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NFV challenges are causing a ‘market pause’, but operators must not disengage completely

Caroline Chappell Research Director

"We are confident that the pause in some operators’ investment in NFV is temporary, but they must demonstrate greater commitment to the success of NFV to survive this radical market transition."

NFV market pause banner

Operators are still taking their first steps on the long and difficult journey towards network function virtualisation (NFV). A few operators are pressing ahead with the transition, but most are daunted by the multiple challenges posed by NFV, and some are pausing investment while they wait for clearer direction from standardisation bodies and their peers. Many operators have not grasped that there may not be NFV ‘standards’ and ‘blueprints’ to follow in a software-defined world. Successful companies will have the courage to develop their own paths towards NFV, underpinned by an exceptional level of cross-functional collaboration, leading-edge skills in software innovation and a pragmatic approach to real-world NFV deployments.

Operators are still deterred from deployment by the challenges of NFV

Progress towards NFV has been slow or (in many cases) imperceptible, despite the compelling benefits the technology promises – a new level of business agility, lower operational costs and the ability to compete against cloud-based companies. We have detected a collective pause in the exponential growth of this market from its small base this year. Operators are consolidating their achievements thus far and assessing the next round of challenges. We do not expect growth in NFV to pick up significantly for another 2 years. Operators need time to absorb early lessons, take strategic technology decisions and carry out the organisational and cultural changes that are vital to the technology’s success.

Figure 1: Network function virtualisation revenue, worldwide, 2015–20201

Network function virtualisation revenue, worldwide, 2015–2020

Three major challenges have overshadowed adoption of NFV from the outset. Resolution of these challenges will require extraordinary effort and commitment.

NFV involves a variety of still-evolving technologies

NFV requires knowledge of multiple rapidly-evolving technologies, most of which are alien to telecoms operators. Operators that can draw on enterprise/IT divisions with experience of cloud will have an advantage in implementing NFV, but even they are finding it difficult to keep up with the pace of change. Cloud technologies also need to be implemented holistically, rather than sequentially or only in part, which compounds the challenge.

NFV operations are uncharted territory for operators

NFV operations differ fundamentally from classical network operations. Operators must borrow heavily from IT in designing their operations, but make telecoms-specific adaptations. The pioneers of NFV operations are following their own paths. They are developing proprietary functionality and ‘pivoting’ regularly to address their individual concerns. This is causing market fragmentation and uncertainty for both vendors and other operators that want ‘standard’ blueprints to follow.

Transforming organisational culture is the hardest part of the NFV transition

Change on the scale of NFV threatens careers and familiar ways of working, so professionals at the highest levels within many operators are finding excuses not to engage with it.  They believe that NFV can currently be ignored, in favour of conventional cost reduction programmes and new network roll-out based on physical devices with compelling price tags. This lack of C-level sponsorship for NFV is a serious threat to change within operator organisations.

Ignoring NFV is a high-risk strategy

Operators that refuse to rise to the challenges of NFV risk being bypassed by competitors with the competence to apply cloud technologies to the network. Operators may have halted investment, waiting for clearer direction from the market, but technological innovation will not stop. Virtualisation is a pervasive industrial trend. NFV democratises networking technologies and lowers barriers to telecoms-market entry for web-scale companies, large enterprises and new start-ups. Leading proponents of NFV among operators anticipate an unrecognisable networking landscape in 2020, due to developments in the technology that will by then have become mainstream. These developments include programmable, elastic IP/optical networks, virtualised core routers, mobile cores running on Raspberry Pis, cloud-RANs with baseband units located hundreds of miles from cell sites, and granular, container-based L4-7 network functionality, which will be consumable on-demand. These innovations will enable new, disruptive business models and services. Operators must begin the difficult transformation to NFV now or they will be left even further behind as network innovation accelerates.

Stamina and determination throughout an organisation are essential for success in NFV

It takes courage and resolve to tackle NFV and this must be present from the highest to the lowest levels within an organisation. Operators need exceptional levels of organisation and co-ordination across their businesses to succeed in NFV. Telefónica’s joined-up messaging, open lines of communication between executives charged with NFV, cloud, 5G and operations, and its strong organisational vision for future network architecture are impressive in this respect. Other operators successfully implementing NFV similarly emphasise collaboration across functional boundaries and the ability to agilely pivot their organisations.

Software mastery is key to virtualisation and NFV leaders have stressed the necessity of advanced software skills in-house. Examples of this trend are AT&T’s creation of ECOMP, Telefónica’s founder membership of Open Source MANO and investment by other operators in innovative software start-ups and cloud companies to gain access to DevOps/agile software development skills.

Operators also need to be pragmatic. Leading NFV practitioners began the process slowly with an implementation they could easily justify, such as a compelling service or a single function reaching its end of life. They did not necessarily roll out their target NFV architecture immediately, although this consideration informed their deployment approaches. Such early exercises provide valuable, hands-on learning and the confidence to address the next set of challenges. Telefónica’s Unica architecture is not yet completely ready, but that has not stopped the company from launching virtual network services, SD-WAN and cloud-VPN trials for small and medium business customers.

We are confident that the pause in operators’ investment in NFV is temporary, caused by the realisation of many that NFV requires a much more complex and far-reaching transformation than they first thought. The trailblazers in NFV reached this conclusion over 2 years ago and have strengthened their commitment to maintain momentum. Some less-prepared operators are not currently showing the same level of commitment, but NFV is not going away, not least because a remarkable amount of progress towards it has already been made. However, not all today’s household operator names will survive this radical market transition unless they demonstrate greater commitment to the success of NFV.

1 For further details, see Analysys Mason’s Report Software-controlled networking: worldwide forecast 2016–2020