Alcatel-Lucent has outlined its plans for a big strategic shift centered around network functions virtualization (NFV) as the vendor begins its transition from selling boxes to selling services that run in the cloud.
The vendor is effectively migrating mobile network functions to the cloud, including the evolved packet core (EPC), IMS (IP Multimedia Subsystem) capabilities and Radio Access Network (RAN) functions. The services are designed to help network operators offer more scalable services to customers, with flexible pricing and greater innovation.
Alcatel-Lucent (NYSE: ALU) says it's already working with 20 providers to introduce its NFV capabilities to their networks. At the upcoming Mobile World Congress 2014, Alcatel-Lucent and China Mobile Ltd. (NYSE: CHL) are demonstrating voice and video delivered over a virtualized proof of concept LTE RAN Baseband Unit (BBU) and virtualized evolved packet core (vEPC) using CloudBand 2.0, the vendor's second-generation NFV platform. (See Alcatel-Lucent Opens Cloud R&D Facility in Israel and NFV Requires Redefined Reliability: AlcaLu.)
NFV allows mobile service providers to innovate more easily and rapidly scale services up and down as needed, Alcatel-Lucent said in a statement. It optimizes delivery of service including voice-over-LTE (VoLTE), web real-time communications (WebRTC), secure mobile communications for enterprise, and machine-to-machine (M2M) communications.
"Today the company is announcing a carrier-grade virtualized mobile portfolio that is hardware independent -- by the optimal separation of functional software from the underlying hardware," Alcatel-Lucent noted in a statement.
"The whole idea is to be able to respond to rapidly varying demand patterns to users as well as growing the network," Marcus Weldon, Alcatel-Lucent CTO and head of Bell Labs, told Light Reading. "We have to scale the network rapidly to provide new services."
The NFV portfolio comprises three key elements:
Heavy Reading senior analyst Caroline Chappell notes, in a statement included in the vendor's official announcement, that the "arguments for NFV are compelling for mobile operators. When combined with SDN, NFV will enable them to deliver new services flexibly and faster, with positive implications for revenue generation and their ability to expand into new markets. NFV is timely as operators migrate to LTE and look for new ways to take full advantage of this technology."
Chappell adds, though, that it's "critical that virtualized network functions for LTE maintain the features and stringent performance requirements of the same functions in non-virtualized networks."
Alcatel-Lucent's new strategy, which parallels industry-wide trends, will put service providers on a pay-as-you-go model, rather than having to buy new equipment to scale capacity, Gartner analyst Akshay Sharma said in an interview.
Alcatel-Lucent has been working towards the unveiling of NFV capabilities for a while, having previously announced support for both the cloud and functions virtualization, developing capabilities such as the Virtual Service Platform (VSP) at its software-defined networking (SDN) venture Nuage Networks, and stating that its VoLTE support strategy would be based around virtualized functions. (See Alcatel-Lucent Creates NFV Community, Nuage Unveils SDN Gateway, and Alcatel-Lucent CTO States the Case for NFV.)
"They've been announcing parts of this for a long time, but now they're connecting the dots," Sharma said.
"The weakness is there may be negative earnings for all vendors with proprietary solutions," Sharma said. But the positive side for vendors such as Alcatel-Lucent is that they'll move from selling equipment to an annuity stream of income that comes from offering services. Vendors may take a hit in the short term, "but it'll benefit companies that are in it for the long haul," he said.