Will deploying software-defined networking (SDN) capabilities and implementing a network functions virtualization (NFV) strategy pay off for fixed-line, cable and mobile communications network operators?
This is the big telecom question of our time. For more than two years now we have been talking about the potential benefits that SDN and NFV could bring to traditional communications network operators as they look over the wall at the web/cloud/OTT services giants and fancy some of what they've got (lean physical infrastructure coupled with DevOps strategies and an endless will to try out new things, often with financial success).
But there is always one quote I used in an article in late 2012 that sticks in my mind. It was from Margaret Chiosi at AT&T Inc. (NYSE: T): "There's no point in moving to SDN if it's just as complex as what we have now." (See AT&T Has High Hopes for SDN.)
And of course there is no point in moving to SDN and virtualizing network functions if the cost of doing so is going to kill the operator (financially and operationally) before it even has the chance to gain any of the benefits. Embracing the New IP world has to be worth it.
That brings us to the publication of a study, released today by Bell Labs Consulting, the industrial research and advisory arm of Alcatel-Lucent (NYSE: ALU), and global management consultancy Arthur D. Little (ADL). The headline takeaway of their report, called "Reshaping the Future with NFV and SDN," is that, collectively, the fixed and mobile operators they surveyed across 35 European countries could save a total of €39 billion (US$43.4 billion) per year as a result of deploying virtualized networks and becoming Cloud Carriers. (See Europe's Operators Could Save €39B From SDN & NFV Deployment.)
Or, to quote the report: "The efficiency impact of onboarding NFV and SDN for these operators could be worth 14 billion euros per year in the network domain alone, which will be augmented by a further 25 billion euros per year in non-network operating costs through greater automation and simplification of business processes."
Those are big numbers, even when spread across numerous operators in 35 countries.
The report is interesting. It even breaks down those potential savings into the various parts of the network where savings could be greatest (access and aggregation) and particular operating model potential savings (sales and marketing costs could be reduced significantly, according to the cost model used by Bell Labs and the consultancy). You can see the details yourself by downloading the report.
How much would the operators need to spend -- in capex, training, hiring new people to facilitate changes, redundancy payments and so on -- to get to this cost-saving nirvana? Do the costs outweigh the savings? And after how many years might these projected savings be achieved?
I'm not saying that the study, report and methodology used is not worth the effort, or that migrating to SDN and NFV will not deliver cost savings of some sort (if it doesn't, then heaven help us all). But analysis that focuses only on potential cost savings doesn't provide the big picture and answer the big question -- will a transformation towards becoming a Cloud Carrier be worth it?
I'm not alone in looking at it this way: here is what my much more learned colleague Caroline Chappell, principal analyst, Cloud and NFV, at Heavy Reading , has to say.
- NFV will potentially deliver massive savings if the industry manages to surmount the many obstacles to its implementation, including large interoperability and scoping issues associated with integrating the various components of the NFV architecture. But of course, operators will have to invest heavily to achieve NFV and it may be some time before they see large returns on that investment.
This is always the case with a disruptive technology -- the shift to IP networks illustrated this when operators leading the march had to backtrack on how quickly they would roll IP out due to the cost of transformation.
If there's one lesson to be learned from the move to IP, though, it's that technology disruption changes the competitive landscape. And that will happen again with NFV. We're already seeing new entrants, such as WiFi operators, moving straight to NFV and there are signs of a surge in NFV-based service creativity.
Savings or not, the most compelling reason for investing in NFV remains survival in an increasingly cloudified world.
Ah yes, survival of… the fittest? Leanest? Smartest? Most cloudified?
As ever, hindsight will deliver the closest we will ever get to an answer to the "will it be worth it" question -- and the answer will be different for every single operator in every region. Averages and analysis can be helpful and be a great catalyst for strategic thinking, but it only goes part of the way.
Hats off to Bell Labs and Arthur D. Little for providing a detailed and interesting catalyst for further discussion -- and there will be plenty of that on Light Reading and also face-to-face as we meet to do some networking of the human kind. The topic of virtualization strategies will be at the heart of many discussions and presentations at Light Reading's Big Telecom Event (BTE) (June 9-10 in Chicago), where we'll get the latest views of some of the protagonists who are at the very heart of such telco transformations -- the likes of Axel Clauberg from Deutsche Telekom, Bikash Koley of Google, Jared Wray and James Feger from CenturyLink, Nico Fischbach from Colt, Christos Kolias at Orange Silicon Valley, Randy Nicklas of Windstream and many more.
Big decisions are being made about the future of the communications industry right now. That requires a big-picture view of technology, people (skills, capabilities and requirements -- how many ops staff will be needed by 2030?) and financials.
Let's dig deeper during BTE and beyond.
— Ray Le Maistre, , Editor-in-Chief, Light Reading