middleware. Some will attempt to run this middleware themselves; many more will look to outsource the operation of this. The entrenched network equipment providers and systems integrators are already fighting very hard to be these gatekeepers: that is, the companies operating that virtualization middleware.
Operators will also demand that network functions software meets stringent service-level agreements (SLAs), and this is likely to be one of the primary levers the established players will use to retain their share of the market. Network function providers will all be required to attain those SLAs on equipment delivered and maintained by third parties. This will change the contractual relationship with network operators in ways that are hard to predict; but the bigger providers will have the resources to do more testing and more certification and validation, and -- of course -- they will have a head start on rivals and more control over their own destinies if they are running those middleware platforms.
Old players that don't change their ways will die out in the newly virtualizing telecom world. Those that adapt will find a new role. The latest Heavy Reading Insider, "Picking Winners From the NFV Revolution," takes an in-depth look at the potential benefits of NFV for operators, and at how the major network equipment providers are evolving their strategies so they can continue to serve their clients in the future. It includes profiles of network equipment providers, systems integrators and independent software providers that have been swift to develop NFV visions and solutions.
— Simon Sherrington, Analyst, Heavy Reading Insider
Picking Winners From the NFV Revolution, a 25-page report, is available as part of an annual subscription (12 monthly issues) to Heavy Reading Insider, priced at $1,595. This report is available for $900. To subscribe, please visit: www.heavyreading.com/insider.