Software defined networking (SDN) is an architectural method that separates network configuration and traffic engineering from the underlying hardware. Unlike traditional networks, which depend on dedicated hardware devices for controlling network traffic, SDN employs software-based controllers and application programming interfaces (APIs) to communicate with the underlying hardware infrastructure and regulate traffic flow on a network. Meanwhile, network functions virtualisation (NFV) is a complementary technology that separates network functions from hardware components, eliminating the dependency on proprietary and traditional hardware appliances. While SDN focuses on separating a network’s data and control planes, NFV virtualises network services and decouples them from hardware elements.

Global trends in the SDN domain

SDN is increasingly being used to deploy data centre services infrastructure, hybrid cloud and cloud-based applications across the industry. They help improve network efficiency and agility by deploying software-based functionality and a software-based network management layer on top of a physical network backbone. It allows organisations to govern massive amounts of data and network traffic in a flexible and cost-efficient way.

The key global trends driving the adoption of SDN include:

  • Rising deployment of cloud-native applications: Cloud-native applications may function in a highly distributed and independent way while easily being capable of adapting to dynamic and demanding needs within private, public and hybrid cloud settings. SDN can help with that while also increasing the speed and agility of cloud-native applications. Organisations may use a cloud-native approach to create distributed systems that are highly adaptable. SDN simplifies the complexity of managing these distributed physical network infrastructures with programmability and centralised control.
  • Emergence of 5G: A major aspect of 5G is its ability to enable network programming. This is also a crucial element contributing to the rise of private 5G networks as it enables the virtualisation of network components, thereby enhancing flexibility and manageability. It gives companies more control over network data, with evolving capacity fully adapting to the actual business needs.
  • Rise in remote working: An increasing number of employees worldwide have shifted at least part of their working hours from their offices to their homes. To this end, SDN enables flexible alignment with evolving business needs including highly fluctuating levels of remote working. With the lowest latency values readily assured, as well as the ability to seamlessly scale the bandwidth capacity up or down, even in a segmented way, SDN allows for infrastructural agility.
  • Increased adoption of IoT: Amidst the rising adoption of internet of things (IoT), and the rising network complexity, SDN is the way to go to provide for optimal connectivity and data transfer. With traditional, hardware-based networks, major IoT challenges may arise when it comes to flexibility, latency and security. SDN does not have any constraints in this respect, which means it is equipped to overcome these interconnectivity challenges for the adoption of IoT.
  • Growing hybrid and multicloud adoption: Small- and medium-size businesses as well as international conglomerates can benefit from a hybrid and multi-cloud approach. The advantages range from increased resilience, flexibility and freedom of choice to to cost reduction. The key challenge, however, is to interconnect these different cloud and on-premises environments efficiently on a regional and/or worldwide scale. SDN offers the ultimate connectivity concept for hybrid and multicloud solutions. The technology allows for flexibility of IT infrastructure deployment as well as simplified cloud connectivity management and heightened security options, while lowering network expenses and speeding up cloud adoption.

Trends driving NFV uptake

NFV has also been widely used globally. It allows for the abstraction of network forwarding as well as other network functions from the hardware on which it is deployed. It means that NFV substitutes dedicated hardware with virtualised software to establish network services such as routers, load balancers and firewalls. These network hardware appliances are replaced by virtual machine software. In a traditional network set-up, a hypervisor would be designated to manage such virtualised network services, which is the role that SDN plays in this case. Together, NFV and SDN technologies make the network architecture and deployment of IT infrastructures extremely flexible, both from an appliance and network traffic point of view.

With networks becoming more complex, the demand for cloud-based services, IoT deployments, security agility and cloud migration is growing, increasing the demand for network virtualisation and automation. In addition, the need for advanced network management systems is a key driving factor for the growth of the NFV market. However, factors such as increased network security risks in NFV and worsening economic conditions as a result of the Covid-19 pandemic pose serious challenges to growth.

NFV also addresses the issues of high capital investment, support and maintenance, and end-of-life events of the hardware networking devices by leveraging off-the-shelf IT. Virtualisation integrates many network devices into high capacity industry-standard servers, switches and storage that can be deployed in data centres, network nodes and end-user facilities.

The market is characterised by emerging technological innovations to keep pace with  customers’ changing needs. Technologies such as software-defined wide area network (SD-WAN) and virtualisation are some of the latest innovations in the telecom industry. Large investments in infrastructure modernisation and the increasing adoption of automation technologies such as IoT and artificial intelligence (AI) are primarily driving the growth of the NFV industry globally.

Adoption scenario

As per industry research, the worldwide SDN market was valued at $28.2 billion in 2023 and is expected to witness a CAGR of over 17 per cent between 2024 and 2032. In terms of regions, North America dominated the global SDN market with a major share of over 35 per cent in 2023. North America’s SDN industry is growing owing to its dynamic ecosystem, innovation and collaboration. As the region is home to a huge number of tech giants, star-ups and research institutions, it witnesses higher adoption and utilisation of SDN, leveraging its expertise in cloud computing and telecom.

In 2021, the global NFV market reached a value of $19.95 billion and is projected to grow at a CAGR of 26.9 per cent until 2030.

The way forward

The growing need for an efficient and cost-effective network management system, the rising adoption of telecom equipment and services across commercial and data centre applications, the ever-increasing pace of network automation and virtualisation technology adoption, server virtualisation, cloud services and the growing data centre consolidation is significantly contributing to the uptake of SDN and NFV across the globe. SDN and NFV deployments are changing operators’ operational and service dynamics. Indian operators must also accelerate SDN/NFV deployment to meet the increasing demands and expectations of consumers and enterprises. To this end, SDN and NFV can help telecom service providers gain a competitive edge in the business-to-business (B2B) space by offering customised solutions and improving customer experiences. They can open the doors to new business opportunities centred on providing flexibility and adaptability to end-users.