NFV is Opening Up Telco Networks to Innovators

Author: Derek Kerton, Chairman, Telecom Council of Silicon Valley, @derekkerton

Here in Silicon Valley, we’re fortunate to have so much innovation taking place that it pulls in the major players from around the world. There are about 40 different telecom network operators that have set up field offices in the Valley, either for R&D or for the more common practice of scouting and partnering with local startups. To facilitate the connections between these big players, and the more nimble startups in the Valley, the carriers participate in an organization called the Telecom Council of Silicon Valley, where they can articulate their needs, startups can present their solutions, and partnerships are fostered.  Through that group, the carriers can specifically identify areas where they have gaps in technology, or where they see opportunities for partnership. Right now, NFV is near the top of every carrier’s list. And NFV is particularly interesting for investors and startups, because it is so disruptive that it will create a waterfall of opportunity for the entrepreneurs.

 

Telecom NFV borrows heavily from the lessons learned in enterprise IT, where virtualization freed companies from on-premise, dedicated, single-function server boxes, and enabled CIOs to shift towards more generic machines, often hosted in the cloud, which could spin up virtual machines (VM) in an instant to respond to real-time demand. Virtualization disaggregated the function of the server with the hardware, both geographically and functionally. This allowed IT managers much better ability to respond to peak demands, to reduce hardware costs, to reduce software costs, and to eliminate the need to over-provision – fairly phenomenal benefits, which explains the high valuations and wealth creation seen in companies like VMware.

 

The reason why NFV is such a standout in terms of opportunity is the following:

 

  1. It is new, and thus presents new opportunities in and of itself.
    1. Carriers are looking to find cheaper vendors of more commodity hardware and servers, opening the door for new competitors to long-time Tier 1 vendors like Ericsson, Alcatel-Lucent, etc.
    2. It opens the door for more cloudification at the carriers, and sales of all associated cloud technologies, from solid-state memory to cluster technologies, big data, etc.
    3. There are technology gaps in orchestration and management of the virtualized and distributed systems, and the carriers need solutions.

 

  1. NFV is an innovation multiplier. The top reason the carriers cite for adopting NFV is to increase their agility. With their legacy systems, there was very high effort and high risk to installing new hardware or software to try out new ideas. But virtualizing the operating environments removes the risk and lowers the cost. With NFV, carriers can be more agile, trying out innovative ideas faster, more often, and failing fast with some while doubling down on the winners. The agility is the multiplier. With NFV, carriers will seek out more innovations from partners, and will be more willing to try new things. Opportunities will grow in VNF (Virtualized Network Function) solutions that can be sold into a carrier, for example, you could develop and market a Home Security IoT Device Management VNF, and help carriers attack the SmartHome market.

 

  1. NFV is on the pathway to another disruptive technology, SDN, or Software Defined Networks. SDN is the management of the physical network in software. This allows a carrier to be highly responsive to shifts in demand, local outages or spikes, event-based changes, traffic flows, new hardware installation, network planning, and more. SDN is facilitated by virtualized hardware, so NFV will accelerate the opportunities for startups in SDN.

 

Over the past decade, telecom carriers have come a long way in terms of their willingness and ability to partner with smaller, entrepreneurial companies. Today, partnerships are common, and most carriers can point to dozens of startups who contribute to their services. But NFV is set to disrupt telecom, and open the field even more for startup deals.

 

 

Foot Note:

Every year, the Telecom Council of Silicon Valley holds a sort of upside down conference where we flip the model and ask the world’s most important telecom operators to pitch to Silicon Valley. Over 24  telcos will present what makes them unique, what makes them good partners, the right avenues to use to approach them, and, perhaps most notably, the top 5 technology areas where they have gaps or are otherwise seeking partnerships. TC3 also provides lots of tools for the startup community to take meet with the carrier outreach groups, and to make their pitch, too. To learn more about TC3 Summit, click here.

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