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NFV Promises Cost Savings of Nearly 70% – Study

New research paints a compelling picture of the cost savings and service-agility benefits associated with virtualization technology.

Iain Morris

July 15, 2015

3 Min Read
NFV Promises Cost Savings of Nearly 70% – Study

Efficiency gains and cost savings are often touted as key attractions of virtualization technology, but a new piece of research has attached some compelling numbers to that message, arguing that mobile network operators could reduce capital expenditure by 68% and operating expenditure by 67% through the use of NFV.

Commissioned by Affirmed Networks Inc. and VMware Inc. (NYSE: VMW), two high-profile players in the virtualization market, the research was carried out by a small consulting company called ACG Research and compares the costs of deploying a virtualized Evolved Packet Core (vEPC) solution with investments in legacy technology over a five-year period. (See NFV Cuts Costs Immediately – Study.)

Besides witnessing a dramatic reduction in their costs, the operators deploying the vEPC were able to begin saving money in the first year of rollout and to pay off their entire investment in just three, according to ACG.

The consulting company also claims it took operators adopting a virtualized approach less than six months to introduce services, compared with 15 months on average for players using traditional technology.

This is, of course, all theoretical -- based on an analysis of expected costs between 2015 and 2019 for an operator supporting several million subscribers and steadily growing its customer base -- but it could persuade more companies of the benefits of NFV.

In ACG's analysis, the virtualized solution covers the signaling gateway (SGW), packet gateway (PGW), policy and charging enforcement function (PCEF), subscriber firewall, deep packet inspection (DPI) and web and video content management.

The traditional technology, meanwhile, is defined as a "multivendor, best-of-breed solution" including a mobile core platform (hosting the SGW, PGW, DPI and subscriber firewall), a load balancer with co-located PCEF and a content management platform for web and video services.

ACG says it used its "best estimates" of market prices to determine costs.

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

Explaining its findings in greater detail, the research says there are two main sources of cost savings -- the use of x86-based hardware with the virtualized solution, compared with proprietary processing blades in the traditional one, and the service flexibility of the virtualized solution next to the traditional technology.

As ACG points out, the so-called "common-off-the-shelf" servers that use x86 processors have become a lot more powerful and significantly cheaper than proprietary hardware appliances.

Another factor in the cost savings is a reduction in systems management thanks largely to the orchestration capabilities of the virtualized solution.

But cost savings are only one part of the NFV story. Deutsche Telekom AG (NYSE: DT) has indicated that service agility is the prime motivation for its interest in technologies like NFV and SDN, while Vodafone España S.A. already claims to have developed an MVNO service in just a fraction of the time it would normally take through the use of virtualization technologies. (See Deutsche Telekom Turns On Pan-European IP and Vodafone Builds MVNO on Elephant Talk SDN.)

ACG reckons virtualization will cut service deployment time in half, in many cases, thanks to service orchestration, a reduction in the number of manual processes and greater automation.

"All totaled, the virtualized service creation process required six months, while the traditional service creation process required 15 months," said the company in its report.

For operators looking for an indication of concrete benefits associated with NFV technology, this is bound to be heady stuff. But there are clearly still a number of hurdles the industry needs to overcome -- particularly on standardization and interoperability -- before NFV becomes mainstream.

Of course, Light Reading will continue to keep a close eye on operators' early experiences in this area.

— 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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