US telcos move ahead on NFV as Europe watches: 2017 predictions

We will see virtualized services start to roll out, principally in the USA, and to a lesser extent in Japan through NTT. While everyone remains sure that the way forward is virtualization, the industry is still figuring out how to solve the multiple technical, commercial and organizational challenges posed by migration.

Operators will be closely watching AT&T and its Domain 2.0 program and keeping an eye on Verizon too, in a bid to learn lessons about how to implement NFV. Europe’s hard-pressed operators, in particular, will mostly stay parked in ‘watch and learn’ mode, continuing with RFx, proof of concepts and trials. In fact, we’re unlikely to see any virtualized services roll out across Europe in 2017. Compelling business cases are harder to assemble in the European continent and, until these are squared away, operators will prefer to observe how US and Japanese trail-blazers facilitate service migration and preserve their choices – both major factors driving current and near-term investment decisions.

#2 NFV’s ROI equation will need to be cracked

The industry will become increasingly focused on how to generate ROI from virtualization. White-box CPEs are still expensive, which restricts the size of the virtualized services market to the large enterprise sector, driven by the need to consolidate network appliances. Don’t be surprised to see much more interest in ARM-based white-boxes as a result.

CSPs will look at ways to use more cost-effective classical CPEs (or pCPEs) for delivering virtualized services in hybrid ways for the volume end of the market. The NETCONF-enabled classical CPE will rise in importance to both future-proof near-term service deployments and address the ROI issue for the volume part of the market.

Ultimately though, as operators work out how best to tackle ROI in the context of CAPEX pressures, far-sighted CSPs now have an ideal opportunity to capitalize and gain a competitive advantage on rivals.

#3 CPEs will have the same focus, just a different colour

Whilst CPE service delivery will remain the key focus (as virtualized data centres have yet to solve the twin challenges of scalability and technology maturity), we will start to see a change in the colour of CPEs during 2017.

2016 saw the launch of the first virtualized services based on grey-box CPE, a move that was seen by some as a compromise to enable quick gains in acquiring virtualization experience and show progress. In 2017, those operators that use grey boxes will push to introduce the purer white box CPE. The result will be the gradual roll-out of white-box CPEs to replace their grey siblings.

#4 Improving IT wallet share

The main driver for new virtualized services at CSPs will be improving IT wallet share at enterprises, especially those that build their own networks.

By convincing their customers to take an operator-managed white-box CPE this establishes a paid beach-head for the managed services model. Once there it enables a relatively easy upsell for additional VNF-based managed services on the same box.

The first target services will be security and Hybrid-WAN. They offer the prospect of increased ARPU in the case of security and revenue protection in the case of Hybrid-WAN. Legacy voice and service assurance will also be needed as both will be necessary to sell a larger portfolio of managed services to enterprise customers. 

#5 DevOps will thrive as it helps unlock virtualization’s potential

2017’s general industry trend will be DevOps as it is increasingly being seen as the next ‘big thing to do’. Already extensively discussed as a concept, CSPs will move to implement it – this has as much to do with achieving greatly needed OPEX savings, which is a necessary condition for virtualization.

Nevertheless, virtualization will be the catalyst to shift away from the silo culture that exists within CSPs as they realize that introducing virtualization is too slow and too expensive if they rely on their traditional waterfall NPI process.