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Dell’Oro Group recently held a lunchtime presentation and discussion on Network Functions Virtualization (NFV) and related technologies in San Jose.

At the luncheon, Shin Umeda, our vice president who spearheaded our Advanced Research Report on Network Functions Virtualization, led the discussion.  Shin was joined by Chris DePuy, our vice president covering the two key markets we track that are beginning to see the effects of NFV, namely Carrier IP Telephony (IMS) and Wireless Packet Core (Evolved Packet Core).

One of the highlight’s of Shin’s presentation was his insight into the potential implications of Network Functions Virtualization on Service Provider business challenges (see chart).

NFV Lunch Blog

Traditional Service Provider business models and processes are under pressure from operational, financial, and competitive perspectives.  According to Shin, NFV has the potential to address these growing business pressures in a new way.

The presentation addressed one of the biggest sources of pressure for Service Providers – exponential traffic growth.  The number of global connections is currently in the billions and is moving to the tens of billions.  Service Providers are constantly looking for ways to optimize networks to better match traffic volumes and patterns.

As network connections and traffic grow, the complexity of the underlying network infrastructure and the corresponding service delivery processes and mechanisms also increase.  This leaves Service Providers looking for new ways to manage financial resources – namely CAPEX and OPEX.

Shin described one of the key premises of NFV as a potential solution – the use of low-cost and standard IT, common off the shelf (COTS) hardware instead of expensive, specialized hardware, thereby reducing equipment costs.

OPEX improvements can also be achieved in many areas.  NFV offers the potential to reduce the costs to operate the physical network through lower power consumption, increased automation, and more efficient element management.

Service providers are looking to NFV as a way to develop and deliver new services.  As a service delivery platform, NFV has the potential to accelerate the introduction of new services and reduce development risks, and thereby improve revenue growth and competiveness.

However, Shin sees a long list of tasks and risks that must be addressed by Service Providers as part of the NFV transition.  It is a long term process that will take many years.

Thank you to everyone who attended this presentation and discussion.  For further information on this topic, see Shin’s Advanced Research Report on Network Functions Virtualization.