Posts

Despite complexity and market challenges, CSP spend on NFV/SDN will grow at a 32.4% CAGR from 2019 to 2024 to nearly $147B

Key Insights

NFV/SDN spend will scale through the forecast period as leading CSPs broaden their transformation initiatives and as other CSPs begin their transformational journeys.

Operators will increasingly invest in virtualized network solutions, including vRAN and virtual network cores, to reap the full benefits of 5G.

The pool of vendors capable of aiding telecom operators in their network transformations is growing as cloud service providers and Japan-based vendors join the fray.

TBR’s NFV/SDN Telecom Market Forecast details NFV and SDN trends among the most influential market players, including both suppliers and operators. This research includes current-year market sizing and a five-year forecast by multiple NFV and SDN market segments and by geography as well as examines growth drivers, top trends and leading market players. TBR’s NFV/SDN Telecom Market Landscape includes key findings, market size, customer and geographic adoption, operator and vendor positioning and strategies, and acquisition and alliance strategies.

Network transformation positions CSPs to support advanced use cases and save costs via Open RAN

As communication service providers (CSPs) are transforming into digital service providers they are transitioning their networks to a virtualized, container- and microservices-based, cloud-native architecture. This cloud-centric network architecture will enable CSPs to generate value from new technologies, such as 5G and edge computing, and adopt next-generation network operations based on data as well as AI and machine learning for continuous, closed-loop automation.

This new architecture will also enable CSPs to take advantage of network slicing and low latency to more effectively support use cases in areas such as autonomous transportation, video analytics, robotic process automation, AR/VR solutions, advanced healthcare applications and cloud-based gaming.

The NFV/SDN Telecom Market Landscape includes key findings, market size, customer and geographic adoption, operator and vendor positioning and strategies, and acquisition and alliance strategies and opportunities.

Ericsson’s focused strategy and strong 5G position yield results

TBR perspective

Ericsson’s recovery continues into its third year, evidenced by revenue growth and expanding margins, trends that TBR expects to continue in 2020. A strong 5G position with respect to both RAN and mobile core is a significant driver of this improvement as Ericsson’s early technology bets and increased investment in Networks unit R&D are spurring CSP adoption of Ericsson’s competitive 5G portfolio. Ericsson has notched high-profile wins in 5G and grown its market share at Huawei’s and Nokia’s (NYSE: NOK) expense thanks to ERS, which offers an attractive total cost of ownership and a powerful baseband unit. As restructuring progresses, Ericsson will shift from an emphasis on cost reduction and efficiency to a disciplined growth mindset, evidenced by the recent acquisition of Kathrein’s antenna business and an effort to poach LTE customers from rivals for 5G upgrades. With China deploying 5G en masse in 2020 and the next wave of adopters expected to roll out through the early 2020s, Ericsson has the ability to wring a few more years of growth and market share gains from this cycle.

TBR views Ericsson’s turnaround as a success, but multiple headwinds will take shape over the next few years, such as vRAN; the rise of disruptive startups like Altiostar, Mavenir and Parallel Wireless; and uneven CSP spending. TBR believes Ericsson has baked 5G market share gains in China into its 2020 guidance. These gains are likely to come at Nokia’s expense.

Long term, Ericsson is hoping that emerging businesses including IoT Accelerator, Edge Gravity and eModo scale up. The company needs to succeed in an area outside of RAN and core to maintain share, but Ericsson is not currently preparing to expand its addressable market in terms of enterprise verticals.

Ericsson (Nasdaq: ERIC) hosted its annual Industry Analyst Forum in Boston, bringing along a range of executives to provide an update on the company’s corporate strategy, which includes continued restructuring, particularly within Digital Services, as well as infusing AI and automation across key product areas and selective expansion in emerging technology areas. 5G, however, was the dominant topic due to Ericsson’s market share gains spurred by the Ericsson Radio System (ERS), which is optimized to meet the cost-conscious needs of communication service providers (CSPs). Similar to last year, the tone of Ericsson’s 2019 analyst day was upbeat as the company continues to execute its focused strategy — now in its third year — which is driving improvement in its financial metrics. Following the main session, analysts could attend three tracks — Building the Network Platform, Automation in 5G Operations, or New Business Opportunities for Service Providers (i.e., IoT, private cellular networks and fixed wireless access [FWA]) — and then participate in one-on-one speed meetings.

5G will drive CSPs to adopt a new network architecture, with NFV and SDN as critical aspects

According to TBR’s 3Q19 NFV/SDN Telecom Market Landscape, 5G will push CSPs to accelerate and broaden their NFV/SDN initiatives. As such, TBR expects NFV/SDN-related spend growth will correlate with 5G deployments. Since CSPs will need to upgrade their networks from an end-to-end perspective to realize the full potential of 5G, this will naturally drive CSPs toward the virtualization and cloudification of their networks. This trend will impact most, if not all, of the major network domains from an NFV/SDN perspective over the next five years. TBR notes that 5G core is inherently virtualized, and that this will also naturally push CSPs deeper into the NFV/SDN space over the next five years as they transition to stand-alone 5G networks.

CSPs are more deeply collaborating with other operators, telecom vendors and other technology providers to reap the full benefits offered by NFV and SDN. In particular, the technology industry is becoming more willing to work with open-source groups such as Airship and the O-RAN Alliance to develop open infrastructure that is interoperable across multiple vendors. CSPs such as AT&T and Colt Technology Services are also collaborating to advance the development of intercarrier virtualized network solutions, which will particularly benefit multinational businesses requiring connectivity from multiple service providers within their global footprint.

TBR’s NFV/SDN Telecom Market Landscape includes key findings, market size, customer adoption, operator positioning and strategies, geographic adoption, vendor positioning and strategies, and acquisition and alliance strategies and opportunities. TBR’s NFV and SDN research encompasses the internal (i.e., network operations) and external (e.g., SD-WAN and other virtual network functions [VNFs] sold to end users such as enterprises) NFV- and SDN-related initiatives of communication service providers (CSPs).

For additional information about this research or to arrange a one-on-one analyst briefing, please contact Dan Demers at +1 603.929.1166 or [email protected].

5G will drive CSPs to adopt a new network architecture, with NFV and SDN as critical aspects

According to TBR’s 3Q19 NFV/SDN Telecom Market Landscape, 5G will push CSPs to accelerate and broaden their NFV/SDN initiatives. As such, TBR expects NFV/SDN-related spend growth will correlate with 5G deployments. Since CSPs will need to upgrade their networks from an end-to-end perspective to realize the full potential of 5G, this will naturally drive CSPs toward the virtualization and cloudification of their networks. This trend will impact most, if not all, of the major network domains from an NFV/SDN perspective over the next five years. TBR notes that 5G core is inherently virtualized, and that this will also naturally push CSPs deeper into the NFV/SDN space over the next five years as they transition to stand-alone 5G networks.

AT&T Trumpets SDN Milestone, Reiterates Virtualization Goal

“In the realm of NFV and SDN, AT&T is among the leaders in transitioning its network to this new architecture, said Chris Antlitz, telecom principal analyst at Technology Business Research.

Significant Achievement in SDN

“‘The 75% is a significant number. They’ve built an underlay I believe for their SD-WAN … versus a lot of other operators that are doing an [over-the-top] type play,’ Antlitz said. ‘AT&T is doing it more from the ground up and from that viewpoint this makes it a little bit more significant.'” — SDxCentral

Continue reading

Amdocs Partners With Samsung, Fortifies Footing in NFV Market

“Per a Technology Business Research report, investments in telecom service provider NFV and software defined networking (SDN) are expected to exceed $168 billion by 2022.” — Zacks Equity Research, Yahoo Finance

Continue reading

5G network investment will push Capex for NFV and SDN

“TBR expects the use of white-box hardware in NFV / SDN environments will proliferate, accounting for 60 percent of NFV / SDN hardware spend in 2023, up from 15 percent in 2018. This industry shift toward white-box hardware will significantly disrupt incumbent OEMs’ business models, prompting them to evolve into software-centric companies.”

Continue reading

5G will push CSPs to accelerate and broaden their NFV/SDN initiatives

According to Technology Business Research, Inc.’s (TBR) latest NFV/SDN Telecom Market Forecast, covering 2018 to 2023, 5G will push CSPs to adopt a new network architecture and both NFV and SDN will be critical aspects of that architecture going forward. As such, TBR expects NFV/SDN-related spend growth will correlate with 5G deployments. Since CSPs will need to upgrade their networks from an end-to-end perspective to realize the full potential of 5G, this will naturally drive CSPs toward the virtualization and cloudification of their networks. This trend will impact most, if not all, of the major network domains from an NFV/SDN perspective over the next five years. TBR notes that 5G core is inherently virtualized and that this will also naturally push CSPs deeper into the NFV/SDN space over the next five years as they transition to a standalone 5G network.

TIS market returns to positive growth as key operators accelerate and broaden 5G build-out plans

TIS market returns to growth …

According to Technology Business Research, Inc.’s (TBR) Telecom Infrastructure Services Global Market Forecast 2018-2023, the telecom infrastructure services (TIS) market has returned to a positive growth trajectory through the forecast period after several years of declines, now that the 5G cycle is underway and webscales continue to increase their spend on network technologies to drive their strategic initiatives. Leading operators globally have accelerated their 5G timelines by up to two years, and this has correspondingly pulled forward the TIS market growth curve by two years. 2018 was a key year where leading operators invested to prepare their networks for 5G and, in some cases, began deploying 5G technology. This trend will play out over at least the next five years as operators build out their 5G networks and continue their transformational journeys toward becoming digital service providers.

… but growth rate suppressed by offsetting factors

Offsetting factors that will constrain the rate of TIS market growth include the shift to more efficient network architectures (NFV/SDN and cloud); the decommissioning of legacy infrastructure; the increasing use of network resource pooling, such as network sharing; and operator consolidation.

Graph showing TIS market forecast and growth 2018-2023

Professional services will be the fastest-growing services segment through the forecast period

Increasing technology and business model complexity will drive demand for a broad range of professional services through the forecast period. Leading operators will continue their journeys toward evolving into digital service providers, and this will require the full spectrum of professional services, from consulting to systems integration. Operators will increasingly rely on the vendor community for assistance, requiring expertise, staff augmentation and access to intellectual property, or a combination off all three, as they pursue digital transformation.

TBR’s Telecom Infrastructure Services Global Market Forecast provides annual analysis and forecasting of the deployment, maintenance, professional services and managed services markets for network and IT suppliers.