The traditional carrier networking equipment sector has been awaiting a major transition, as telecom service providers sought a way to free themselves from the constraints of proprietary platforms. Open source software-defined networking (SDN) and network functions virtualization (NFV) hold the key to progress.
According to the latest worldwide study by Technology Business Research (TBR), the NFV and SDN market will grow at a 116 percent CAGR from 2015 through 2021 to reach nearly $158 billion. Early adopters, such as AT&T, began to ramp up their investment in 2015 as open digital transformation became a top strategic priority.
"A growing group of Tier 1 operators is leading the charge in implementing NFV and SDN. This group is driving a significant amount of development in the NFV and SDN ecosystem and is pushing the vendor community to rapidly adapt to this new architectural approach to networks," said Chris Antlitz, senior analyst at TBR.
SDN and NFV Application Development
TBR analysts predict that NFV- and SDN-related infrastructure spend volume is forecast to grow significantly in 2017, at which time use cases will be more defined and the cost benefits of using open technologies will be more apparent.
According to the TBR assessment, this proof-positive experience will prompt the holdout telecom service providers to adopt SDN and NFV, thereby pursuing their own open technology transformation -- primarily to avoid being left behind.
Most of the investment in NFV and SDN will stem from redistribution of legacy infrastructure capex as network operators implement virtualized environments and decommission their legacy telecom infrastructure.
There will also be some external opex spend incurred as network operators lean on vendors for maintenance, professional and managed services to support, integrate and operate these new software-mediated environments.
Network operators are testing NFV and SDN by transitioning domains that are relatively easy to convert -- such as customer premise equipment (CPE), routing and switching, optical transport, EPC and IMS. Some of the more challenging domains -- such as the wireless and fixed access layers -- will be among the last to be virtualized.
Open Source Telecom Market Development
On average, TBR believes that network operators in the U.S. and Europe will drive three-quarters of NFV and SDN spending each year through most of the forecast period, with APAC operators projected to ramp up their investment in 2019.
Though most Japan-, South Korea- and China-based network operators are implementing NFV and SDN, spend will be eclipsed by what select operators -- namely AT&T, Verizon, CenturyLink, BT, DT, Orange, Vodafone and Telefonica -- invest in in the U.S. and European markets.
CALA- and MEA-based operators will be laggards in NFV and SDN, with major transformations coming after evolution in most other regions of the world is already underway. America Movil, Telefonica, Etisalat and MTN are the exceptions in these developing regions.