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Telecom Networking Market Disruption is Now Inevitable

There once was a time when traditional telecom service provider networking vendors were gratified that their proprietary platforms ensured continued success. As long as carrier customers agreed to buy products that locked them into the market leader's technology and associated ecosystems, they were assured high-profit margins and limited competition.

In fact, not that long ago, some industry analysts actually believed that Cisco could maintain 50%+ market share in several of their product categories, for an unlimited period of time. After all, they had already achieved that goal -- in some cases, for more than two decades. The market outlook seemed to be predictable, until one day it wasn't.

Why Telecom Networking is Primed for Disruption

For the past several years, the telecom industry has been moving toward a major network and operational transformation epitomized by software-defined networking (SDN) and network functions virtualization (NFV) with the top goals of automation and service agility.

Carriers have defined the vision, goals and architectures and are progressing through use cases, proof-of-concept projects, field trials and a small but growing number of commercial deployments.

The partially proven promise keeps the industry moving as fast as it can, but this is still early days in this long-term -- 10- to 15-year -- digital transformation of service provider networks.

SDN deployments started in Japan with NEC and NTT, and the nation's forward-looking service providers have been active in deploying real (but relatively small) commercial deployments. China is coming on strong, with many sizeable commercial deployments in 2015 and 2016.

And, telecom service providers in North America and Europe are also leading the charge to deploy SDN, and are anticipated to account for 13 percent of total 2015–2020 SDN revenue.

Given these factors, the telecom service provider SDN market -- including hardware, software and services -- is forecast to grow from $289 million in 2015 to $8.7 billion in 2020, with a 2015–2020 compound annual growth rate (CAGR) of 98 percent, according to the latest worldwide market study by IHS Technology.


Additional highlights from the study include:

  • SDN and NFV represent the shift from a hardware focus to software one: Software and outsourced services will comprise 46 percent of SDN revenue in 2020.
  • SDN orchestration and controller software revenue is forecast to grow to over $1.8 billion in 2020.
  • But by 2020, there will be more value in SDN apps than in orchestration and control, which will be priced reasonably due to competitive pressure.

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