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Growing Globally: Operators begin to migrate to SDN and NFV architecture

July 24, 2018

The shift to software-defined networking (SDN) and network function virtualisation (NFV) technologies is set to transform the telecom industry globally, allowing telcos to rapidly adjust to the changing market dynamics in a scalable way. The cost reduction and productivity boost offered by these technologies give telcos an impetus to invest more time and money in core business and application innovations. The rise of cloud computing has also accelerated the adoption of SDN across the world.

Globally, SDN technology is moving from the proof-of-concept and technology exploration phase towards actual deployment though the level of migration varies across countries. While some operators have migrated only limited functions of their service layer (the ones that have been the easiest to migrate) to SDN, the others, particularly the big players, are investing heavily in these technologies and are in a more aggressive implementation mode. A complete migration, however, will take several more years as operators have invested significantly in their existing infrastructure.

Market size and growth

The global SDN market is estimated to grow at a compound annual growth rate (CAGR) of 39 per cent between 2017 and 2023, to reach $61 billion. Further, service providers’ SDN and NFV investments will grow at a compound annual growth rate of 45 per cent between 2017 and 2020, accounting for nearly $22 billion in revenue by end 2020.

In order to reduce the total cost of ownership (TCO), mobile operators are aggressively jumping on the NFV and SDN bandwagon, targeting deployments across various functions. Around 40 per cent of the investments will be directed towards the mobile core, IP multimedia subsystem/voice over long term evolution and radio access network (RAN) segments. SDN is becoming a favoured technology for data centre switching. Globally, operators are likely to start replacing traditional Ethernet switches with white box switches.

Regional uptake

The global SDN market is dominated by North America, which is the largest revenue generator in the SDN market owing to the continuous technological advancements in the region and the increasing use of mobile devices, tablets and smartphones. Major telecom players are making significant investments in research and development. The market revenue of North America is expected to reach $12.2 billion by 2022. Europe is the second biggest region in terms of SDN deployments and uptake, followed by the Asia-Pacific and Latin America, the Middle East and Africa.

The Asia-Pacific region is estimated to be one of the fastest growing SDN markets owing to the increasing adoption of cloud services. Telecom service providers in this region are investing in the technology to improve their network infrastructure. For instance, China’s key telecom operators, China Unicom, China Mobile and China Telecom, are set to invest more than $180 billion in 5G infrastructure by 2023. This will further drive the growth of the SDN market. The increase in internet penetration, mobile subscription and smartphone uptake is also likely to contribute to the growth of the SDN market in the region.

In the US market, AT&T, Bell Canada, CenturyLink and Verizon are moving forward with their SDN and NFV plans, with network automation playing a prominent role in accelerating service creation and delivery over software-centric network architecture.

SD-WAN as a promising application

SD-WAN technology is an application of SDN technology in the wide area network (WAN) space. WAN refers to a communications network that connects multiple remote local area networks located at varying distances from each other. For example, a corporate WAN may connect the networks of its headquarters, branch offices and cloud service providers. Traditional WAN solutions, such as multiprotocol label switching (MPLS), are expensive and require a long gestation period before service provisioning. Wireless networks, on the other hand, fall short in bandwidth capacity and stability. The advent of SD-WAN solves these problems to a large extent.

MPLS is a proven, trusted network protocol for high volume traffic and is not likely to become outdated in the near future. Organisations are likely to overlay their current networks with WAN optimisation services, creating hybrid WAN. It will allow organisations to leverage the low-cost bandwidth of the public internet, along with the benefits of SD-WAN.

With cybersecurity becoming a towering issue for nearly all enterprises, companies deploying SD-WAN will also have to focus on adopting solutions to safeguard their networks from cyberthreats.

In 2017, global revenues from SD-WAN stood at over $300 million, with the number of operational SD-WAN sites exceeding 90,000. This is expected to further increase over the next few years. Reducing the operational cost is one of the major drivers for SD-WAN adoption. According to a market research report, the global SD-WAN market is expected to reach $9,691 million by 2023.

5G and SDN/NFV

While 5G does not typically depend on NFV technologies to survive, it can benefit from them. The performance benefits of 5G, such as high speed and low latency, combined with SDN and NFV can result in greater efficiency and flexibility. To adapt to different scenarios, 5G will need a more flexible and scalable architecture, which is proposed to be based on SDN and NFV.

Issues and challenges

Despite their growing adoption, SDN and NFV technologies pose various challenges for operators. SDN is vulnerable to bugs, failures and attacks, and a single point of failure is capable of taking down an entire network. Being a centrally controlled platform, SDN is an easy target for hackers trying to steal information or cause disruption. No major attacks have been reported to date but as the technology is adopted more widely, the likelihood of attacks will increase.

One of the key challenges posed by NFV is vendor interoperability. Most enterprises may want to preserve their current vendor model, whether it is dual skimming or using a single load balancing vendor. With NFV, multiple services that are virtualised onto a single platform will have to work together effortlessly.

However, vendors working together on service provisioning may result in greater conflict. In response, the demand for vendor management services is likely to increase, so that enterprises are spared the extra work involved in coordinating vendor collaboration.

From a technical perspective, the key challenge is the lack of standardisation. It is very difficult for operators to pick and choose different components from different vendors and still have high clarity on complete integration. So, to ensure integration, there is a need to test the interfaces. This is one of the key barriers although we are seeing progress every year.

The migration from legacy networks to a new environment is a challenge as there are several risks associated with the unknown. The behaviour of a traditional network machine during a fault is predictable. However, in the case of SDN, the level of control is still not clear. Therefore, chief technology officers need to be cautious when considering the move towards SDN. They need to develop internal expertise that is lacking in most of the companies.

The move to SDN and NFV, and the increasing level of automation would also require less human intrusion to ensure faster and more efficient networks. Companies like CenturyLink and BT (UK) plan to lay off employees due to the automation of tasks previously carried out by them.

The way forward

The scope of both SDN and NFV needs to be expanded to ensure mass deployments. Currently, SDN is gaining traction in the cloud data centre space and NFV opportunities will grow if operators deploy more cloud data centres and host virtual functions. Going forward, carrier cloud will emerge as a common driver for SDN and NFV.

That said, on-the-ground deployment of such solutions may still take time as network operators have already made huge investments in their existing infrastructure. For them to shift to a new technology, the operators must either reduce the total cost of ownership or increase revenues significantly. While operators will eventually need to shift to SDN and NFV, it will take them a minimum three years to replace the existing infrastructure.


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