NETWORK VIRTUALISATION MARKET UPDATE: WHERE ARE WE AND WHAT CHALLENGES LIE AHEAD?

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1 EUROPEAN TELECOMS SUMMIT 2016 BUILDING BLOCKS FOR SUCCESSFUL OPERATOR STRATEGIES #AMTMT NETWORK VIRTUALISATION MARKET UPDATE: WHERE ARE WE AND WHAT CHALLENGES LIE AHEAD? 6 OCTOBER 2016 CAROLINE CHAPPELL AND ANIL RAO EVENT PARTNER

2 Summary 1 What is the current status of network virtualisation as leading-edge operators begin to utilise the cloud? 2 Business cases for network virtualisation suggest that applying network function virtualisation (NFV)/software-defined networking (SDN) technologies can result in promising revenue and cost saving opportunities. 3 Network virtualisation faces two key challenges: the impact of open source and the need to radically change operations.

3 The market is moving beyond basic virtualisation, but cloud native approaches are at least 3 or 4 years away Key phases and estimated timeframes for virtualisation of a hypothetical CSP 3

4 CSPs are combining NFV and SDN to target enterprise customers with SD-WAN and hybrid cloud solutions SDN connectivity and virtualised customer-provided equipment (vcpe) provide a strong upsell opportunity. They offer customer self-service, on-demand delivery, connectivity choice, visibility and optimisation. CSPs are competing fiercely to bring differentiated propositions to market. 4

5 Top NFV use cases, such as vcpe, are beginning to prove their worth and gain market traction

6 Implementing a vims for VoLTE can help CSPs achieve 33% net savings: 45% net capex saving and 10% net opex savings VoLTE and fixed mobile convergence (FMC) are key business cases for vims. Vendors expect that most IMS implementations will be virtualised in the future. The cost benefits of vims are largely enabled by closed-loop automated, policy- and real-time analytics-driven management and orchestration.

7 NFV/SDN-based video delivery and operations can deliver cost savings of USD1.8 billion and attract young consumers NFV/SDN-enabled multiscreen 4K video services business case Benefits of virtualised video management and delivery vs. physical 7

8 Open source is capturing the imagination of CSPs, but only those with the deepest pockets can afford to participate Number of affiliations with key NFV/SDN-related open-source initiatives by region and by CSP (only CSPs with more than one affiliation are shown) Asia Pacific North America Europe SKT (8) KDDI (2) AT&T (9) Deutsche Telekom (5) China Mobile (4) NTT DoCoMo (2) Verizon (5) Telefónica (5) NTT Communications (4) PCCW (2) Sprint (3) British Telecom (4) China Unicom (3) TTSL (Tata) (2) Comcast (2) Orange (4) China Telecom (2) Telecom Italia (3) Number of CSPs affiliated with selected key NFV/SDN-related open-source initiatives. Vodafone (3)

9 CSPs need a new operational model for NFV/SDN, based on DevOps and automation, to achieve business agility We spend significant amounts of money on OSS today. With NFV/SDN making its way into the network, and 5G and IoT close on their heels, this spend pattern is not sustainable. Efficiency will be an important driver as we transform our operations to support these new initiatives. Tier 1 European operator 9

10 Incremental steps will be required to gain trust, but the goal is to drive network changes based on business KPIs Everything that can be automated, should be automated. Tier 1 European operator 10

11 AT&T s ECOMP architecture is an influential blueprint for next generation operations and it is going open source 11

12 Key takeaways 1 Virtualised network deployments (NFV/SDN) are increasing, driven by strong CSP competition, but the market is still at an early stage and has a long way to go. 2 The business case for network virtualisation remains strong, but the industry is wrestling with two key challenges: the role of open source and altering operations. 3 Existing organisational operations, processes and systems need to change in disruptive ways to drive the business case for network virtualisation.

13 Analysys Mason has carried out more than 20 NFV/SDNrelated consulting engagements over the past 2 years 1 Strategic advisory Selected NFV/SDN consulting engagements Nokia s Telco Cloud Index 1 assesses the maturity of an operator s telco cloud strategy (NFV/SDN) IT architecture review, virtualisation blueprint and TCO assessment for a large group operator Impact of NFV/SDN on network design and planning 2 Thought leadership white paper 2 The impact of telco cloud transformation and hybrid network managements on CSPs operations vcpe services business case: potentially billions of dollars payback for fixed CSPs Next-generation OSS is critical to delivering service agility in new virtualised networks Software-controlled 3 Software-controlled vcpe: global spending networking: global Customised networking: spending on related spending on forecasts on NFV/SDN in Subprofessional services NFV/SDN per product Saharan Africa segment 1 For more information, see 2 For more information, see Analysys Mason s White Papers at 13

14 Topic for discussion How should we address the challenges facing network virtualisation to accelerate its adoption? The current OSS is not fit for purpose in a future operational model should CSPs adopt a build new or transform existing approach? What steps should CSPs take to bridge the trust gap in operations and embrace more automation? Do open source initiatives help or hinder the pace of transformation? 14

15 Contact details Caroline Chappell Principal Analyst Boston Tel: Cambridge Tel: +44 (0) Madrid Tel: Manchester Tel: +44 (0) Caroline Chappell Dubai Tel: +971 (0) Milan Tel: Anil Rao Senior Analyst AnilRaoAM Anil Rao Dublin Tel: +353 (0) Hong Kong Tel: London Tel: +44 (0) New Delhi Tel: Paris Tel: +33 (0) Singapore Tel: linkedin.com/company/analysys-mason youtube.com/analysysmason analysysmason.com/rss 15