Ponder or implement? The promise of SDN and NFV

Ponder or implement? The promise of SDN and NFV

The Delta Perspective

Authors: Mayssaa Issa and Akmal Abdul Wahab

The infrastructure running the internet is being challenged like never before. According to the latest Cisco Visual Networking Index, annual global traffic is expected to reach 1.6 zettabytes in 2018. This is mainly driven by the proliferation of smartphones and the consumption of internet video which will witness a 30% compounded annual growth between 2013 and 2018. The rise of Over the Top (OTT) services has further exacerbated the challenges faced in network operations. On the other hand, operators are facing the difficulty in network upgrades which are often complex, time consuming and expensive.

In recent years, SDN (Software-Defined Networking) and NFV (Network Function Virtualisation) have started to gain some traction as they promised a cost-efficient, flexible and scalable solution to overcome the challenges. SDN makes the network “programmable”, separates the control and data planes and allows server-based software to control the network. NFV separates network functions from hardware so that they can run in software and support a virtualised infrastructure.

The promise of SDN and NFV

The two technologies would deliver more efficient networks by optimising resources, thus reducing OPEX and CAPEX, enable scalable and programmable networks with faster time to implement, simplified operations and maintenance (OAM) and reduced total cost of ownership (TCO). According to Strategy Analytics, the virtual services would reduce TCO by 33% to 42% and reduce OAM costs by 80%. In a similar note, British Telecom announced in 2013 that its network virtualisation research revealed that there is a potential to “reduce the total cost of ownership by a third to a half and reduce power consumption by more than 50%”.

SDN and NFV implementation: Varying operators strategies in different parts of the network

As with all new technologies or strategies, the operators’ inertia in adopting new concepts is clear since the tangible benefits are uncertain to them. . What seems risky and innovative today might establish itself as the standard of tomorrow. An analogy could be drawn with British Telecom’s 21CN, the effort started in 2004 to transform the legacy network into an all-IP network, which, at the time did not have many supporters but is today’s norm in fixed networks. Similarly, the launch of innovative pricing plans by operators does not gain traction easily unless some benefits are realised by the pioneers or industry catalysts. This was the case when Verizon first launched shared data plans in June 2012. Only after achieving 50% adoption in the postpaid base did other operators launch similar plans in other markets.

Based on an analysis that we performed over 30 major telecom operators, around 30% and 40% of the pool did not have a clear view about SDN and NFV respectively. Interestingly, operators that have already engaged in implementing or trialing the two technologies are doing so in different parts of the network, as shown in exhibit 1.

Exhibit 1: Operators’ SDN and NFV plans

AT&T and Deutsche Telekom are leading the evolutionary shift with their SDN and NFV plans. The former plans to rebuild its network with software-controlled equipment and increase its value by “driving improved time-to-revenue, enabling new growth services and apps, and facilitating new business and revenue models”, and the latter has trialed an end-to-end network optimization for its Croatian operation (Terastream pilot network) in just three months. According to AT&T, the changes that required a year to implement could now take effect in minutes.

In contrast, other operators have focused their efforts in specific parts of the network. This is the case for Telefonica, which believes that the redesign of the network should be gradual, with plans to kick-off this effort in 2014 and have more than 30% of the infrastructure virtualised by 2016. This program (known as UNICA) is in line with Telefonica’s transformation journey into a digital operator.

Cost-benefit analysis for phased deployment

While SDN and NFV are intended for the end-to-end network, some operators have opted for phased deployment, starting in the data centre or at the edge, thus realising different benefits as shown in exhibit 2. Virtualisation benefits are maximised when deployed at the edge (e.g. Telefonica Brazil’s virtual CPE deployment launched in 2013) even though they incur a heavy upfront investment when deployed at the access compared to the data centre or core network.

Exhibit 2: Cost benefit analysis for SDN/NFV in different network parts

Current implementation & trials

Gradual implementation: answer to operators’ concerns and a means to witness benefits

The industry has seen multiple cycles of big network upgrades such as 3G and 4G in mobile as well as migration to IP and Next Generation Network (NGN) in fixed. With increasing traffic levels straining operators’ networks, coupled with pressing competition from OTTs, acquiring additional spectrum, implementing new policies and charging methods for data or launching new services may not be the solutions to run simple, scalable and cost-efficient networks.

Decision makers are faced with a tough call as to when and where to invest. A gradual implementation of SDN and NFV starting from the core and moving to the edge may prove to be the reasonable approach to realise the technologies benefit without incurring prohibitive costs ahead of deployment. On a broader note, management needs to take the time to understand the true economics of these technologies and think strategically rather than see this as an incremental effort in improving existing networks.


Authors' bio:

Mayssaa is a Senior Research Associate working in the Intelligence Unit at Delta Partners. Her main area of expertise includes networks (spectrum, international connectivity, technologies) and broadband (fixed and mobile broadband, pricing, value proposition). Mayssaa looks after the Middle East region with great focus on the GCC. Prior to Delta Partners, Mayssaa worked for 3 years as an account manager with focus on unified communications, wireless solutions and security.

Akmal is a Research Associate at Delta Partners’ Intelligence Unit, based in Dubai. His regional focus is APAC and he is also an expert in the technical areas of telecoms. Prior to Delta Partners, Akmal has 5 years of experience in the telecoms industry with past experience in a leading Malaysian mobile operator, global market research firm as well as European chipset vendor.