Market Trend

DATA: Network Functions Virtualisation (NFV)

Service Providers (SPs) face a long list of tasks that must be addressed as part of the NFV transition. New business processes and models will need to be developed. Interoperability and compatibilty with legacy infrastructure will need to be considered.

Requirements for security, stability, reliability and resilience – all hallmarks of telecoms infrastructure – may need further development for the NFV environment.

The transition to NFV and virtualisation-based networks is a long-term process that will take many years. Dell’Oro Group estimates that the timeframe for NFV will be similar to the transition from circuit and TDM-based technologies to packet-based technologies.

Over the next five years, the analyst firm expects NFV to evolve continuously, with many technology developments and innovations. At the same time, it expects large-scale deployments are likely to occur at a conservative rate, as service providers try to implement NFV with minimal risk.

Some of the metrics and milestones to watch are shown in the timeline below.

NFV technology supplements

Dell’Oro Group’s NFV forecast identifies three service provider technology categories where equipment sales are likely to see material effects from NFV over the next five years. The three technology categories are Carrier IP Telephony (CIPT), Wireless Packet Core (WPC) and SP Routers/Carrier Ethernet. Within each of these categories are sub-segments where NFV is likely to have an effect.

Wireless packet core MME session shipments

As of the fourth quarter of 2014, the fraction of licences that were NFV based (delivered as software running on virtual machines) were very small – less than 1%.

However, service providers and vendors appear to have begun pricing contracts in the second half of 2013 based on the expectation that software-only licensing will happen soon. This means that certain contracts are now being billed on a recurring revenue basis instead of a perpetual licensing basis. This billing model could be described as vendors “risk sharing” with service providers.

Dell’Oro views this as an advanced price cut ordered by certain vendors to their preferred service providers, as a strategy that may allow them to preserve market share ahead of what likely will be one of the most important architectural shifts in the service provider infrastructure that we have ever seen.

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