TBR report predicts U.S. and European operators to lead way in NFV and SDN investments
Spending on network virtualization technology including software-defined networking and network functions virtualization is expected to hit $157 billion by 2020, driven by telecom operators based in the U.S. and Europe.
In a new report, Technology Business Research predicts the NFV and SDN market to post a 113.8% compound annual growth rate between 2014 and 2020, with three-fourths of that yearly spend coming from a handful of operators, including AT&T, Verizon Communications, CenturyLink, BT, DT, Orange and Telefónica. TBR did add that it expects Asia-Pacific operators to ramp up spending later in the forecast period.
Central and Latin America along with the Middle East and Africa are expected to be “laggards” in the NFV and SDN space, though TBR did single out América Móvil, Telefónica and Etisalat as exceptions across those regions.
TBR noted those carriers driving the market will garner a head start in reaping the benefits of NFV and SDN, but also will pave the way for the laggards to join the market as the technology matures.
“A small group of tier-one operators is leading the charge in implementing NFV and SDN,” said Chris Antlitz, a telecom senior analyst at TBR. “They are driving a significant amount of development in the NFV and SDN ecosystem and are pushing the vendor community to rapidly adapt to this new architectural approach to networks. NFV and SDN spend volume is forecasted to ramp up in 2017, at which time use cases will be more defined and the cost benefits of using the technologies will be more apparent. This will prompt holdout operators to jump on the bandwagon and aggressively pursue transformation with these technologies to avoid getting left behind.”
Initial spending is targeting “domains that are relatively easy to convert first,” which TBR said include routing and switching, optical transport, evolved packet core and IP multimedia subsystems. More complicated processes are expected to be hit last, including service delivery platforms and radio access layers.
While segment spending is expected to show strong growth, TBR did note NFV and SDN spend would most likely come at the expense of traditional infrastructure equipment.
“There will also be some external [operating expense] spend incurred as operators lean on vendors for maintenance, professional and managed services to support, integrate and operate their software-mediated environments,” the firm added.
A report earlier this year from IHS predicted the global market for NFV hardware, software and services is set to surge from $2.3 billion this year to $11.6 billion in 2019. Revenue from outsourced services geared toward NFV projects is expected to post a 71% compound annual growth rate from 2014 to 2019, with revenue from software-only video content delivery network functions for managing and distributing data forecast to grow 30-fold between 2015 and 2019.
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