There has been a surge in the adoption of software-defined networking (SDN) and network function virtualisation (NFV) technologies among service providers globally. Companies across the world are striving to become more agile and efficient, and reduce their capital and operational expenditure. To this end, they are increasingly deploying server virtualisation and SDN technologies. The ability of SDN and NFV technologies to improve programmability, enable faster service delivery, and reduce the overall capex and opex for service providers is driving their uptake. In addition, factors such as demand for better speeds and capacity of mobile services, the growing complexity of network architecture, varied traffic patterns, surge in demand for cloud services, and growth in the amount of data flowing into data centres have significantly added to the demand for SDN and NFV solutions.

Data centre providers, cloud service providers and telecom service providers are the key users of the technologies. The manufacturing vertical is also fast emerging as one of the key adopters of the technologies.

Market size and growth

The traditional networking solutions are increasingly proving to be inefficient in terms of managing different technologies within the network infrastructure. Network complexities have led operators to explore solutions that can efficiently integrate different types of networks and at the same time manage the growing traffic. To this end, operators are increasingly deploying SDN solutions as it enables heterogeneous network scenarios by accommodating multiple solutions without affecting the performance of networks.

According to a report by Global Market Insights, the SDN market is expected to grow from around $8 billion in 2018 to $100 billion by 2025. From the entire portfolio of SDN solutions deployed by operators, SDN controllers and managed services solutions have seen the highest uptake. The market for SDN controllers is estimated to grow at a Compound annual growth rate (CAGR) of over 40 per cent by 2025 while the managed services segment in the SDN market is expected to grow at a CAGR of over 45 per cent.

As far as the utility of these solutions is concerned, SDN controllers redirect packet-based network requirements, modify  traffic flow, and notify network operators about congested links, thereby effectively addressing the problem of network congestion,  improving service delivery and reducing operating expenses. Managed services solutions help operators reduce capital expenditure by 30-40 per cent and increase operational efficiency by 50-60 per cent.

Operators are increasingly coupling their SDN deployments with NFV solutions. The NFV solutions market is projected to be worth over $70 billion by 2024. NFV enables service providers to effectively virtualise network components such as load balancers, firewalls, subscriber policy management, and mobile radio access networks (RANs). NFV solutions offer great flexibility and agility to enterprises, thereby enabling them to scale their networking infrastructure in the face of increasing workload. This effectively brings down the cost incurred for the deployment of additional hardware appliances to support new network services.

Regional uptake

In terms of region-wise adoption, North America is expected to dominate the SDN and NFV market, which can be attributed to the well-established IT, telecom and banking sectors in the region. The region has always been at the forefront in terms of adoption of new technologies such as cloud, internet of things (IoT), artificial intelligence (AI), long term evolution and now 5G. All this has led to the generation of large amounts of data, putting a strain on the existing networks. This has made North America a promising market for SDN and NFV solutions. The region is expected to contribute a major share in the global SDN market in terms of revenue. The market revenue for the region is projected to reach $12.2 billion by 2022.

North America is expected to be closely followed by Western Europe and Asia-Pacific (APAC). According to Global Market Insights, the NFV market in the APAC region is projected to grow at a CAGR of around 50 per cent by 2024, the highest globally. This growth will be driven by the adoption of cloud-based computing and storage technologies by small and medium enterprises, expansion of the data centre ecosystem, and large-scale investments in 5G testing and commercialisation by telecom carriers. Further, industry experts predict that the region will drive the demand for application delivery controllers in the SDN and NFV market.

This demand is expected to be supported by the increasing penetration of telecom services in the region, particularly in countries like India and China. Their governments have made significant investment in the expansion of IT and telecom infrastructure. The Digital India programme is a case in point. Moreover, operators in both the countries are constantly enhancing their connectivity infrastructure. For instance, China’s incumbent telecom operators China Mobile, China Unicom and China Telecom are planning to invest over $180 billion by 2023 for the development of 5G infrastructure in the country. There has also been a growth in the number of data centres deployed in the APAC region.

The way forward

Going forward, the SDN and NFV solutions market is expected to witness significant uptake across sectors. The coming in of 5G is expected to further drive the adoption of these solutions. 5G will have use cases across various verticals instead of being restricted to the telecom sector. It will generate more data and add to network congestion, thus making the deployment of SDN and NFV solutions imperative across sectors. All geographies are expected to see a growth in SDN and NFV deployments although the level of adoption will differ.