Service provider NFV, SDN investments to reach $21B by 2020, report says

Service provider-centric network functions virtualization (NFV) and software-defined networking (SDN) investments are expected to reach nearly $21 billion by 2020, according to SNS Research.

Apparently following the old "you gotta spend money to make money" paradigm, operators that go the way of NFV/SDN will reduce their reliance on expensive proprietary hardware platforms. NFV and SDN promise to reduce capital expenditures for wireless carriers, and both technologies can help them slash operational expenses due to the reduction in physical space, labor and power consumption, the research firm notes.

"Driven by the promise of TCO (total cost of ownership) reduction, operators are aggressively jumping on the NFV and SDN bandwagon, targeting deployments across a multitude of areas," SNS Research said in its press release.

By the end of 2020, SNS Research estimates that NFV and SDN investments on operator networks will account for nearly $21 Billion. These investments will primarily focus on mobile core/EPC, policy/IMS services, RAN (radio access networks), OSS/BSS, data center, backhaul and CPE/home environment.

Leading the way to NFV/SDN in the United States is AT&T (NYSE: T), which last week reviewed some of the progress it has made over the past year. In a blog post, SVP of Technology and Operations John Donovan said AT&T's goal is to virtualize and control more than 75 percent of its network using a software-driven architecture by 2020.

AT&T is also starting to virtualize and put into production critical network functions such as Domain Name Service (DNS), Network Analytics, Intelligent Data Platform and Virtualized Provider Edge Router, improving cycle time, elasticity and operational efficiency, the company said.

In a follow-on call, Donovan told Current Analysis that the roster of vendors supporting AT&T's software-centric network evolution is unlikely to see any significant additions. New vendors likely will be integrated by AT&T's existing suppliers Affirmed Networks, Alcatel-Lucent (NYSE: ALU), Amdocs, Brocade, Ciena, Cisco, Ericsson, Fujitsu, Juniper and Metaswitch.

Peter Jarich, vice president of Consumer and Infrastructure research at Current Analysis, said that in many ways, that wasn't surprising. "AT&T is one of a handful of operators actively driving SDN and NFV forward--paving the way for others to follow. It only makes sense for the operator to 'put its money where its mouth is.'"

Jarich added that AT&T isn't alone in favoring telco vendors over IT vendors when it comes to SDN/NFV deployment and integration; almost two-thirds of carriers surveyed in a recent Currently Analysis poll expected telco vendors to take the lead in supplying SDN/NFV software and integration services. But, he said: "That doesn't mean this isn't potentially short-sighted.

"For service providers, SDN and NFV are, ultimately, about the integration of IT principles, assets and operations into their service-bearing networks. Bringing IT vendors into these transformations at a foundational level only makes sense in order to benefit from their insights and assets and culture. Will an SDN or NFV strategy fail without them? Probably not. Would it be better with them? Probably."

For more:
- see this press release

Related articles:
AT&T: 75% of network will be software-driven by 2020
Ericsson's Vestberg discusses software transformation, 5G aspirations and more
AT&T, Cisco showing the way to SDN and NFV
Marian Croak on why and how AT&T is moving to SDN, NFV and an all-IP future with Domain 2.0
Ericsson CTO: Virtualization will open up mobile to OTT innovation
Virtualization creating a breeding ground for rival vendors

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