In the era of exponential data growth, telecom operators across the globe are constantly looking for appropriate technologies to establish a sustainable network infrastructure. While legacy network technologies have been successful in providing adequate support for 2G and 3G services, 4G services demand a more robust network infrastructure, capable of supporting the growing data traffic. Further, the increased uptake of over-the-top (OTT) applications has resulted in a large amount of data traffic flowing through operators’ networks. Therefore, operators are looking at technologies that can transform their networks to support data-centric services and also reduce capex and opex requirements.
To this end, software defined networking (SDN) and network functions virtualisation (NFV) have emerged as key technologies in the global telecom industry. By enabling a transition from hardware to software, SDN and NFV solutions have led to increased automation. This enhances operational flexibility and scalability, reduces costs, enables the use of dynamic bandwidth, and provides agility to systems and processes. Further, by using SDN and NFV solutions, operators can provide a host of network services ranging from standard mobile IP multimedia systems to features such as deep packet inspection through software, in a cost-effective manner.
In light of these benefits, operators across the globe are planning to make significant investments in the SDN/NFV space. As per industry estimates, operators’ investment in SDN and NFV solutions worldwide is expected to increase at a compound annual growth rate (CAGR) of 94.3 per cent during 2016-22, and reach $168 billion.
A look at the key developments in the global SDN and NFV market and the outlook for the sector…
Global deployment trends
Several operators across the globe have been devising their own network transformation strategies based on SDN and NFV technologies. Tier I operators in the US, Europe and Japan are at the forefront of driving this transformation.
In the US, investments in SDN and NFV technologies are expected to grow at a CAGR of 116 per cent between 2015 and 2021. Operators in the country, including AT&T and Verizon Communications, Sprint and T-Mobile, have stepped up their investments in SDN and NFV technologies to offer enhanced enterprise communication solutions to customers. AT&T has virtualised around 34 per cent of its network using SDN and NFV as of December 2016. The operator aims to virtualise 55 per cent of its network in 2017 and 75 per cent by 2020 to meet the growing data demand. Further, Verizon is looking at solutions such as SDN wide area network multi-tenant, NFV orchestration and NFV hosting in 2017 to expand its SDN/NFV infrastructure.
On the other hand, the European NFV market is expected to grow at an estimated CAGR of 53 per cent between 2017 and 2022, as per market reports. This trend will be driven largely by the efforts of operators in Western Europe. Meanwhile, the Asia-Pacific region, which currently represents the fastest growing market for these solutions, is likely to witness a significant uptake of SDN and NFV technologies. In this region, China Mobile has been leading the initiatives for SDN and NFV deployment. The operator has collaborated with Nokia and has been using the vendor’s SDN and NFV solutions for transforming its network. Further, it has recently partnered with Brocade to leverage its NFV solutions. In March 2016, Japan-based operator NTT DOCOMO adopted a multi-vendor NFV solution developed by Ericsson. According to Ericsson, the solution was launched for NTT DOCOMO’s commercial network, which was the first instance of multi-vendor NFV technology deployment in the world. In the future, NTT DOCOMO plans to deploy SDN technology as well to make IP networks flexible.
Other parts of the world are also witnessing significant traction in these technologies. In February 2016, Switzerland-based operator Swisscom partnered with Ericsson for deploying its SDN and NFV solutions. Under the partnership, Swisscom is using Ericsson’s SDN and NFV solutions for its core network functions. Further, South Korea-based operator LG Uplus has been leveraging Ericsson’s SDN and NFV solutions to accelerate the virtual transition of its networks. Meanwhile, Vodafone recently signed an agreement with Mirantis for the deployment of NFV technology. Under the partnership, Mirantis will be a part of Vodafone Ocean, a framework for developing, testing and deploying SDN and NFV technologies.
Key issues and challenges
Despite the efforts of key telecom operators to deploy these technologies, a complete transformation to an SDN-and NFV-based paradigm is still a few years away. The lack of standardisation poses a significant challenge for the integration of SDN and NFV technologies into the current format. Although the industry is moving towards open standards, there is a need for large-scale solutions as service providers transform their networks to entirely virtualised set-ups and embrace futuristic technologies. This is because these technologies have a multi-layered architecture. It includes the hardware layer, which consists of servers, storage and networks; the virtualisation layer, which enables a protected environment; and the core layer, which comprises virtual networks, high-level network services and applications that work inside the virtual ecosystems. In addition, there is a resource management layer, a service orchestration and assurance layer, and a business support layer, which together form the outer blankets of the core environment. These layers work in tandem with management systems and predetermined services while being open for access by multiple vendors. However, since the standards are yet to be determined and finalised, creating an open, accessible and multilayered environment is difficult. This is because the multilayered architecture of SDN and NFV technologies is struggling with a potential hazard caused by the breakdown of one layer upon the others.
Further, even as service providers move towards new network technologies, it is essential to retain the existing architecture and network management system. This will not only help secure technology deployment, but also maintain continuity and reduce the time-to-market for new technologies. Moreover, as service providers are moving from traditional to SDN-and NFV-based architecture, the network nodes need to be switched in a way that minimises any hindrance during the transition period and ensures complete availability of the network. Moreover, there is a challenge of maintaining the desired service level during the technology evolution period, as the operator adapts to new technologies and updates the software.
In addition, multi-vendor services deployed by operators could pose a serious security risk to the virtualised set-up owing to differences in the service levels and architecture provided by various vendors. Further, network functions scattered across a host of vendors and data centres make it challenging to define and manage network security zones.
By using SDN and NFV solutions, operators can provide a host of network services ranging from standard mobile IP multimedia systems to features such as deep packet inspection through software, in a cost-effective manner
Despite the challenges involved in their deployment, SDN and NFV technologies present promising opportunities for innovation in the telecom industry. As OTT players and cloud solution providers acquire increased market space, the transformation of networks through SDN and NFV technologies has become essential for the long-term sustainability of operators, especially when the global telecom industry is on the verge of adopting 5G and internet-of-things technology.
Further, the transition to SDN and NFV-based infrastructure would lead to the increased use of private cloud by operators, value-added resellers and vendors. Moreover, increased competition with the entry of new players will drive innovation in terms of architectural design and security features, and in enabling a seamless transition from traditional networks.
With stakeholders slowly recognising these benefits, the market is poised to grow at an unprecedented rate in the future. To this end, the value of the SDN and NFV professional services market is expected to increase from $800 million in 2016 to $6 billion in 2018.
While the global SDN and NFV market is currently dominated by Tier I global operators, smaller players are expected to learn from their experience and are likely to follow suit in the coming years.