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Overall SDN and NFV Market will Reach $11B in 2018

Like any business that's investing heavily in new technology, telecom service providers must monitor their project ROI to determine if it has met the stated business outcome-related objectives. Now more than ever, project goals for bottom-line cost savings are aligned with equally important goals to enable top-line revenue growth.

In fact, telecom service providers view the creation of new revenue, quicker time to revenue attainment, and service provisioning agility as their top drivers for investing in Software-Defined Networking (SDN) and Network Functions Virtualization (NFV) projects.

Moreover, new research indicates some service providers have discovered that the business case for deploying SDN and NFV is marginal until the new revenue upside value is incorporated into the equation.

According to the latest global market study by Infonetics Research,  there is now a significant growth opportunity for the leading vendors that offer NFV and SDN hardware or software that's ultimately deployed in telecom service provider networks worldwide.

The findings from their latest study provides detailed analysis of the open-source SDN and NFV markets and their many facets -- from SDN router and switch hardware and associated platform software, to the many categories of NFV offerings.

Their detailed analysis included the virtualized network functions (VNFs) comprising policy, the mobile packet core and evolved packet core (EPC), IP multimedia subsystem (IMS) and security.

"For three years, the telecom industry has been abuzz over SDN and NFV, with anticipation and hard work developing the vision, goals, architectures, use cases, proof-of-concept projects, field trials, and even some commercial deployments," said Michael Howard, principal analyst for carrier networks at Infonetics Research.


He added, "We've been gathering data in this early market for nearly two years and are projecting the global telecom service provider SDN and NFV market to reach $11 billion in 2018."

To better understand spending in this emerging market, Infonetics has classified SDN and NFV hardware and software in three distinct categories. First, revenue from brand new SDN and NFV software, which they expect to make up 20 percent of the total SDN and NFV market in 2018.

Second, revenue that comes from products that companies will buy instead of buying something else -- what they refer to as "displaced" revenue, including NFV infrastructure (NFVI) hardware (servers, storage, switches) purchased instead of network hardware (routers, DPI, firewalls, etc.). This segment will make up about 12 percent of the market in 2018.

And third, revenue that generated from newly identified segments of existing markets -- the virtualized network functions (VNFs), ports on routers, switches, and optical gear that have become SDN capable. This last segment makes up the largest slice of the SDN and NFV pie, forecast at 68 percent in 2018.

Key highlights from the market study include:
  • Infonetics expects global carrier SDN and NFV hardware and software to grow from less than $500 million in 2013 to over $11 billion in 2018.
  • NFV represents the lion's share of the combined market, from 2014 out to 2018.
  • The value of NFV is in the virtualized network functions software -- the actual applications -- rather than the orchestration and control; VNF makes up over 90 percent of the NFV software segment.
  • SDN and NFV exemplify the shift from hardware to software -- SDN and NFV software are projected to make up of three-quarters of total revenue opportunity in 2018.

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