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NFV Market Drivers

NFV is more than a transformative technology. Like any new technology that brings major changes and new benefits, NFV has had to go through acceptance and adaption by the market. The market drivers for NFV are very significant, obvious, and promising. These have played a part in making NFV move beyond its infancy in research labs and bringing it into mainstream deployments in a very short span of time.

Access to the Internet and the trend toward digital services across the world are creating a big market for the network service providers. The scale and the bandwidth needs are already straining the existing network infrastructure. Upgrading this traditional network infrastructure requires high levels of time, money, and resources from the providers. This has forced the providers to rethink the network architecture and use new innovations that could keep up with the new cloud and digitalization world. One of the main drivers is the movement to cloud technology coupled with the utilization of the matured technology such as the virtualization and COTS hardware. Network providers are now using the same cloud infrastructure such as the computers (servers) and storage devices and adding the network function to these elements to provide services for new market requirements. By taking this approach, they gain major cost savings, the ability to bring new services to market faster and capacity to adapt quickly to any change in the market landscape.

The NFV market drivers that bring new business opportunities have made network operators eager to transition to NFV. Figure 1-19 lists some of these market drivers, which are described in the sections that follow.

Figure 1-19

Figure 1-19 NFV Market Drivers

Movement to Cloud

With the advent of new smart devices, bandwidth-hungry applications, the new breed of connected devices, and Internet of things (IoT) technologies, the demand for and usage of networks has been increasing exponentially. These recent changes have created market demand for services being provided anytime, anywhere, and on any device. To meet this market shift, providers are looking to build and offer cloud-based services that can satisfy the new requirements.

Research publications forecast that between 2015 and 2020, the NFV market will grow to beyond $9B with a compound annual growth rate (CAGR) of 83.1% [4]. This is a huge market for the traditional providers to miss, and many new providers are now jumping into this market, such as cloud providers, service providers, enterprise, startups, etc.

New Business Services

Consumption-based growth ensures that the network resources grow in close correlation with demand. With the use of traditional network equipment, network growth occurred in jumps, resulting in first overprovisioned and later underprovisioned network capacities, as depicted in Figure 1-20. The use of NFV avoids wastage of time and resource that would have been spent in continuously reprovisioning and decommissioning the network capacity.

Figure 1-20

Figure 1-20 Consumption-Based Capacity Growth

One of the new business opportunities made possible by NFV is to offer hosting of network and IT services using massive server deployments. This type of service offering has been picking up pace and is proving to be a high-revenue business.

Instead of investing in network and data infrastructure, many enterprises are now opting to lease it as a service through the cloud providers. This is commonly referenced as Infrastructure as a Service (IaaS).

With NFV, providers can offer network services on demand like a shopping-cart experience, allowing consumers to add or delete services and devices through self-managed portals. Since the services will use NFV, these new services can get deployed automatically and become available instantaneously. In this case, if a customer wants to add a new firewall to a branch location, the customer can use such a portal to buy this service with few clicks, and the back-end at the provider will spin off a new virtual machine and deploy the firewall VNF on it as well as connect that VNF to the existing devices for that branch office.

These are just a few examples of NFV’s ability to offer new set of business services that can be deployed on-demand and brought up in a short time span. The new breed of services that NFV can make possible are already gaining popularity and creating market enthusiasm. Providers are also offering new business models that utilize consumption-based growth, on-demand deployment, pay-as-you-grow and pay-as-you-use services, and better monetization for the network resources.

Capital Expense Savings

The hardware innovations required in traditional network hardware are costly for vendors to develop and produce. These devices have a small market and are therefore sold in low volume. These two factors are reflected in the cost to the network operators. On top of that, vendors of traditional network equipment have been able to keep the margins high by exploiting the fact that limited alternatives were available to the network operators. NFV revolutionizes this situation by using standard high-volume hardware such as the servers, switches, and storage components.

COTS hardware devices are already mass produced and sold at a reasonable price due to their use in data centers, and the use of off-the-shelf components keeps development costs low and competitive. The low manufacturing cost, combined with economics of scale and efficiency, results in equipment costs that are much less than those of purpose-built hardware.

Operational Expense Savings

With NFV’s push for standardized framework, the proprietary aspect of the existing network’s vendor-specific hardware and software combination is eliminated or minimized. NFV encourages and supports the use of open standards within its functional blocks as well as their interaction with existing management tools. This makes NFV deploy and operate networks using many existing vendor independent tools from server and data-center space, without new investments.

Virtualized network can share the infrastructure between the network functions as well as applications running on the network, data centers and server farms. The power and space consumed by the infrastructure can therefore be shared and more efficiently used.

Barrier of Entry

With traditional network devices, it’s difficult for new vendors or new service providers to enter the market. The development costs for the vendors and the infrastructure costs for the providers present a barrier that is challenging to penetrate. With NFV, which uses open software implementing various network functions and has lower hardware costs, this barrier has been removed. This opens up doors for new vendors and providers to enter the market, bringing innovations and challenging the current vendors by offering lower priced and higher performing implementations of network functions.

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