Carriers Hungry for NFV and SDN Solutions
Author: Derek Kerton, Managing Partner, Kerton Group
Telecom carriers don’t have a history of being the fastest moving enterprises in the economy, and that reputation is earned. With a history of PTTs, monopolies, and literally entrenched competitive assets, there were very few competitive threats to a carriers’ hegemony. But while the reputation may still stick, the reality is that this type of telco is a relic of the last century. Since the calendar flipped into years starting with a “2”, the telcos have seen an existential spike in both opportunities and threats, delivered by the tide of digitization, IP technology, and the Internet.
The adjustment has not been a smooth one. The early years of the century were spent with the painful transition from NIH thinking to a new strategy of adopting outside technology, and working with more partners. But painful or not, the shift to rapid adoption of best-in-class innovative ideas is a necessary one. Without innovative technologies supplied by partners, carriers could never respond to the competitive pressures they are facing:
- New competitors: Telcos from other regions, VoIP telcos, Cablecos, etc.
- Wireless competition: Cellular, and now Wi-Fi-First wireless companies.
- Over The Top (OTT) assaults: attacks on voice, messaging, enterprise services, content, etc.
It is in response to these attacks that we’ve seen developments like Telefónica buying JaJah, or Bharti Airtel partnering with Uber. In the past 15 years, carriers have developed scouting and partnering teams, M&A groups, incubators, and field offices in faraway innovation centers like Silicon Valley. The Valley, rife with hot Internet companies, VC money, and startups, is home to permanent scouting offices of over 30 telcos from around the world.
These carriers are looking for three classes of innovations among these four:
- Apps and content. Actually, these fall below carrier’s radar, and are directed to platforms.
- Significant products and services for their subscribers. ex: Skype, Uber,
- Platform products for developers and subscribers. ex: connected home, payments, iOS
- Enabling technologies that make their networks better. Ex: 5G, NFV, OSS/BSS
How NFV and SDN are Different
But while many of the technology partnerships are important to telcos, like Deutsche Telekom working with Dropbox to provide cloud storage to their customers, NFV and SDN are innovation multipliers. That is, where Dropbox is an end offering for the customers, any partnerships the carriers make with NFV and SDN are not intended for use by subscribers, but rather they are intended to increase the carrier’s agility and ability to offer even more products and services later on. NFV is not the destination, but rather the vehicle for carrier innovation.
This explains why at the Telecom Council of Silicon Valley, there is such strong ongoing interest from our carrier members seeking companies that can provide them technology for virtualizing their networks and abstracting network devices from the software that controls those devices. In fact, this is one of those perfect storms, where the buyer (carriers) is very motivated, as are the vendors, as well as the innovators. Everyone is rowing in the same direction in this boat. Innovators, in particular, see the trend towards digitization and virtualizing as a key advantage for small companies and startups, who historically were too small to get a carrier’s attention. However, if carriers can use NFV to be more agile, that increased agility translates into the ability to try out solutions from many vendors well outside the Tier 1 size.
With an annual global aggregate Telecom spend of $5.6 Trillion market, the notion that this spend might be parceled out to a wider range of Tier 2 vendors and startups is energizing the market. Yes, trillion with a “T”.
So what sort of NFV, VNF, and SDN solutions are carriers seeking right now? Telecom Council of Silicon Valley asks dozens of network operators just that question each fall at the TC3 Summit: “What technologies, innovations, and partnerships do you want from Silicon Valley (or any innovator) over the next year?”
While this year’s TC3 hasn’t taken place yet, early feedback from the carriers is that they will be asking for innovations in:
Carriers are learning that, despite a cautious desire to launch just one VNF at a time, cost factors are steering them towards launching more. That’s because there are fixed costs in trying NFV that include platforms, equipment, training, staffing, and partnerships. Once those costs are invested, it makes sense to leverage the expense across more than one small trial VNF.
For this reason, carriers are seeking great functions to try. At first, we thought they might seek only new functions, leaving legacy in place, but we’re finding an appetite for trying out replacement VNFs as well as new service enablement.
In ongoing roundtables the Telecom Council has co-hosted with HP’s OpenNFV, orchestration has worked its way to the top of the list of current challenges with NFV. Having started with pilots and trials of NFV, network operators are learning that as they expand the trials, the imminent challenge will be coordination of the network elements. Uncertainty over centralized versus distributed management and stateful or not have yet to be answered. Carriers are looking for the best solutions in this space, but also seeking to stick with standards.
SDN is the telecom equivalent of a wrestling tag-team partner to NFV. As virtualization works its way through the carrier’s network, new opportunities open up to make that network a dynamic, living thing. Since individual virtual machines can change and alter their function, the network itself becomes something that can be programmed. Carriers are looking for solutions that allow them to separate the control logic from the data forwarding plane.
Network Functions Virtualization, SDN, hetnets, adherence to standards, and a switch to all-IP networks is liberating carriers from a single-vendor world. And on the business side, outreach offices like those in Silicon Valley are helping carriers make deals that in prior years would not have been possible. Eventually, we’re going to see carriers that are far more nimble than anyone ever expected. We’ll see them try more ideas, fail quickly, and find some winners. That’s great. It means more content and services for the end users, and more competition with the OTT and other players.