Network functions virtualization (NFV) is fast becoming a classic "point of disruption" in the network technology market, and is emerging as a key pillar of the software-centric network. Operators want NFV to lower costs, to be able to scale services "elastically," and to benefit from greater programmability and service agility.

There's one huge problem, however. A primary objective of NFV is to substantially reduce the money operators spend on network hardware, and then to divert an ever-larger portion of the spending that remains to IT vendors, preferably no-name server vendors from the Far East.

You can see how that would be a hard sell to the vendor community. For some product lines, and some companies, NFV is perhaps even an existential threat.

One executive at a major vendor I met with at MWC explained the dilemma in down-to-earth terms: "How do I motivate a sales team to sell a version of the product that has 30 percent less revenue attached?"

A 30 percent revenue cut is also charitable. In this case, the product in question was an IMS application for the 4G core, which is sold on a licensing model, so 30 percent might be in the right ballpark. But we also hear operators say they're looking for much more substantial savings -- up to 90 percent in one case.

For smaller, software-centric vendors, this is not a problem. NFV is in fact a welcome development, because these firms have never had the capability to develop and test against hardware platforms the way larger vendors can.

But for these large vendors -- the market leaders -- what's the upside?

Consider also that applications will need to be at least partially rewritten to work optimally in the cloud. Spending on R&D to lose money on the eventual sale is hardly an alluring prospect. As a result, vendors are positioning themselves as ecosystem and platform builders, while quietly reminding operators of the value of purpose-designed, engineered systems.

Operators know all this, of course. They see vendors digging in their heels (not in public, of course) and proposing halfway-house approaches to NFV as more realistic and practical. The question is how this game plays out.

In our work with operators, we frequently hear statements like: "We will hold their feet to the fire"; and "We'll buy from startups, they can move at the pace we need"; and "Traditional vendors are being cut out."

The threat is that operators, working with IT vendors or other disruptive players, will seek to cut out "classic" network hardware and software products if incumbent vendors prove unwilling to move quickly enough to NFV.

Yet operators also know they need suppliers with long-term commitment to R&D and product support. And they know that without vendor buy-in, NFV will be much slower. The risk of moving without the major vendors is very high -- probably too high for most operators.

For their part, vendors see that operators are starting to put their money where their mouth is, and they are aware that they can't afford to find themselves on the wrong side of history. It is not that operators will spend less on the network -- they won't -- but they will direct investment to different places and functions. It will take vendors time, and judgement, to adjust to that.

Operators, rightly, want more networking capability for their money, and NFV can help deliver it.

— Gabriel Brown, Senior Analyst, Heavy Reading