Analyst Highlights NFV Pressures

As interest grows in the potential of network functions virtualization (NFV), so financial analysts are starting to look at the impact this development could have on the prospects, and financial health, of the telecom sector's hardware vendors. (See What's NFV All About? and MWC: The Network Blinked.)

Simon Leopold, a communications equipment analyst and managing director at Raymond James Financial Inc., has been checking out the potential impact of NFV, which he regards as "a threat and opportunity" to the vendor community.

In a research note issued Friday (entitled 'NFV, As if We Needed Another Acronym'), he states that the potential to "implement many network functions on standard high volume servers, switches and storage as opposed to specialized hardware appliances" could, in time, lead to reduced capital expenditures, as well as alter vendor pricing models and market shares.

But, as Leopold notes, "it is premature to draw conclusions regarding equipment suppliers." While the many theoretical gains -- "scale advantage of commercial servers, faster time to market, partitioning of test and production, multi-tenancy, reduced capital and operating costs" -- of NFV look very appealing to network operators, there are "significant obstacles" to the broad introduction of NFV-based network topologies, including "performance, latency and throughput limitations" of non-specialized hardware, "interoperability and portability of applications… new security risks" and the challenges of "interworking with legacy systems."

Leopold believes the "next catalyst" in the emerging NFV space might be Alcatel-Lucent's unveiling on April 2 of its software-defined networking (SDN) vision, which is due to pull together developments from its IP division and Nuage Networks, its SDN operation. (See Alcatel-Lucent Preps 'TiMetra Mark II' and Alcatel-Lucent Has a Top-Secret SDN Startup!)

That's two weeks away, by which time we can expect to have heard a lot more about NFV developments from the vendor sector.

— Ray Le Maistre, International Managing Editor, Light Reading