Suppliers must accelerate cloud and NFV spend as carriers target virtualization within the decadeDocument Transcript
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
Michael Sullivan-Trainor, Networking & Mobility Practice Executive Analyst
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)
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
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
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
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?