NFV/SDN spend is forecast to grow at a 94.3% CAGR from 2016 to 2022 to over $168 billion as operators work through internal challenges and as vendors increasingly align with the market shift, according to Technology Business Research (TBR).
A group of 20 to 25 Tier 1 operators have driven the vast majority of spend in the NFV/SDN market thus far, and Tier 1 operators are expected to remain the key investors in the technologies through the forecast period, with Tier 2 and 3 operators joining en masse in the later years, according to TBR’s latest NFV/SDN Telecom Market Forecast.
Not only will the number of operators adopting NFV/SDN increase through the forecast period, but the scope of transformations will also increase, providing further fuel to drive the rapid proliferation of this market, said TBR telecom senior analyst Chris Antlitz.
“Though technology interoperability, human resource challenges and operator-vendor disagreements, among other issues, have limited adoption of NFV/SDN technologies thus far, the ecosystem will work through these challenges and the market will scale during the forecast period,” said Antlitz. “Operators are under pressure to transform their businesses to improve financial results and remain competitive in the digital ecosystem. This pressure will push operators to embrace network virtualization because the traditional way of doing business in the telecom industry is not optimized for the data-driven digital economy, requiring operators to adapt or fade from relevancy.”
TBR believes the telecom industry will begin to see meaningful and measurable cost savings from the use of NFV/SDN starting in 2021. The spend reduction will stem predominantly from lower hardware and hardware-attached services spend, thanks to the use of commodity solutions. Savings will show up first in preliminary use-case areas such as in the customer premise equipment (CPE), evolved packet core (EPC), IP Multimedia Subsystem (IMS), content delivery network (CDN) and SDN domains.
One of the key reasons cost savings will not materialize sooner at an aggregate level is because operators need to fully transition domains over to NFV or SDN and retire legacy infrastructure. At present, operators are using stand-alone NFV/SDN and legacy environments concurrently.