SDN and NFV Strategies: Global Service Provider Survey March 27, 2014

Transcription

1 SDN and NFV Strategies: Global Service Provider Survey March 27, 2014 TABLE OF CONTENTS TOP TAKEAWAYS... 1 INTRODUCTION... 2 Market Background...2 Key Definitions...4 Methodology and Demographics Overview...4 SDN AND NFV EVALUATION TIMING... 5 SDN AND NFV DEPLOYMENT DRIVERS AND BARRIERS... 6 SDN Deployment Drivers...6 SDN Deployment Barriers...8 NFV Deployment Drivers...9 NFV Deployment Barriers...10 NFV USE CASES Deployment Timing for NFV Use Cases...12 NFV Use Cases: Most Important for Revenue Generation...14 NFV Use Cases: Most Important for Opex Improvements...15 NFV Use Cases: Most Important for Capex Reduction...16 VIRTUALIZED NETWORK FUNCTIONS: WHERE CARRIERS PUT THEIR NFV SERVERS SDN TARGET DOMAINS SDN Deployment Timing: Targeted Network Domains...18 SDN Network Domains: Most Important for Revenue Generation...20 SDN Network Domains: Most Important for Opex Improvements...21 SDN Network Domains: Most Important for Capex Reduction...22 CARRIERS IDENTIFY SDN/NFV APPLICATIONS FOR PRODUCING NEW REVENUE SUPPLIERS FOR SDN AND NFV SOFTWARE AND HARDWARE PRODUCTS Preferred SDN Product Supplier Types...24 Preferred NFV Product Supplier Types...25 i

2 TOP SDN SUPPLIERS Perceived Top SDN Vendors...26 SDN Vendors Installed and Under Evaluation...28 TOP NFV SUPPLIERS Perceived Top NFV Vendors...29 NFV Vendors Installed and Under Evaluation...31 BOTTOM LINE METHODOLOGY AND DEMOGRAPHICS Respondents Are Influential in SDN and NFV Planning and Strategy Formation...33 Respondents Control 51% of the World s Telecom Capex...33 Respondent Service Provider Types and Regional Distribution...35 ii

3 LIST OF EXHIBITS EXHIBIT 1 WHEN SERVICE PROVIDERS ARE EVALUATING SDN AND NFV... 5 EXHIBIT 2 NEARLY ALL PLAN SDN AND NFV DEPLOYMENTS... 6 EXHIBIT 3 SDN DEPLOYMENT DRIVERS... 8 EXHIBIT 4 SDN DEPLOYMENT BARRIERS... 9 EXHIBIT 5 NFV DEPLOYMENT DRIVERS EXHIBIT 6 NFV DEPLOYMENT BARRIERS EXHIBIT 7 DEPLOYMENT TIMING FOR NFV USE CASES EXHIBIT 8 MOST IMPORTANT NFV USE CASES FOR REVENUE GENERATION EXHIBIT 9 MOST IMPORTANT NFV USE CASES FOR OPEX IMPROVEMENTS EXHIBIT 10 MOST IMPORTANT NFV USE CASES FOR CAPEX REDUCTION EXHIBIT 11 LOCATION OF SERVERS RUNNING VIRTUALIZED NETWORK FUNCTIONS (VNFS) EXHIBIT 12 TIMING OF SDN DEPLOYMENTS IN TARGETED NETWORK DOMAINS EXHIBIT 13 MOST IMPORTANT SDN NETWORK DOMAINS FOR REVENUE GENERATION EXHIBIT 14 MOST IMPORTANT SDN NETWORK DOMAINS FOR OPEX IMPROVEMENTS EXHIBIT 15 MOST IMPORTANT SDN NETWORK DOMAINS FOR CAPEX REDUCTION EXHIBIT 16 IMPORTANT SDN/NFV APPLICATIONS FOR PRODUCING NEW REVENUE EXHIBIT 17 SOURCES TO PURCHASE SDN PRODUCTS EXHIBIT 18 SOURCES TO PURCHASE NFV PRODUCTS EXHIBIT 19 TOP SDN PRODUCT VENDORS RESPONDENT PERCEPTION EXHIBIT 20 SDN VENDORS INSTALLED AND UNDER EVALUATION EXHIBIT 21 TOP NFV PRODUCT VENDORS RESPONDENT PERCEPTION EXHIBIT 22 NFV VENDORS INSTALLED AND UNDER EVALUATION EXHIBIT 23 STRONG RESPONDENT INFLUENCE IN SDN/NFV STRATEGY AND PURCHASES iii

4 EXHIBIT 24 RESPONDENTS REPRESENT A SIGNIFICANT PORTION OF 2012 WORLDWIDE CAPEX AND REVENUE EXHIBIT 25 RESPONDENT SERVICE PROVIDER TYPES AND GEOGRAPHIC DISTRIBUTION iv

5 TOP TAKEAWAYS Service providers around the globe are moving toward SDNs (software defined networks) and NFV (network function virtualization), as shown by this survey of worldwide service providers that control over 51% of global telecom capex and 47% of revenue. Providers believe that SDNs and NFV are a fundamental change in telecom network architecture that will deliver benefits in new services and revenue, operational efficiency, and capex savings. Top drivers for service provider SDN/NFV investments and deployments are: Service agility and quick time to revenue A global view of network conditions across different vendors equipment, network layers, and technologies (routers, switches, DSLAMs, mobile core, mobile backhaul, etc.) The ability to simplify provisioning of services and virtualize their networks through a consolidated management plane, obviating the operational tedium of utilizing various vendor-specific management systems Key findings and recommendations: 29% of respondents are currently implementing SDNs, with another 52% planning to evaluate SDNs by the end of In fact, all major operators are either now deploying SDN or plan to within the next few years. Many carriers in 2014 are moving from their proof of concept (PoC) investigations/evaluations for SDN and NFV to working with vendors on the development and productization of their software that will become the basis for commercial deployments. Operators want SDNs/NFV in most parts of their networks: 84% of SDN respondents named MPLS backbone core and cloud services offered as an SDN target domain, followed by 81% targeting multi-layer transport (IP/MPLS + optical); other prime targets are metro aggregation and optical transport. Service providers are targeting many more than these top 5 target use cases (see discussions/definitions later) for NFV in : Business ve-cpe Service chaining vims core vcdns vpe Telecom equipment vendors and data center network manufacturers are well positioned to take considerable market share in sales of SDN/NFV as they top the list of sources for these products, with virtually all respondents saying they are likely to buy from them. Carriers expect to eventually reduce spending on telecom hardware/software; if this happens, a good way for vendors to increase revenue is by beefing up integration services to meet their customers needs and expectations. 1

6 The top 4 SDN targeted network domains for deployment by are: Within DCs Cloud services to customers Between DC Operations and management INTRODUCTION Market Background From its academic beginnings at Stanford University in 2005 to practical applications in data centers and telecommunications carrier networks during the past 4 years, SDN (software defined networks) shows the potential to solve significant operational problems. The early successes by Google in data centers and by NTT in the carrier environment have inspired service providers around the world to invest time and effort into laboratory proof of concept (PoC) projects for specific SDN target network domains and use cases using the inter-related partner NFV (network function virtualization). Our research indicates that 2 primary factors drive service providers to SDN and NFV: Service agility that results in quicker time to revenue: Service providers can quickly add, drop, and change the services and applications they offer by using SDN control software and NFV virtualized network functions on virtual machines (VMs) on commercial servers (e.g., Intel x86) rather than having to invest in new, specialized network hardware to deploy each new service. With these capabilities, they can cost-effectively test new services on a small group of customers before expanding for wider commercial availability, modify the service and give it another try, or simply scrap it without too great an investment if it s not working out. Global view of the network for provisioning across multi-vendor networks and multiple layers: Rather than relying on each vendor s management system to view the status of traffic and equipment in their networks, carriers want to use SDN to make all types of equipment from various vendors visible, manageable, and controllable so that services and virtual networks can be easily created and deployed across the entire network. The fine-grained control offered by SDN will enable carriers to run their networks hotter and minimize the amount of equipment they need, thus reducing capex costs. In addition, the visibility and management capabilities of SDN will give carriers a better view of what individual subscribers or groups of subscribers are doing and the opportunity to provide them with a higher quality of experience based on subscription level, all on an automated basis. For the most part carriers are starting small with their SDN and NFV deployments and focusing on only parts of their network, which we call contained domains, to ensure they can get the technology to work as intended. And, we see in the results of our survey that though momentum is strong, it will still be many years before we see bigger parts or a whole network that is controlled by SDNs. SDN and NFV represent fundamental changes to carrier networks. Here is a look at where SDN and NFV were last year and how I believe they will evolve over the course of the next 6 years: 2

7 2013, the POC year: Last year we saw a lot of work among operators, manufacturers, and software providers, who were seeking answers to questions about deployment of SDN and NFV: How complicated is deployment? What could they do with these new technologies? At what costs? Can they get to revenue quickly with new services? There were a lot of POC tests in carrier labs to test NFV in the use of vepc, vims, vgilan, and revenue-impacting ve-cpe (enterprise) and vcpe (consumer). The benefit of running network functions on virtualized servers was demonstrated in experiments with scaling traffic out and in. In the lab, operators discovered that they were able to run VNFs (virtual network functions) on standard servers (typically Intel) and could increase the number of VMs (virtual machines) and physical servers in use as the traffic increased and then reduce accordingly as demand subsided. 2014, from the lab to field trials: This year, vendors are bringing their products-to-be WIP (work in progress) software to operator labs in order to refine it. This software will begin moving to field trials this year. I saw a lot of this software running in demos in vendor and operator stands at MWC it s easy to see that the software is much more real than in We will see a few operators move to actual commercial deployments, mostly specific NFV use cases but only a few. 2015, the beginning of commercial deployments: The successful field trials of 2014 move to commercial deployments in 2015, still most likely on a limited basis, as operators put 1 or 2 use cases to the test under real world conditions that is, in their live networks. The cycle continues with other use cases: lab trials this year lead to field trials next year and then to some commercial deployments. Operators choose different use cases to test in different parts of their network as a precursor to commercial deployments. Our 2013 SDN-NFV survey shows the plans/timing of targeted SDN network domains and NFV use cases (see SDN and NFV Strategies: Global Service Provider Survey, July 2013; a study of operators who control 53% of the world s telecom capex). 2016, widespread commercial deployments: Each operator will move at its own pace, with its chosen NFV use cases and SDN network domains. I expect that the process from lab to commercial readiness will take a long time, but within the next 2 years, carriers will select contained domains to deploy SDN and NFV , even more commercial deployments: As operators become more comfortable with their initial NFV use cases and SDN network domains, they ll continue the process POC to lab trial to field trial to commercial deployment for an expanded variety of use cases in different domains of their networks. 3

8 Key Definitions For this survey, we define SDN as a method to make networks programmable in 2 main ways: Abstract and separate a control plane from the data plane using a protocol such as OpenFlow, BGP-TE, or PCE Provide network APIs that can be used by applications to obtain network state or information, control traffic flows, or request services (e.g., ALTO) NFV (network function virtualization) moves functions usually embedded in network hardware (such as routers, DPI, EPC, and firewalls) into software that can run in a VM on standard servers. These servers could be located in routers, next to routers in the same CO, in nearby DCs, or instantiated in various locations in the network as required without the need for installation of new network equipment. Many operators are planning to deploy NFV now since it is generally easier and many use cases involve new revenue. Methodology and Demographics Overview In February and March 2014, we interviewed 31 service providers that have evaluated or plan to deploy SDN or NFV projects or both. Respondents control 51% of worldwide telecom capex and 47% of worldwide telecom revenue. Respondents have detailed knowledge of their companies strategies and plans for SDNs and/or NFV and are influential in purchase decisions for these products. Please see Methodology and Demographics for details on the respondent sample. The rest of this report discusses the data from the 31 and 29 respondents who plan to evaluate SDN and NFV, respectively. 4

9 SDN AND NFV EVALUATION TIMING To qualify for this survey, operators had to be deploying or evaluating SDN or NFV. We divide the sample into those qualifying by evaluating SDNs by 2016 (all 31 of the respondents is the SDN group, who answered all the SDN questions) and those qualifying by evaluating NFV by 2016 (29 of the respondents, who answered all of the NFV questions). For some questions, we show the results of both the SDN group and the NFV group and show the SDN group with n=31 and the NFV group with n=29 (for example, in the next Exhibit). Currently, 29% of the SDN group are implementing SDN, and 34% of the NFV group are implementing NFV, with another 52% saying that they re evaluating SDN and 48% NFV before the end of Exhibit 1 When Service Providers are Evaluating SDN and NFV SDN n=31, NFV n=31 60% Percent of Respondents 40% 20% 32% 29% 52% 48% 0% Currently implementing Evaluate by end of % Evaluate by end of % 3% Evaluate by end of 2016 SDN NFV 5

10 Nearly every operator we talked to was likely to deploy SDNs or NFV in some aspect of their network at some point. Exhibit 2 Nearly All Plan SDN and NFV Deployments SDN n=31, NFV n=29 100% Percent of SDN and/or NFV Respondents 80% 60% 40% 20% 97% 93% 0% Will deploy SDN Will deploy NFV SDN AND NFV DEPLOYMENT DRIVERS AND BARRIERS In this survey, all respondents indicated that they were evaluating and planning to deploy SDN, and all but 2 said they were considering or planning to deploy NFV. Every new technology is driven by certain forces, and some factors inhibit adoption of the new technology. It is important for operators and hardware/software vendors alike to understand the drivers and barriers on an industry-wide basis so that collective investments and development activities can focus on solving the right problems and avoiding a paper-chase down unattractive avenues. SDN Deployment Drivers SDN respondents rated factors in evaluating SDNs on a scale of 1 to 7, where 1 means not a driver, 4 means somewhat of a driver, and 7 means a strong driver. The next chart shows the percentage of respondents rating each factor 6 or 7, or a driver. 6

11 Much like last year, the top 3 drivers we found in this survey revolve around service agility and revenue: automating service provisioning, introducing new services quickly for faster time to revenue, and service automation. These were followed by the desire to automate network provisioning and orchestrate multidomain, multi-layer, and/or multi-vendor networks. Not surprisingly, just like last year, far fewer operators were concerned about reducing router and switch costs. These rankings makes sense because if carriers have tools to view the entire network, including subscriber behavior and traffic conditions and how the various segments and nodes are performing, they can then command the network to run more efficiently and deliver the appropriate Quality of Experience (QoE) for high-paying and other customer sets more via automated policy tools. A fair number 42% of SDN respondents indicate that multi-layer router/optical SDN is a driver, and as shown in Exhibit 12, 81% plan to deploy a multilayer transport SDN at some point. Those concerned with DCs loudly tout that a main goal of SDNs is to reduce the use of high-cost routers by using SDN-controlled, commodity-priced Ethernet switches. Although 35% of SDN respondents indicated lower cost routers/switches is a driver for their SDN deployment, this factor is rated lower than other drivers. In our conversations, many operators said this is a nice goal, and desirable, but they don t expect it to be an issue over the next few years. Service providers just don t see themselves replacing their edge or core routers as there are many cases where in-line control plane is required; for example, at heavy traffic points and at any point where revenue-bearing customer traffic might experience degraded performance. Instead, service providers believe cost savings will be derived from better use of existing equipment. 7

12 Exhibit 3 SDN Deployment Drivers n=31 Automate service provisioning Introduce new services quickly for faster time to revenue 68% 68% Service automation 68% Automate network provisioning Orchestration over multi-domain, multi-layer, and/or multi-vendor 58% 61% Drivers E2E network mgmt/ctrl E2E service mgmt/ctrl 48% 52% Realtime traffic optimization 45% Multilayer router/optical SDN 42% Network virtualization NaaS 39% Modify services faster 35% Reduce router/switch cost 35% 0% 20% 40% 60% 80% Percent of SDN Respondents Rating 6 or 7 SDN Deployment Barriers Next, SDN respondents rated factors in evaluating SDNs on a scale of 1 to 7, where 1 means not a barrier, 4 means somewhat a barrier, and 7 means a strong barrier. The next chart shows the percentage of respondents rating each factor 6 or 7, or a barrier. 8

13 The highest vote for barriers was only 45% of respondents less than half. Last year, the top 3 barriers were each rated highly by over 60% of operators. This significant change shows that the industry is becoming more comfortable with SDN and that they re going to deploy it somewhere in their network. Operators have invested a lot of time over the past year learning about SDN, and as a result, they feel less intimidated about real or perceived barriers to deployment. SDN is obviously maturing because those things that were barriers before are becoming less so, according to operators. For example, in 2013 incomplete standards, ROI, and finding and training staff were at the top with 62%, but these barriers have reduced dramatically in just a year s time. Also, last year immature products were a barrier for 57%, but this year only 45% consider it a barrier if products aren t carrier grade. Either these issues are no longer top of mind or, after learning more, operators don t see them as that big of barriers at all. Exhibit 4 SDN Deployment Barriers n=31 Products not carrier grade 45% No multivendor controller Integrating SDN into existing networks Incomplete standards 42% 42% 45% Barriers OSS/BSS for SDN Unknown ROI 39% 42% Unknown TCO 39% Finding/training staff Choosing SDN controller/ orchestration 19% 19% Selecting domain for SDN 0% 20% 40% 60% 80% Percent of SDN Respondents Rating 6 or 7 NFV Deployment Drivers In this question, NFV respondents rated factors in evaluating NFV hardware and software on a scale of 1 to 7, where 1 means not a driver, 4 means somewhat of a driver, and 7 means a strong driver. The next chart shows the percentage of respondents rating each feature 6 or 7, or a driver. 9

14 86% of NFV respondents believe that scaling services up or down quickly is a driver to invest in NFV, and related to this is introducing new services for quick revenue by using software (69% of respondents). The basic premise of NFV using standard commercial servers vs network equipment follows at 62%. Exhibit 5 NFV Deployment Drivers n=29 Scale services up or down quickly 86% Use software for quick revenue 69% Use commercial servers, not network equipment 62% Drivers Operational efficiencies Multi-tenancy 45% 59% Realtime network optimization 34% Save energy consolidating workloads 28% VNFs from small players 14% 0% 20% 40% 60% 80% 100% Percent of NFV Respondents Rating 6 or 7 NFV Deployment Barriers NFV respondents rated factors in evaluating NFV hardware and software on a scale of 1 to 7, where 1 means not a barrier, 4 means somewhat of a barrier, and 7 means a strong barrier. The next chart shows the percentage of respondents rating each feature 6 or 7, or a barrier. 10

15 Last October, we noted that at various industry conferences operators were expressing optimism about their SDN and NFV deployments, but they still had concern about the back office and potential problems with their OSS/BSS systems (see our November 5, 2013, CRS note, Good News and Bad (Homburg) News at the SDN & OpenFlow World Congress 2013). Though we didn t include the back office as one of the barriers in last year s survey, it became clear that this was one of the major hurdles operators had to jump to ensure success of their SDN and NFV deployments. Not surprisingly, based on what we have been hearing in conversations with operators, OSS/BSS for NFV was the top deployment barrier mentioned by 69% of NFV respondents. So it seems the biggest concern is not about the NFV technology itself but about how it will integrate with other more complicated aspects of a provider s operations. Take, for example, what AT&T s John Donovan has noted in presentations about Domain 2.0: the company has more than 1,000 OSS/BSS applications to decommission as it cleans up and modernizes its back office to facilitate the move to SDN and NFV. In last year s survey, finding and training staff was one of respondents biggest barriers, but this year it has dropped to just 28%. This is likely because operators are learning more about SDN and NFV, and the more they learn about it, the less they fear it. Engineers have had more time to explore SDN and NFV in PoC projects in their labs and as a result are becoming more comfortable with it. Exhibit 6 NFV Deployment Barriers n=29 OSS/BSS for NFV 69% Integrating NFV into existing networks 38% Products not carrier grade 34% Incomplete standards 34% Barriers Finding/training staff Unknown TCO 28% 28% Unknown ROI 24% CIO-CTO responsibility splits 17% Selecting NFV use cases 3% 0% 20% 40% 60% 80% 100% Percent of NFV Respondents Rating 6 or 7 11

16 NFV USE CASES The network industry is very interested in how NFV will be deployed, the use cases, and where in the network operators will make their initial investments. As you ll see in this section, a majority of operators are clear about where they intend to deploy NFV and how these solutions will be used. Deployment Timing for NFV Use Cases Some of the earliest deployment use cases in the timeframe of NFV will be for business ve-cpe (52%) and service chaining (45%). See the next exhibit, which is sorted by popularity and timing. Service chaining is a horizontal use case utilized when deploying a different set of VNF services for different customer sets. We expect that almost every NFV deployment will involve service chaining. vcdns were popular last year, as they are this year, tied for 4th with vpe (and vims core is 3rd). vcdns are relatively easy to implement using NFV technologies. The virtual edge router, known as a Provider Edge router or vpe, is a big winner in this list, with 69% indicating they will deploy. The PE sits at the point of the IP edge which is the point in an operator network where IP VPNs, CDNs, and other IP services are delivered via the access network to customers. Regarding vims core for wireless, 19% of operators are wireline only, so this is not something that all respondents would be using. Many mobile operators are planning to use vims core for VoLTE deployment, and most of these operators will also deploy mobile core/vepc, which 59% of NFV respondents plan to deploy by 2016 or later. 41% of NFV respondents will use NFV for vran, which involves the separation of remote radio head antennas from the baseband units (BBU), and deploying software VNF versions of the BBUs. We designed this list of NFV use cases, with a few minor split outs, to correspond with the 9 use cases outlined in the ETSI NFV Use Cases document. 12

17 Exhibit 7 Deployment Timing for NFV Use Cases n=29 Business ve-cpe 52% 28% 21% Service chaining 45% 34% 21% vims core 34% 34% 31% vcdns 31% 52% 17% NFV Use Cases vpe vnpaas Consumer home environment 17% 21% 31% 38% 41% 41% 31% 38% 41% Mobile core, vepc 14% 45% 41% vbng 14% 28% 59% vran 3% 38% 59% Consumer fixed 0% access 41% 59% 0% 20% 40% 60% 80% 100% Percent of NFV Respondents or later/ timing TBD Won't deploy/ don't know 13

18 In the next 3 sub sections, we look at the NFV use cases that carriers consider most important for (1) revenue generation, (2) opex improvements, and (3) capex reduction. Respondents chose their top 3 use cases for each of (1), (2), and (3). NFV Use Cases: Most Important for Revenue Generation In terms of generating revenue, the top 3 were business ve-cpe, the clear winner with 62% (of NFV respondents choosing it in their top 3 NFV use cases for revenue generation), service chaining, and vnpaas. 52% of NFV respondents indicated service chaining, a horizontal function of chaining NFV services. 41% cited vnpaas, or virtual network platform as a service. This use case enables operators to sell slices of its network at a time so that a customer can get a virtual network with all the SLAs, bandwidth, and duration they are accustomed to with a physical network. About one third mentioned consumer home environment is ripe for revenue production with NFV. Exhibit 8 Most Important NFV Use Cases for Revenue Generation n=29 Business ve-cpe 62% Service chaining 52% vnpaas 41% Consumer home environment 31% NFV Use Cases vpe vcdns Consumer fixed access Mobile core, vepc 7% 7% 17% 24% vran 7% vbng 3% vims core 3% 0% 20% 40% 60% 80% Percent of NFV Respondents 14

19 NFV Use Cases: Most Important for Opex Improvements In addition to revenue generation (above), more NFV respondents again included business ve-cpe among their top 3 NFV use cases for opex improvements as ve-cpe will enable operators to improve service agility to business. Mobile core/vepc was 2 nd, followed by service chaining and vims core, which are of interest to operators with mobile services. vpe, or virtual provider edge router, which operators expect to use to deliver IP VPN services, is also seen as enabling opex improvement. Exhibit 9 Most Important NFV Use Cases for Opex Improvements n=29 Business ve-cpe 52% Mobile core, vepc 45% Service chaining 34% vims core 31% NFV Use Cases vpe Consumer home environment vcdns 24% 24% 31% Consumer fixed access 14% vbng 14% vnpaas 14% vran 7% 0% 20% 40% 60% Percent of NFV Respondents 15

20 NFV Use Cases: Most Important for Capex Reduction For capex reduction, more NFV respondents again included business ve-cpe (48%) in their top 3 NFV use cases for capex reduction, followed by mobile core/vepc and vims core, and then vcdns and vran. The 4th-place ranking of vcdns is somewhat surprising in terms of use for capex reduction as we expected it to be higher for opex improvement. However, vcdns will enable to operators to buy less heavy backbone routers and optical equipment required to carry video and web pages, so its ranking here makes sense. Exhibit 10 Most Important NFV Use Cases for Capex Reduction n=29 Business ve-cpe 48% Mobile core, vepc 38% vims core 31% NFV Use Cases vcdns vran Consumer home environment vpe 28% 28% 24% 21% vnpaas 17% Service chaining 14% vbng 14% Consumer fixed access 0% 20% 30% 40% 50% Percent of NFV Respondents VIRTUALIZED NETWORK FUNCTIONS: WHERE CARRIERS PUT THEIR NFV SERVERS Virtualized network functions or VNFs are software that runs on servers. The basic principle of NFV is to move a network function that traditionally runs on specialized network hardware (DPI, firewall, etc.) and instead deploy it as software that can be run on any server. In this question, we asked about the location of the servers executing the VNFs. 16

21 The results are not surprising: 80% to 82% of NFV respondents plan (at some point in time) to deploy VNFs on servers that sit in a nearby DC or in the same CO or POP where the service is being delivered, typically via a router. Proximity is important for uses that may be impacted by latency, such as applications that are high bandwidth, have heavy traffic, or require quick responses. A mini DC is a rack or a few racks of servers and storage that resides in a CO or POP and uses the CO facilities without the more demanding requirements of a DC. Coming in 3rd is a server in a distant DC. This location can be used for applications, like a consumer firewall, that don t have instant demands or require large bandwidth or require the high QoE of a higherpaying enterprise customer. The service chaining mechanism can be used to shunt such traffic to faraway DCs, incurring some delay to be sure but reducing the need for compute/storage in the CO or nearby DC. On the low end of responses to this question were sites at the extreme ends of the network, including customer premise or cell site. Though some may use these locations, the majority say they will not deploy or don t yet know if they will. Exhibit 11 Location of Servers running Virtualized Network Functions (VNFs) n=29 Server in same CO/POP 52% 28% 21% Server in nearby data center 48% 34% 17% Servers in distant data center 41% 31% 28% Locations Server in nearby mini data center Server resident on blade in network equipment 28% 28% 24% 38% 34% 48% Server resident on customer premises 28% 14% 59% Server resident on/near cell site or base station 3% 28% 69% 0% 20% 40% 60% 80% 100% Percent of NFV Respondents or later/ timing TBD Won't deploy/ don't know 17

22 SDN TARGET DOMAINS The network industry is very interested in how SDN will be deployed, the target network domains, and where in the network operators will make their initial investments. A majority of operators are clear about where in their networks they intend to deploy SDN. SDN Deployment Timing: Targeted Network Domains In this section, we examine the part of the network that carriers plan to put under SDN control that is, we look at the network domains as opposed to use cases for NFV. The top 3 this year are within data centers, cloud services offered to customers, and between data centers. Operations and management is 4th. SDN will be used in other domains ultimately, including multi-layer transport and optical transport, which 81% and 78% of SDN operators noted, respectively. There are a lot of industry efforts to define the transport SDNs, with 26% planning deployment by end of 2015 and another 52% sometime in the future. Similarly, there is much work going on in terms of SDN for mobile backhaul. Though the designs today are working well, they are taking their time. 18

23 Exhibit 12 Timing of SDN Deployments in Targeted Network Domains n=31 Within data centers 65% 6% 29% Cloud services offered to customers 52% 32% 16% Between data centers 42% 32% 26% SDN Network Domains Operations and management Multi-layer transport (IP/MPLS + optical) Optical transport Access for business MPLS backbone core 26% 26% 26% 19% 39% 39% 35% 55% 52% 65% 26% 19% 23% 35% 16% Metro aggregation 16% 61% 23% Mobile backhaul 52% 39% Fixed access, BNG/BRAS 39% 52% 0% 20% 40% 60% 80% 100% Percent of SDN Respondents or later/ timing TBD Won't deploy/ don't know 19

24 In the next 3 sub sections, we look at the most SDN targeted network domains that carriers consider most important for (1) revenue generation, (2) opex improvements, and (3) capex reduction. Respondents chose their top 3 network domains for each of (1), (2), and (3). SDN Network Domains: Most Important for Revenue Generation In terms of revenue production, 74% of SDN respondents included cloud services offered to customers via SDN in their top 3. Cloud services are typically the domain of AWS, Google, and Microsoft, but carriers are hoping that cloud services could be a huge revenue generator as they plan to package compute and storage with network access. The 2nd ranking revenue producer is access for business, for which SDN in conjunction with NFV gives agility and better control over services offered. Exhibit 13 Most Important SDN Network Domains for Revenue Generation n=31 Cloud services offered to customers 74% Access for business 58% Between data centers 26% SDN Network Domains MPLS backbone core Mobile backhaul Within data centers Operations and management Optical transport 13% 13% 6% 26% Fixed access, BNG/BRAS 3% Multi-layer transport (IP/MPLS + optical) 3% Metro aggregation 0% 0% 20% 40% 60% 80% Percent of SDN Respondents 20

25 SDN Network Domains: Most Important for Opex Improvements Operations and management is tied with metro aggregation at 45% among SDN respondents for the top SDN network domains important for opex improvements. Metro aggregation is the location in the network where a lot of equipment, such as DSL or optical Ethernet, connects to the customer. Because there are so many end points that get aggregated here, it makes sense that this is a target for reducing opex. Within data centers ranks as 3rd (32%), which is understandable as this was one of the original drivers that spawned the invention of SDN. However, in a carrier network, they are more concerned about what is in the network vs what s in the data center. Exhibit 14 Most Important SDN Network Domains for Opex Improvements n=31 Metro aggregation Operations and management 45% 45% Within data centers 32% SDN Network Domains Mobile backhaul Between data centers MPLS backbone core Multi-layer transport (IP/MPLS + optical) Access for business 16% 26% 23% 23% 23% Cloud services offered to customers 16% Optical transport 13% Fixed access, BNG/BRAS 3% 0% 20% 30% 40% 50% Percent of SDN Respondents 21

26 SDN Network Domains: Most Important for Capex Reduction Results for important network domains for capex reduction were spread out. Metro aggregation ranks 1st (35%), followed by multilayer transport and within data centers, which were tied with 32% among SDN respondents. MPLS backbone core comes in 3rd with 29%. The motivation behind SDN for metro aggregation and MPLS backbone core is the ability to run the network more efficiently by redirecting traffic flows. Google has shown that this works, and as a result it can run its network hotter. Exhibit 15 Most Important SDN Network Domains for Capex Reduction n=31 Metro aggregation 35% Multi-layer transport (IP/MPLS + optical) 32% Within data centers 32% SDN Network Domains MPLS backbone core Optical transport Fixed access, BNG/BRAS Access for business Between data centers 16% 19% 23% 26% 29% Cloud services offered to customers 16% Operations and management 16% Mobile backhaul 0% 20% 30% 40% Percent of SDN Respondents 22

27 CARRIERS IDENTIFY SDN/NFV APPLICATIONS FOR PRODUCING NEW REVENUE We asked operators to rate a set of applications commonly considered to be revenue opportunities well suited for an SDN/NFV environment. They rated these on a scale of 1 to 7, where 1 is not important and 7 is very important for producing new revenue. Bandwidth on demand (BoD) topped the list, with 58% of SDN operators rating it 6 or 7, or important. There are several opportunities for adding revenue with this offering in the business and consumer markets. Businesses can get more bandwidth if they expect an uptick in web traffic or host a video conference or do seasonal shopping. Consumers could be offered the chance to hit the turbo button to get greater bandwidth to watch videos and ratchet back down when they re done. Dynamic policy and pricing, which ranked 2nd with 52%, is a general function that will allow operators to do quite a few things from developing a bandwidth-on-demand service to ensuring that higher-paying customers get the bandwidth they purchase. Tied for 3rd place at 48% are elastic service chaining, virtual managed services, and virtual private cloud. Elastic service chaining allows processing of different services to scale out when needed and scale back in when not. Virtual managed services include services such as firewalls or parental control. We didn t expect that virtual EPC or virtual GiLAN would be revenue generators, and the survey results support this view. 23

28 Exhibit 16 Important SDN/NFV Applications for Producing New Revenue n=31 Bandwidth on demand 58% Dynamic policy and pricing 52% Elastic service chaining 48% Applications Virtual managed services Virtual private cloud Virtual public or hybrid cloud 39% 48% 48% Bandwidth calendaring 35% Virtual EPC 19% Virtual GiLAN 13% 0% 20% 40% 60% Percent of SDN Respondents Rating 6 or 7 SUPPLIERS FOR SDN AND NFV SOFTWARE AND HARDWARE PRODUCTS Many industry observers believe that SDN and NFV will open the door for new classes of vendors to make their mark. Though there is some opportunity for this to occur, most carriers still expect to buy the necessary products from existing telecom equipment vendors. Preferred SDN Product Supplier Types As you ll see in the next few charts, 100% of SDN respondents say telecom equipment vendors and DC network equipment manufacturers are among their sources for purchasing SDN and NFV products. And though not all carriers have DCs in their networks, all respondents indicated that they would source equipment from data center network vendors as well. Telecom equipment manufacturers have a great opportunity now to benefit from this trend. Many operators expect that adopting SDN/NFV technologies will result in decreased purchases of telecom hardware/software. At the same time, carriers are increasingly looking to these manufacturers to provide integration services to support the transition to SDN/NFV. 24

29 Rounding out the top 3, with all but one of the survey respondents indicating they consider it, are SDN controller/orchestration vendors. Also in the running for preferred providers of SDN are SDN software vendors and telecom/datacom appliance manufacturers. Exhibit 17 Sources to Purchase SDN Products n=31 DC network eqpt manufacturer 100% Telecom eqpt manufacturer 100% Sources SDN controller/ orchestration vendor SDN software vendor 58% 97% Telecom/datacom appliance manufacturer 55% DC virtualization software vendor 35% Network/IT systems integrator 23% 0% 20% 40% 60% 80% 100% Percent of SDN Respondents Preferred NFV Product Supplier Types The top sources for NFV products are essentially the same as for SDN, with data center network equipment manufacturer and telecom equipment manufacturer taking the top 2 spots, followed by telecom/datacom appliance manufacturer and NFVI software specialist. 55% of NFV respondents also indicated that they would consider a VNF software specialist. We have already seen this start to happen as is evidenced by AT&T is working with Tail-f in its Domain 2.0 SDN/NFV rollout. 25

30 Exhibit 18 Sources to Purchase NFV Products n=29 DC network eqpt manufacturer 100% Telecom eqpt manufacturer 90% Telecom/datacom appliance manufacturer 76% Sources NFVI software specialist VNF software specialist 55% 72% DC server/storage eqpt manufacturer 45% DC virtualization/orchestration software vendor 45% Network/IT systems integrator 28% 0% 20% 40% 60% 80% 100% Percent of NFV Respondents TOP SDN SUPPLIERS Perceived Top SDN Vendors In an open-ended question, we asked SDN respondents whom they consider to be the top 3 SDN product vendors, a measure called unaided brand awareness, which provides a good view of overall brand strength. Typically, the larger a vendor (e.g., broad product portfolio) and the more visible their brand (e.g., TV commercials, product placement), the better they fare in this question. The strongest performers in this unaided perception are telecom equipment vendors, led by Alcatel- Lucent/Nuage, Cisco, and Huawei, with server virtualization vendor VMware in 4th. Rounding out the top 11 are big companies including HP, Ciena, Juniper, NEC, and Ericsson. Several smaller players made the list, including Tail-f and Cyan. 26

31 A year makes a lot of difference. Ericsson was perceived as top dog last year. Ericsson was one of the early vendors, championing SDN and NFV for 3 years now, but now Ericsson is only 1 among a growing group of competitors that are rising in perception. In the past year, Cisco, Juniper, ALU, Huawei, and little Tail-f have raised their industry profiles considerably. Many players have a much better developed story in Another factor is that 19% of our respondents have no voice services (data services specialist, wholesale providers, etc.), and likely have little relationship with Ericsson. Industry perception changed in the past year, and Ericsson now has lots of competitors. As we only asked for the top 3, we assume the results show where most of respondents SDN investments will go. Carriers expect additional integration services to be required with their SDN/NVFrelated equipment purchases, so vendors should ensure they have these to offer it s a good way for vendors to increase revenue by beefing up integration services to meet their customers needs and expectations. Vendors mentioned by 3% of SDN respondents include Arista, Coriant, IBM, Intel, Overture, Plexxi, Stratosphere, and Vello. Exhibit 19 Top SDN Product Vendors Respondent Perception n=31 Alcatel-Lucent/Nuage 32% Cisco 32% Huawei 26% VMware 16% Vendors Ciena HP NEC 13% 13% 13% Tail-f 13% Cyan Ericsson Juniper 0% 20% 30% 40% Percent of SDN Respondents 27

32 SDN Vendors Installed and Under Evaluation Carriers are installing and evaluating a wide range of vendors for SDN from the big telecom equipment manufacturers to medium and smaller players. In an open-ended question, we asked SDN respondents to name the vendors of the SDN hardware or software they will have in their networks by the end of 2014 and whom they are evaluating to be added to their networks by the end of A number of respondents have no vendors installed in If we consider router market share and the fact that 100% of respondents will purchase from their telecom equipment supplier, then the top 4 under evaluation (Cisco, Alcatel-Lucent, Juniper and Huawei) are the top 4 router vendors that together hold over 80% of router market share, while Ericsson is between #5 or #7 in routers (trading places some quarters with ZTE) and is #4 Under Evaluation. 28

33 Exhibit 20 SDN Vendors Installed and Under Evaluation n=31, 31 Vendors Cisco 45% 13% Alcatel-Lucent 35% 13% Juniper 26% Ericsson 23% 13% Huawei 23% 13% Tail-f 19% 13% HP 16% 6% Cyan 13% 13% NEC 13% 3% Ciena 6% Intel 6% Arista 6% 6% VMware 6% 6% Metaswitch 6% Under evaluation 3% Installed IBM 6% 0% 0% 20% 30% 40% 50% Percent of SDN Respondents TOP NFV SUPPLIERS Perceived Top NFV Vendors In an open-ended question, we asked NFV respondents whom they consider to be the top 3 NFV product vendors, a measure called unaided brand awareness, which provides a good view of overall brand strength. Typically, the larger a vendor (e.g., broad product portfolio) and the more visible their brand (e.g., TV commercials, product placement), the better they fare in this question. 29

34 Just as with top SDN vendor perception, the top perceived NFV vendors are telecom equipment vendors Alcatel-Lucent, Huawei, Juniper, Cisco, and Ericsson. The next tier of 3 includes Brocade, HP, and Intel. NEC and quite small players, Overture and Tail-f, rounded out the top 11. Our remarks above in the SDN perception section hold for NFV as well. A year makes a lot of difference as there is a growing group of vendors small and large rising in perception. In the past year, Cisco, Juniper, ALU, Huawei, and little Tail-f have raised their industry profiles considerably. Many players have a much better developed story in Vendors rated by 3% of respondents include A10, Arista, Ciena, Cyan, Mavenir, Nicora/GMC, and NSN. Exhibit 21 Top NFV Product Vendors Respondent Perception n=29 Alcatel-Lucent 38% Huawei 21% Juniper 21% Cisco 17% Vendors Ericsson Brocade 17% HP Intel NEC 7% Overture 7% Tail-f 7% 0% 20% 30% 40% Percent of NFV Respondents 30

35 NFV Vendors Installed and Under Evaluation In an open-ended question, we asked NFV respondents to name the vendors of the NFV hardware or software they will have in their networks by the end of 2014 and whom they are evaluating to be added to their networks by the end of NFV is different than SDN, yet many of the same SDN vendors appear on the NFV list. One big European operator said to me in our interview, We will have only 1 control and orchestration system for SDN and NFV, not separate software for each. Exhibit 22 NFV Vendors Installed and Under Evaluation n=29, 29 Vendors Alcatel-Lucent 34% 14% Cisco 34% Ericsson 24% 14% Juniper 24% 14% Huawei 21% 14% HP 21% 7% Tail-f 14% 14% Intel 14% Brocade 3% NEC 3% Overture 0% Cyan 7% 7% Under evaluation IBM 7% 0% Installed Metaswitch 7% 0% 0% 20% 30% 40% Percent of NFV Respondents 31

36 BOTTOM LINE We have investigated SDNs and the intertwined NFV for the past 4 years as they have become the hottest topics in telecom. There are basic differences between DC SDN deployments and service provider SDN-NFV environments. DCs are simple, contained domains comprising Ethernet-serverstorage, and they pale in comparison to the complexity of service provider networks that have 7 layers, multiple network types (consumer broadband, business VPNs, mobile, mobile backhaul, and on and on), and multiple services (broadband, layer 2 VPNs, layer 3 VPNs, optical transport, etc.). Carriers must bite off smaller chunks of their network contained domains in which to explore, trial, test, and deploy SDNs and NFV. Discussions abound at conferences and other venues about what are the most cost effective, or simplest, or most attractive network domains, the best revenue opportunities, and optimal use cases for operators to invest in first. Through our interviews, we received the answers to these questions from 31 service providers that control 51% of the world s telecom capex. These operators tell us that the major telecom and DC equipment vendors are their top choices to supply SDN-NFV software and hardware. This report discusses the key drivers for SDNs and NFV, the timing of deployments for targeted SDN network domains, the timing of deployment of NFV use cases, and the operators preferred suppliers for both SDN and NFV We are in the early stages of a long-term transition to SDN-NFV architected networks; a lot will be learned as each year passes. Market research is very useful to determine current buyer thinking, and some of the top targeted SDN network domains and NFV use cases have changed positions since our 2013 survey and may settle in for fewer changes in positions by Carriers will learn that some avenues are not as fruitful as expected, and telecom equipment manufacturers and software suppliers may well invent new approaches that open up new applications. We will, of course, conduct an SDN-NFV survey again in 2015, and it will be interesting to see what new issues emerge and which problems get resolved. METHODOLOGY AND DEMOGRAPHICS In February and March 2014, we interviewed 31 service providers that have evaluated or plan to evaluate SDN or NFV projects, or both. Information from these service providers was gathered by telephone interviews with key executives directly involved in SDN decision making, as well as and online surveys. 32

37 Respondents Are Influential in SDN and NFV Planning and Strategy Formation To qualify, all respondents had to have detailed knowledge of their companies strategies and plans for SDNs and/or NFV and be influential in planning and purchase decisions for these products. Exhibit 23 Strong Respondent Influence in SDN/NFV Strategy and Purchases n=31 A lot of influence 35% Primary decisionmaker 39% Some influence 26% Respondents Control 51% of the World s Telecom Capex Respondents control 51% of worldwide telecom capex and 47% of worldwide telecom revenue a very significant sample! 33

38 Exhibit 24 Respondents Represent a Significant Portion of 2012 Worldwide Capex and Revenue n=31, 31 60% Percent of 2012 Worldwide Public Carrier Total 40% 20% 47% 51% 0% Revenue Capex Source: Infonetics Research, Service Provider Capex, Opex, Revenue, and Subscribers Database 34

39 Respondent Service Provider Types and Regional Distribution Our sample has a nice spread of service provider types with a just over half comprised of capex-heavy, global incumbents and a balanced geographic distribution. Exhibit 25 Respondent Service Provider Types and Geographic Distribution n=31, 31 Service Provider Type Geographic Distribution Competitive 26% EMEA 39% Incumbent 52% Independent Wireless 16% North America 29% Cable operator 6% Asia Pacific 32% As always, I welcome your comments. Michael Howard Co-founder and Principal Analyst +1 (408) michael@infonetics.com 35