Network Functions Virtualization, or NFV*, continues to be among the hottest areas within telecommunications networking.  Fundamentally, NFV changes the way networks are designed and operated, and in turn, changes the products that vendors sell to network operators.  Sizing the market of new technologies such as NFV can be tricky, and here, we offer a quick look into some key considerations for this expanding market.

One approach to measuring the NFV market is to assess its effect is on existing technology markets.  A number of questions arise when taking this route, and here are five that we think are at the top of the list for consideration.

  • Which telecom products and technologies are affected by NFV and to what extent?  This is the starting point from which we can leverage Dell’Oro Group’s broad range of telecom equipment market coverage.
  • When implemented, is NFV a like-for-like replacement of an existing technology?  In other words, does the market simply shift from one class of products (network appliances) to another (software and servers)?  This is the cannibalization or substitution scenario that is common with new technologies.
  • Can the new technology be enabled with existing products, or are all new products and technologies required?  Some vendors might provide an upgrade path that leverages the existing installed base to enable new capabilities.
  • Does the new technology create pricing and/or unit volume disruption?  As the NFV movement is being driven by network operators, overall price reductions are a very likely outcome.
  • Beyond the like-for-like replacement, can NFV technologies result in an incrementally larger market than existing technologies?  One of the goals of employing NFV is to drive revenue growth and justify investment returns beyond capital and operating cost savings.

For our recently published NFV Advanced Research Report, we considered the questions above, as well as dozens of others.  NFV is an early stage market that is changing and developing rapidly.  Likewise, our approach to sizing the market will evolve and allow us to incorporate new information on a regular basis.  Stay tuned…

* NFV is a new construct for networking in which virtualization technologies are used to perform network functions that have traditionally been run on proprietary hardware appliances.  The network functions are implemented in software running on industry standard servers, and can be deployed or moved in various locations without installing new equipment.


Posted by Shin Umeda on April 25, 2014

About Shin

Shin Umeda covers a broad view of Telecommunications Infrastructure at Dell’Oro Group as he has built our coverage and researched many of the technologies. He currently produces the analysis on Network Functions Virtualization’s (NFV) impact on telecom operators as well as equipment and component manufacturers.