The industry is excited about network functions virtualization (NFV) , but there is a lot more work to be done to prove its return on investment and ability to deliver monetization of carrier-based services.
- Save money on hardware
- Save money on operations
- Drive new revenue faster
The first two are quite complicated and still unproven in terms of ROI, but the last one is promising and may become the most important because of the thirst for revenue growth.
If you had to choose a technology that could deliver savings on operations and capex or a technology that could deliver revenue faster, it’s likely that company leadership would favor revenue growth. NFV has to potential to do it all, but proving out its revenue acceleration capabilities will be key to adoption. This was reflected in research including in both our 2015 NFV Report and 2015 Virtual Edge Report.
Revenue acceleration will be crucial in the traditional service provider community, which in recent years has struggled to gain traction with new digital services. They were beaten in the content arena by the over the top (OTT) content providers and in the data-center market by the cloud platform providers. With growth in mobile services slowing, the service provider market needs to find a way to introduce new services, or at least improve existing services while lowering operational costs. This is how they expect to “monetize” NFV by demonstrating a clear ROI. It’s the only way that the NFV market is going to take off.
Because of missed opportunities in OTT and cloud, the best bet for service providers is to go back to their roots in consumer and enterprise connectivity and to deliver services that are layered on top. Software-defined security and software-defined wide-area network (SD-WAN) services seem the most promising.
Why WAN and security? Enterprises have a constant thirst for new connectivity services, and these are services that can be most sensibly deployed in a cloud format at the edge of the network. Meanwhile, enterprise customers have told us in numerous surveys they need more flexible, easily deployed security and WAN services.
Secure Cloud Broadband (Branch Office Access): There is more demand from employees to access a secure, reliable WAN from branch offices. Often, they need it fast, via Internet broadband connections. With a cloud-based WAN approach, technology can make existing broadband Internet technologies more robust, by combining circuits from different broadband pipes (link aggregation), optimizing the existing connection (WAN Optimization), and/or providing encryption to add additional security (VPN).
Cloud Application Acceleration: On the data-center side, a specific application provider might be looking for ways to speed up access for customers, leveraging an SD-WAN solution or vCPE to optimize access to applications. These types of services can be offered in the cloud using NFV platforms.
Mobile to Cloud: Mobile enterprise connectivity is a huge challenge for enterprise customers. Companies want to manage and secure the way employees connect to corporate applications with mobile devices. In many cases a thin client can be installed on a mobile device, so it can connect securely to the corporate WAN using mobile networks. Many mobile features, including security and application functions, can be offered in an NFV platform – including radio access and virtualization at the evolved packet core (EPC) level.
Security: Virtual firewalls, IPsec (encryption for VPN), intrusion detection systems (IDS), anti-virus (AV)
WAN Optimization: Link redundancy, TCP optimization, de-duplication compression.
SD-WAN and Routing: SD-WAN control, routing, network address translation (NAT), intelligent path selection.
Full NAAS: In this model, the cloud service provider (CSP) or telecom service provider has built an entire network, including local points of presence (POPs), to provide a wide range of network functionality that may include secure VPN, data or network encryption, intelligent routing, WAN optimization, and traffic optimization. A service provider or enterprise might use vCPE and SD-WAN technology to build an extensive network of cloud-based services, with NFV.
All of the areas and use cases mentioned above have the potential to be delivered in a cloud model using NFV. It’s been proven in recent years that enterprises are interested in buying services and applications from the cloud and are increasingly moving in that direction. Most enterprises use public (67%), private (60%) and hybrid (33%) cloud services.
Given the success of cloud technologies for a wide variety of software applications, it seems natural that both enterprises and consumers will look for a new generation of connectivity and security applications to be delivered in the cloud. NFV technology looks like the leading candidate to deliver such services, which could increased and averaged revenue per user (ARPU) in both the business and consumer markets, but the service providers will have to move fast to build a cost-effective infrastructure if they want to avoid being beaten to the punch by cloud providers and even large enterprise technology vendors offering their own cloud services.