IHS-Markit Forecast: Carrier NFV at $37B in 2021 for a CAGR of 30% from 2016-2021

by Michael Howard of IHS-Markit (co-founder and lead analyst at Infonetics)

Network Function Virtualization (NFV) MANO (management and network orchestration) and VNF (virtual network function) software revenue was $3.5B in 2016 and is expected to reach $5.9B for 2017, according to the NFV Hardware, Software, and Services biannual market tracker from IHS Markit.

NFV revenue is not all new: it includes displaced revenue and newly identified parts of existing market segments. In 2021, 49% of the NFV revenue will be new revenue from software and outsourced services, and 8% will be displaced revenue spent on NFVI server/storage/switch hardware purchased instead of purpose-built network appliances. The remaining 43% represent spend on VNF software.

“Operators around the world are planning or extending their NFV environments to customer sites on CPE (customer premises equipment), which we are calling uCPE (universal CPE). We expect operators will spend $11M on physical “uCPE” hardware in 2017, growing to $448M in 2021,” stated Michael Howard, Executive Director Research and Analysis for Carrier Networks at IHS Markit.

“In our 5th annual global carrier surveys on SDN and NFV, 82% of respondents indicated they are deploying or plan to execute VNFs on uCPE located at customer sites (with 97% in COs and 85% in DCs). Because this is such a large part of operator plans and products available now, we have sized and forecast the uCPE market,” Michael Howard added.

Above illustration courtesy of IHS-Markit

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Editor’s Note:  NFV and MANO Backgrounder:

nfv infrastructure and vim nfv framewrok

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NFV Reference Architecture showing NFV Orcestrator and VNF Manager

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Above illustration extracted from the ETSI NFV MANO Specification

Recently, there’s been more innovation around the MANO portion of the NFV infrastructure and a recognition that MANO might need more development as a model given the gap between the MANO layer in NFV and the OSS/BSS (operations support systems/business support systems) portion of network operator  businesses that handle the core orchestration and billing functions as shown above.

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More NFV Market Highlights (IHS-Markit):

·         Revenue to vendors and systems integrators for outsourced services for NFV projects will grow to $16.6B in 2021 with a 2016-2021 CAGR of 23%.

·         NFV software (NFV MANO and VNFs) revenue will grow to $15.5B in 2021 with a 2016-2021 CAGR of 36%.

·         NFV hardware (NFVI server, storage, and switches) revenue will grow from $696M in 2016 to $3.1B in 2021 with a 2016-2021 CAGR of 35%.

·         Service providers will invest $2B in hardware and software for the enterprise vCPE use case in 2021, and $293M for the consumer vCPE use case.

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NFV Hardware, Software and Services Report Synopsis:

The IHS Markit NFV Hardware, Software, and Services market tracker provides biannual worldwide and regional market size, forecasts through 2021, analysis and trends for:

(1) NFV hardware [servers, switches, storage and uCPE],

(2) software: NFV MANO, Virtual Network Functions (VNF) [SD-WAN, mobile core & EPC, PCRF & DPI, security, IMS, SBC & DCS, video CDN, vRouters, and other VNFs],

(3) outsourced services for NFV projects, plus NFV use case spending [consumer vCPE and enterprise vCPE].

Vendors tracked include Amdocs, ADVA, Ciena, Cisco, ClearPath, Ericsson, Fujitsu, HPE, Huawei, Juniper Networks, Metaswitch Networks, Nakina Systems, Nokia, Nuage Networks, NEC, NetCracker, Oracle, ZTE, and others.

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Editor’s Note:

I strongly respect Mr. Howard’s work ethic and primary market research findings.  While not having read this latest report, I’m sure it’s excellent.  However, I’m still much more pessimistic on the NFV market due to the lack of standards for exposed interfaces/APIs and backward compatibility (especially hybrid network management) with the installed base of non NFV equipment/boxes.

ABI Research on NFV Market:

ABI Research forecasts that North America will lead the NFV market, accumulating $13 billion in NFV-related investments during 2022, while Europe will experience the highest growth rate at an estimated 53% CAGR between 2017 and 2022. Early adopters claim several benefits to NFV-enabled systems, which include reductions in network CAPEX & OPEX, service agility, and reduced deployment times for new network elements.

“In 2015 and 2016, the market experienced some early successes but mostly reconsiderations and failures with NFV,” says Neha Pachade, Senior Analyst at ABI Research. “Early adopters conducted proof of concept testing and NFV-integrated system demonstrations with the aim to understand the true impact of NFV in the technical, operational, and cultural domains. Our forecasts indicate that NFV will become a sizeable opportunity for vendors, although it is not yet clear whether it will cannibalize existing hardware-based product lines or create new market use cases.”

ABI Research estimates that total NFV market revenues will reach $38 billion in 2022. Hardware spend—including servers, storage devices, and switches—will reduce with time, while software and services will have higher growth rates of 55% and 50%, respectively. Although the market is evolving and technical expertise is starting to mature, the standardization and multi-vendor involvement challenges will remain stagnant for the next couple of years. Software and services vendors will have opportunities to identify NFV use-cases in enterprise verticals and use these to offer end-to-end integrated systems.

“Early contracts and market trends illustrate the biggest winners are likely to be the established vendors, including Ericsson, Huawei, and Nokia, as well as specialists like Amdocs and Netcracker, with systems integration becoming more important each day,” concludes Pachade. “Several vendors also place heavy and risky bets on open source software, which may increase business opportunities but may also create difficult choices for them in the future, particularly if telco interest in specific open source projects fizzles out. For the time being, NFV is mostly considered as a cost-cutting exercise, since new revenue opportunities require a transformation in a much broader context, which is more likely to be driven by 5G, after 2020.”

These findings are from ABI Research’s Network Functions Virtualization Tracker and Forecasts report.

AT&T and KT to work together on 5G, NFV & SDN; Consortium of 5G Carriers Forming?

Executive Summary:

According to Business Korea, AT&T Chief Strategy Officer John Donovan met with Lee Dong-myeon, director of the KT  (Korea Telecom) Technology Convergence Center to discuss plans for the well respected telcos to share AT&T’s NFV and SDN work and KT’s efforts around 5G.  AT&T is expected to cooperate with KT in many new technologies, especially their own version of SDN/NFV and 5G.  KT is leading the 5G technology development (along with SK Telecom) and is prepared to share that with AT&T.

“We expect that cooperation through AT&T’s SDN/NFV leadership and KT’s 5G leadership will create synergies to solve challenges of the telecom industry in the future,” said Mr. Lee.

Lee Dong-myeon (left), director of the KT Technology Convergence Center and John Donovan, CSO of AT&T.

Lee Dong-myeon director of the KT Technology Convergence Center and John Donovan, AT&T Chief Strategy Officer.                                                                         Photo courtesy of Business Korea

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KT and AT&T Working with Other Companies on 5G Development & Deployment:

Service Providers Talk White Box Trials & Future at 2017 NFV World Congress

Introduction:

The 2017 NFV World Congress was held May 2-5, 2017 in San Jose, CA. This author attended the first two days and was quite impressed with the depth and breadth of the presentations and panel sessions.

According to conference Chair Mark Lum, there were over 40 network operator speakers and/or panelists on the program.  Those included AT&T, Verizon, Sprint, Deutsche Telekom, BT, Orange,  Cable Labs (representing the cablecos/MSOs), NTT (2 divisions), China Unicom, Level 3, PCCW Global, and Google (which designs and deploys their own backbone + customer facing network along with a managed WiFi network for India Railways).  A few of the operator keynotes and panel sessions were from:

  • Ken Duell | AVP, New Technology Product Development & Engineering | AT&T
  • Shawn Hakl | Vice President | Verizon
  • Mansoor Hanif | Director of Converged Networks Research Lab | BT
  • Vijoy Pandey | Head of Engineering, Networking | Google
  • Geng Lin | CTO, Enterprise Network & Infrastructure Services | Google
  • Phil McKinney | President & CEO | CableLabs
  • Patrick Lopez | VP Networks Innovation | Telefónica (panel and keynote)
  • Andrew Dugan | CTO | Level 3 Communications (panel)
  • Lyle Bertz | Principal NFV/SDN Architect | Sprint
  • Klaus Martiny | Senior Program Manager | Deutsche Telekom (ETSI NFV ISG)
  • Hany Fahmy | AVP – Global Public Policy | AT&T
  • Jehanne Savi | Executive Leader, All-IP & On-Demand Networks Programs | Orange
  • Christos Kolias | Sr. Research Scientist & Principal | Orange
  • Francisco-Javier Ramón | Head of Network Virtualisation, GCTO | Telefónica
  • Travis Ewert | SVP – Network SW Development | Level 3 Communications
  • Ichiro Fukuda | Chief Architect, Infrastructure | NTT Innovation Institute
  • Kazuaki Obana | Executive Research Engineer | NTT DOCOMO
  • David Hughes | VP Engineering | PCCW Global
  • Shahar Steiff | AVP New Technologies | PCCW Global
  • Zheng Yi | Senior engineer of IDC network | China Unicom
  • Tetsuya Nakamura | Principal Architect | CableLabs

White Boxes Take Center Stage:

During the conference, quite a few network providers, including AT&T, Verizon and Telefonica, talked about open source software running on white boxes.  AT&T is preparing a US coast-to-coast trial, Verizon hinted that they would deploy white boxes soon, while Telefonica is committed to the Facebook organized Telecom Infrastructure Project (TIP) which is specifying “open hardware.”  In a blog post last June, Telefonica explained why it had joined TIP.

1.  AT&T’s Ken Duell, PhD said that AT&T had virtualized 34% of its network functions (via AT&T VNFs*) at the end of 2006 with a goal of 55% VNFs by the end of 2017 and 75% by 2020.  If so, this year would be the “tipping point” for AT&T’s virtualization of network functions as the majority of AT&T services would be delivered by VNFs.

* A Virtual Network Function (VNF) is often referred to as a “virtual appliance for networking.”  It replicates the functions of a specific type of physical network equipment via software running on a commodity compute server.  Examples include: virtual router, virtual firewall, virtual application delivery controller, virtual session border controller, etc.

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ONAP, previously described in this article, is an OS platform for managing and orchestrating network services. It was positioned as being complementary to VNFs.  Ken said both ONAP and VNFs would run on multiple white box configurations that provided closed loop control, self-service, and quick development of network applications (which would run on top of ONAP).

In AT&T’s forthcoming “coast to coast” white box trial there will be: three different chip vendors (Barefoot, Broadcom, and Intel); Network OS from Snaproute; and two ODMs (Agema and Edgecore).  Value added functions would use “closed loop control,” Duell said.  Please refer to AT&T White Box Trial illustration below.

Chart courtesy of AT&T

The white box switching and routing platform architecture is based on disaggregated hardware and software (courtesy of the Open Compute Project), a distributed network OS (dNOS), transition from closed (vendor proprietary boxes) to open networking (white box) environment, mix and match 3rd party control and management plane and VNFs though a common network data base.  Hardware and software are independently enabled by a hardware abstraction layer.  All of the above is depicted in the graphic below

Chart courtesy of AT&T

During the Q &A session, Ken noted that the scope of AT&T’s VNFs will be to grow new services, not to re-implement old one’s.  In particular, old legacy services (e.g. based on TDM) won’t have VNFs and customers using some of those legacy services will be encouraged to move to new packet services replacing them.

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Sidebar: AT&T wrote on the NFV website:

AT&T is on the leading edge in applying real-world SDN and Network Functions Virtualization (NFV) concepts to a carrier environment. The first of those deployments to launch, Network on Demand, allows customers to adjust their network capabilities on demand in nearly real time.

This network is supported by Domain 2.0, our supplier program, which will transform our network to a modern, open, cloud-based architecture. Domain 2.0 allows us to collaborate with a variety of vendors offering equipment to build this new architecture, based on NFV and SDN. We continue to seek out and welcome suppliers through an open and ongoing procurement process.  http://about.att.com/innovation/sdn

Note: AT&T last month said it tested an open source, white box switch carrying customer traffic.

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2.  Verizon’s Shawn Hakl  said incumbent network providers have put a large amount of dollars into new VNF and Software Defined (SD) infrastructure (including SD-WANs), which penalizes upstart providers that don’t have the money to invest in those areas.  For example, Verizon built an “orchestrator of orchestrator’s” to support its network virtualization technology.

He said that VNF innovation would necessitate multiple VNFs per box, micro-services (undefined), orchestration, and customized service(s) per customer.  Shawn claimed that “customers want true white boxes – commercial off the shelf hardware which could be re-purposed (for different services or applications).  He said that Verizon’s move to white boxes aligns with the companies long term “cloud vision” and that Bring Your Own Hardware (BYOH) is coming.”  However, he did not say when and was not at all definitive as Ken Duell of AT&T (as described above).

During a Q & A, Hakl would not disclose which white box vendors’ equipment would be included but said it will be a “mix of traditional and non-traditional suppliers.  Customers differentiate between white box and gray box solutions. We’ve firmly seen customers are looking for standard off-the-shelf hardware, and they are willing to wait for this,” he said. “They perceive their risk to be really low.  The people who have that are going to clean up,” he added.

Backgrounder:   In 2015, Verizon introduced a software-defined wide-area network (SD-WAN) service. A year later, it began applying network functions virtualization (NFV) to its enterprise customers. Next up: a white-box approach employs a cloud model to deliver services.

It’s interesting to note that with all the talk about a “cloud vision,” Verizon has exited the cloud computing business after acquiring Teramark for their data centers (now divested) to enable them to be a viable cloud service provider.  Verizon recently sold its cloud and managed hosting services to IBM in a deal that also includes further collaboration on networking and cloud services. The companies said the deal will allow each to “fully realize the benefits of their cloud computing investments.”

Conclusion:

Apparently Verizon and AT&T believe a white box solution enables service providers to deliver services on-demand, quickly, and efficiently. However, there’s a lot more systems integration involved as a network OS, various VNFs and a Management and Network Orchestration (MANO) software entity must be included to make NFV a commercial reality.  Also note that there are no standards for exposed interfaces, APIs or inter-layer interfaces (e.g. between a VNF and MANO).  In fact, one of the lunchtime roundtable discussions at Wednesday’s NFV Congress was whether or not telco’s could leverage open source MANO?  That remains to be seen.

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NFV Specification Status:

While NFV implementations are now being specified by Open Source projects like OPNFV (LINUX Foundation) and OSM (ETSI Open Source MANO), the foundation work for NFV was done by the ETSI Industry Specification Group for Network Functions Virtualization (ETSI ISG NFV).

That ETSI  group was responsible for developing requirements and a reference architecture for virtualization for various functions within telecom networks. ETSI ISG NFV launched in January 2013 when it brought together seven leading telecoms network operators, including: AT&T, BT, Deutsche Telekom, Orange, Telecom Italia, Telefonica, and Verizon. These companies were joined by 52 other network operators, telecoms equipment vendors, IT vendors, and technology providers to make up the ETSI ISG NFV. Not long after, the ETSI ISG NFV community grew to over 230 individual companies, including many global service providers.  Please visit various references below:

ETSI ISG NFV References:

NFV Technology Page (information): http://www.etsi.org/nfv

NFV Portal (working area): http://portal.etsi.org/nfv

NFV Proofs of Concept (information): http://www.etsi.org/nfv-poc

NFV Plugtest (information & registration): http://www.etsi.org/nfvplugtest

Open Area-Drafts: http://docbox.etsi.org/ISG/NFV/Open/Drafts/

Issue tracker: http://nfvwiki.etsi.org/index.php?title=NFV_Issue_Tracker

https://www.layer123.com/nfv-webcast-mle123-live/

 

 

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