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NFV Adoption Slower Than Expected, But Will Achieve Spending of $13B by 2022

May 16, 2017 By Steve Senne in

Telecom industry adoption of network functions virtualization (NFV) has been somewhat slower than expected, but ABI Research sees investment picking up steam from here out to 2022. Ongoing NFV spending by major telcos will fuel the uptick in growth, with total North American investment rising to $13 billion in 2022, ABI forecasts.

NFV investment growth will be fastest in Europe – a 53 percent CAGR from 2017-2022, according to ABI.

Some NFV early adopters say they are realizing some of NFV’s anticipated key benefits, including reductions in both capital and operating expenditures, as well as greater agility and lower costs of deploying new network services and other elements.

“In 2015 and 2016, the market experienced some early successes but mostly reconsiderations and failures with NFV,” elaborated ABI Research senior analyst Neha Pachade. “Early adopters conducted proof of concept testing and NFV-integrated system demonstrations with the aim to understand the true impact of NFV in the technical, operational, and cultural domains.”

NFV Spending

ABI predicts NFV will grow to become a significant business opportunity for vendors. That said, it’s not clear at present whether or not NFV sales will cannibalize network hardware sales or create new ones on balance.

ABI estimates that total Global NFV market revenues will reach $38 billion in 2022. Spending on hardware —servers, storage devices, and switches—will decline over time. In contrast, the market research provider expects NFV software and services’ sales will grow faster – at rates of 55 and 50 percent, respectively, over the forecast period.

Technologically, the NFV market will remain fluid as it continues to mature. That said, challenges regarding standardization and multiple vendors being involved in projects will persist over the next couple of years, according to ABI, while opportunities will open up for NFV software and services vendors to identify specific NFV use-cases across enterprise business verticals and take advantage of them to develop integrated end-to-end systems.

“Early contracts and market trends illustrate the biggest winners are likely to be the established vendors, including Ericsson, Huawei, and Nokia, as well as specialists like Amdocs and Netcracker, with systems integration becoming more important each day,” Pachade added

“Several vendors also place heavy and risky bets on open source software, which may increase business opportunities but may also create difficult choices for them in the future, particularly if telco interest in specific open source projects fizzles out. For the time being, NFV is mostly considered as a cost-cutting exercise, since new revenue opportunities require a transformation in a much broader context, which is more likely to be driven by 5G, after 2020.”

Highlighting the advantages and benefits NFV holds out, AT&T announced in late March that it completed a field trial of a 400 gigabit Ethernet (GbE) connection between New York and Washington, D.C. Making use of NFV technology, the 400-GbE connection carried live data between the two cities. Simulating a network failure, automated network software controls automatically rerouted the live data stream to an alternative network path.