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Suppliers must accelerate cloud and NFV spend as carriers target virtualization within the decade

Suppliers must accelerate cloud and NFV spend as carriers target virtualization within the decade






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    Suppliers must accelerate cloud and NFV spend as carriers target virtualization within the decade Suppliers must accelerate cloud and NFV spend as carriers target virtualization within the decade Document Transcript

    • TBR T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C . TBR SPECIAL REPORT Suppliers must accelerate cloud and NFV spend as carriers target virtualization within the decade Michael Sullivan-Trainor, Networking & Mobility Practice Executive Analyst (michaels@tbri.com) Oct. 21, 2013 By 2020, carrier networks will look more like clouds than today’s multilayered hardware-dependent equipment domains. The new networks will have far fewer network elements, and with the exception of RAN, and optical and router elements, there will be little necessity for network equipment in the service layer and at network traffic management and control points. In fact, physical infrastructure will hinder service provisioning agility and the opex and capex savings carriers expect to achieve. Suppliers must prepare for this dramatic shift — which could reduce revenue for system elements by as much as 30% — as dedicated proprietary hardware and software elements are replaced by softwareonly licenses for functions running on virtual machines with multiple functions per commodity server. The graphic below conceptually illustrates how the market would look following a shift to more software licenses purchased with a smaller capital expenditure. Similar shifts can be expected in internal and external operational expenditures. 2013 Service Provider Capex 2020 Service Provider Capex (Overall 15%-30% less spend) Softwareonly 20% Systems 80% Softwareonly 45% Systems 55%
    • TBR Source: TBR estimates of average Tier 1 Service Provider spending allocation Software suppliers that license their wares on standard hardware are more prepared and will likely succeed in this new world. But systems suppliers must look closely at transferring major investments and revenue expectations from hardware and its associated services to software and the management environments required to orchestrate the new network. Drivers and Expectations Carriers are motivated to shift from largely physical to primarily virtual infrastructure because they desperately require these benefits of the virtual paradigm: 1. Reduced costs Service providers have experienced loss of revenue from competitors such as over-the-top (OTT) vendors and have faced increased cost to manage the volume of data traffic from smart devices.  Removing investment in proprietary hardware wherever possible and consolidating operating costs around virtual multifunction platforms are key ways of accomplishing this objective. 2. Increased speed of service innovation Carriers need to deploy and tear down services in hours or days rather than weeks or months to compete against OTT vendors and provide new services for smart devices, cloud, SMBs and enterprises.  Once implemented, virtual functions can be deployed and scaled “at will” to enable faster provisioning than today’s process of building unique proprietary systems to deliver service-specific functions. What Suppliers Can Do Achieving these goals will not be easy, despite carrier enthusiasm for the benefits. Obstacles include:  Service providers need to design and implement an effective architecture that ensures carrier grade reliability. Cloud and virtualization deployments to date have not been proven to achieve 99.999% reliability — a must to guarantee quality of service. Recent cloud service outages by Amazon and Google do not inspire confidence that the reliability problem has been solved.  Costs sunk into recently installed platforms mean existing network equipment will need to run its course before platforms can be replaced and cost savings and agility benefits can be achieved. www.tbri.com
    • TBR Despite these issues, many carriers are optimistic. Most recently, Deutsche Telekom announced it is testing its version of the new network, called TeraStream, at Hrvatski Telekom, its Croatian subsidiary. Alcatel-Lucent and Cisco are the primary suppliers. Alcatel-Lucent is promoting is Cloudband (carrier cloud) and Nuage (SDN) Solutions, while Cisco introduced its Network Convergence System (NCS) to provide a foundation for network function virtualization (NFV) and software-defined networking (SDN). Cisco has also deployed elements of NCS for KDDI in Japan and Telstra in Australia. AT&T recently announced its Supplier Domain Program 2.0, which targets suppliers who will enable the carrier to virtualize an increasing number of network platforms to move to an internal cloud-based architecture. The carrier’s goal is to improve time to revenue, enable service and applications growth, ensure network security, performance and reliability, and facilitate new business and revenue models. More than 100 service providers, including AT&T, BT, CenturyLink, China Mobile, Colt, Deutsche Telekom, Orange, KDDI, NTT, Telecom Italia, Telefonica, Telstra and Verizon (portal.etsi.org/NFV/NFV_List_members.asp), are engaged in the ETSI-sponsored NFV Industry Specification Group,. Telefonica announced an NFV trial with NEC in Brazil for a solution to shift home gateway CPE functions from residences to the carrier’s network. Colt rolled out a Carrier Ethernet platform for metro areas based on Cyan’s SDN. Suppliers are responding to the pull from carriers. Ericsson introduced last year a Service Provider SDN concept, which is anchored by its Cloud System solution and will launch in 1Q14. Juniper recently announced a service chain that unifies its SDN capabilities. Amdocs announced it was virtualizing key elements, including PCRF, HSS and its Service Delivery Broker, in the network service layer. In May Huawei claimed the first SDN/NFV solution, called the vFamily, a solution similar to that used in Telefonica’s and NEC’s Brazilian trial. IBM and HP also announced solutions for carriers, built on their cloud portfolios. HP provides its Cloud Service Automation and Matrix solutions as well as an Aggregation Platform, and IBM offers PureFlex, its Virtual Core Mobile and Service Activator. The exception is NSN, which is focusing its virtualization efforts on the RAN with its Liquid Net solution, including virtualized elements for radio networks, applications and management, and Liquid Applications, which are being trialed for base station functions, IMS and TAS with India-based carriers and SK Telecom. Activity among suppliers is robust, but where and how will the future network unfold? Where should suppliers place their bets? www.tbri.com
    • TBR First-mover carriers point to the service layer of the network. Service platforms are a good target because they offer discrete network functions that reside on proprietary platforms in the data center. These can be transferred to virtual machines that can be consolidated onto standard servers. These functions may not yet be fully distributed across the network and virtualizing them allows carriers to experiment with NFV provisioning and scale as well as test reliability and cost savings. Software suppliers are already moving on this opportunity. Metaswitch, Sonus and Dialogic (Session Border Controller player) have released products, while Acme Packet, the market leader recently acquired by Oracle, has announced intentions to deliver a virtual version. SDN in routing and virtualization of the IT (server, storage and network) environments in carriers is well underway. Bringing SDN and data center initiatives together with NFV programs is one of the first major challenges in broadening the ability of the new network vision. These initiatives will unfold over many years, but carriers hope to realize elements of their plans within the decade and are off to a strong start. Suppliers can expect carriers to become more insistent and numerous in their requests for change, and suppliers will have to adjust their business models accordingly. Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, telecom and enterprise network vendors, and operators. Serving a global clientele, TBR provides timely and actionable market research and business intelligence in a format that is uniquely tailored to clients’ needs. Our analysts are available to further address client-specific issues or information needs on an inquiry or proprietary consulting basis. TBR has been empowering corporate decision makers since 1996. For more information please visit www.tbri.com. ©2013 Technology Business Research Inc. This report is based on information made available to the public by the vendor and other public sources. No representation is made that this information is accurate or complete. Technology Business Research will not be held liable or responsible for any decisions that are made based on this information. The information contained in this report and all other TBR products is not and should not be construed to be investment advice. TBR does not make any recommendations or provide any advice regarding the value, purchase, sale or retention of securities. This report is copyright-protected and supplied for the sole use of the recipient. Contact Technology Business Research, Inc. for permission to reproduce. www.tbri.com