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Uptake in Cloud Computing and Mobility Driving Major Growth in SDN and NFV Market

By Laura Stotler June 23, 2015

Cloud computing and virtualization are rapidly replacing legacy network infrastructure and as a result, a new breed of technologies are becoming mainstream. Heavy workflows that include streaming video and media can no longer be run efficiently and cost effectively using dedicated networks and traditional appliances, and an innovative way of managing and distributing network resources has evolved as a result.

This new age of virtualization has led to adoption of software-defined networking (SDN) and network function virtualization (NFV), handling all layers of the network and all types of workflows. Virtualization is an ideal way to handle cloud and as-a-service solutions and workflows, since the same task and services may be run on a common set of hardware. And by running heavy duty, processing-intensive applications using the same hardware and resources, service providers and operators save money, time and space, which is critical in the age of cloud computing.

According to Infonetics Research, the combined global service provider market for SDN and NFV will reach $11 billion by 2018. That number is up from less than $500 million spent on SDN and NFV hardware and software in 2013. Cloud computing uptake is playing a major role in the revenue increase, along with mobility and big data trends. The research indicates that NFV is expected to dominate the combined market based on virtualized network functions applications, which represent more than 90 percent of the overall NFV software market.

Additional revenues will be derived from NFV infrastructure hardware along with virtualized network functions (VNFs) and ports on routers, switches and optical gear that have become SDN capable.

“This last segment makes up the largest slice of the SDN and NFV pie, 68 percent in 2018,” said Michael Howard, co-founder and principal analyst for carrier networks at Infonetics.

Image via Shutterstock

A recent announcement from AT&T indicates that is exactly the direction the carrier market is moving in, with the company announcing that it will use NFV and SDN to virtualize 75 percent of its network by 2020. Five percent of AT&T’s network functions will be virtualized this year, with three network elements already virtualized this year. These include an evolved packet core as well as AT&T’s Network On-Demand services, which is controlled by SDN. The company has also virtualized its mobile call recording service, commonly used by banks and brokerage houses.

As more and more carriers and service provider heavy hitters take steps to virtualize their network functions, the market for SDN and NFV applications and infrastructure is poised to explode. And the continuous uptake in cloud computing and mobility pretty much ensures that operators will need to adopt virtualization strategies to remain competitive and cost efficient.

Edited by Dominick Sorrentino

NFVZone Contributing Editor

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