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Opex Gloom Grows in New NFV Survey

One tenth of operators do not expect NFV to lead to operating cost savings, up from just 2% six months ago, according to the latest 'Future of Virtualization' CSP Index Update.

Iain Morris

May 27, 2016

4 Min Read
Opex Gloom Grows in New NFV Survey

AUSTIN, Texas -- Big Communications Event 2016 -- A growing number of service providers do not expect virtualization to reduce operating costs, while planning for NFV has suffered setbacks during the past six months, according to new data from the according to the latest Future of Virtualization CSP Index Update published by Heavy Reading.

In a survey of 40 service providers carried out this month, around 10% said they did not expect virtualization to result in lower operating costs, up from 2% during a survey in November last year.

Moreover, just 23% of service providers said they expect to identify all of the functions they plan to virtualize this year, down from 38% in November.

According to Roz Roseboro, a senior analyst at Heavy Reading , a number of service providers that expected in November last year to have virtualized 20% of high priority functions by 2017 are now looking at a 2018 timeframe instead.

"As people get further into this and begin moving PoCs [proofs of concept] into production they are encountering new issues," she said during a presentation of survey results here at BCE this week.

Frank Shapfel, a marketing manager at Intel Corp. (Nasdaq: INTC), expressed some degree of surprise about the expectations regarding operating costs but said these probably reflected the slippage in NFV planning and deployment assumptions. "Uncertainty on the timeline is having an impact on when the opex return is going to happen," he said.

Even so, the survey results seem to back up gloomier comments from executives at some of the world's biggest operators about the cost-saving benefits of NFV technology.

In February, Yves Bellego, the director of technical strategy for Orange (NYSE: FTE), told Light Reading the French operator had stopped promoting SDN and NFV as a means of reducing costs and was focusing on the service-related benefits of virtualization. (See Orange Sours on Cost Benefits of NFV.)

Germany's Deutsche Telekom AG (NYSE: DT) and US telecom giant Verizon Communications Inc. (NYSE: VZ) have also recently downplayed the cost-saving part of the NFV equation, instead highlighting attractions around service creation and agility. (See DT: We Need SDN, NFV to Battle Web Giants.)

According to Christian Martin, a senior director of network architecture and engineering at Cisco Systems Inc. (Nasdaq: CSCO), the growing pessimism about cost savings could indicate that service providers are realizing business transformation will take longer than they originally expected.

"Lots of telco opex is governed by labor and that's very regulated in some markets," he said. "Even if you could automate everything you would have a lot of people in unions sitting in trucks and waiting for something to do… and so it'll probably be a couple of years before there is any shift in opex."

For more NFV-related coverage and insights, check out our dedicated NFV content channel here on Light Reading.

Other industry figures believe that in the long term the cost-saving benefits of NFV will mainly come in the form of capital expenditure reductions, as operators shift their spending patterns.

"You are moving towards business models where you are renting software, which is opex in many accounting measures," said Todd Spraggins, a strategy director for the CTO office of Oracle Corp. (Nasdaq: ORCL).

Virtualization technologies might also need to evolve considerably before they start delivering real advantages to operators. "When this become more powerful is when we start to get smaller VNFs [virtual network functions] and hardware more amenable to that," said Martin. "We probably have to start looking at how we can more rapidly deploy functions that don't require so much machinery."

Caroline Chappell, practice leader of cloud and NFV at Heavy Reading, has previously said that operators may have to go through a second virtualization revolution in the next few years to realize more extreme business benefits. (See The Real NFV Revolution Is 5 Years Away.)

That would entail the deployment of so-called microservices, whereby network functions are decomposed into small individual components that operators can use to create customized and scalable applications. "This is real cloudification," said Chappell during a conversation with Light Reading earlier this year.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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