Just as some large doubts are starting to brew among some key Software Defined Networking (SDN) and Network Functions Virtualization (NFV) startups, Infonetics research has come out with a report saying the market will grow to $11B by 2018.
Some highlights from the Infonetics report:
- Infonetics expects global carrier SDN and NFV hardware and software to grow from less than $500 million in 2013 to over $11 billion in 2018
- NFV represents the lion’s share of the combined SDN and NFV market, from 2014 out to 2018
- The value of NFV is in the virtualized network functions software—the applications—rather than the orchestration and control; VNF makes up over 90% of the NFV software segment
- SDN and NFV exemplify the telecom industry’s shift from hardware to software: SDN and NFV software are projected to make up of three-quarters of total SDN/NFV revenue in 2018.
You can find more information about the report here.
The report was written by Michael Howard, a well known analyst in the space. What’s more interesting about the findings is not the number, but exactly how it will unfold — with a mixture of new technology acquisition, adopting old equipment for the new SDN & NFV functionality, and outright replacement of older technology.
Howard points out that SDN and NFV will happen in three distinct markets: 1) Brand new SDN & NFV gear 2) Displaced revenue from new gear replacing old gear and 3) New Segments of existing markets, such as putting SDN and NFV on routers and switches.
Howard says it’s the last segment that’s the largest. “This last segment makes up the largest slice of the SDN and NFV pie, 68% in 2018.
It’s an aggressive forecast — surprising to me, in fact — that will have many smaller vendors scratching their heads. I’ll tell you why: 2014 has been a confusing year so far, for SDN and NFV technologies. Although there has been some promising trial activity, some of it at large service providers, many of the newer vendors tell me the market is not moving as fast as they wished.
Part of this is the “Cisco factor,” as Cisco Systems Inc. (CSCO) has done a good job of stalling the market with its classic Fear Uncertainty and Doubt (FUD) marketing strategy. The other factor is sheer confusion on the part of the customers, who aren’t ready to abandon billions of dollars in installed hardware to move to the new paradigm.
What I hear is that customers are increasingly asking for an evolutionary migration, or “brownfield” approach to SDN and NFV, rather than rip and replace. can’t blame that for that. That also aligns with Howard’s take, which says that most of SDN and NFV will be of the evolutionary variety.
So, although SDN and NFV have generated more excitement in networking circles than we have seen in more than a decade, it’s going to be a long haul. In our own SDN Revolution report, we predicted that market would take ten years to develop and estimated that we are in year two of that transition.