Tuesday, March 31, 2015

Business Case for Telecom Equipment Vendor in NFV/SDN world


NFV/SDN will separate Telecom  hardware from software and as result, e  Equipment Vendors(EV) may become merely software suppliers. At first glance, we feel that EV will dislike the idea of NFV/SDN since its reducing ambit of  their business. But in that’s not the case, as it seems.

Look at the following news stories:

·        Swedish communications technology and services provider giant Ericsson has signed a five-year software licensing deal with Mirantis that is worth a reported $30 million and is thought to be the largest OpenStack-related deal on record. (https://www.mirantis.com/openstack-portal/external-news/ericsson-engages-mirantis-record-breaking-openstack-deal/ )

·        Mirantis and Juniper Networks are partnering to enable rapid delivery of high-performance, massively-scalable OpenStack clouds with Juniper Contrail software-defined networking (SDN).( https://www.mirantis.com/partners/mirantis-technology-partners/mirantis-partners-juniper/ )

·        Huawei Technologies Co. Ltd. outlined its "SoftCOM" software-defined networking (SDN) strategy to industry analysts and media in London. (http://www.lightreading.com/carrier-sdn/sdn-architectures/huawei-unfolds-sdn-roadmap/d/d-id/701139)

 
Ericsson, Alcatel Lucent, Huawei, NEC and most of leading Telecom EVs have adopted NFV/SDN as future technology. EVs have embraced it quite fast. WHY ?

Emerging Business  Case
When Telcos move to NFV/SDN domain, they will use commoditized hardware for cost benefits, while they need to set-up cloud orchestration platform for virtual applications, thus software expense will be higher. As shown in chart below, in NFV/SDN domain Telco’s hardware expense  will decrease, but correspondingly software  expense will rise, due to Cloud orchestration platform development. Software SDLC has higher operational cost(upgrades, feature expansion, etc) than hardware. EVs seeing their profits coming  from software plug-ins & services, rather than traditional hardware/software integrated box.
 

 
 
 
EVs are targeting Telco’s cloud architecture to find newer opportunities. Openstack will be first choice for cloud management as its no-cost,  open sourced and available for Telco specific customization. Ericsson and Juniper have designed their cloud platform integrated with Openstack APIs and announced partnership with Mirantis, leading Openstack distributor.  Including Openstack their offering, EVs are claiming their product .. cloud-ready.
Openstack Neutron Plug In
Cloud manager, Openstack will provide API framework to configure hypervisors, storage and network elements. Openstack network service, called Neutron API will configure EV’s virtualized network applications (Switches, routers etc) . EVs have developed Openstack Neutron specific plug-ins to integrate with Neutron API service. This plug-in will pass API calls to hardware switches (as Arista) or to SDN controller as open contrail, Nuage etc.
In either case EV’s core business will remain to provide network functionality. This time though Neutron plug-in, SDN and SDN agent as vSwitch, Open Vswitch or  vRouter at hypervisor, rather than proprietary  integrated appliance.
Neutron Plug-in  upgrades, API enhancement and SDN  Application development will be ongoing service business for EVs the same way as current licensed software upgrades
 
Most of EVs have already have clear SDN offerings, as Juniper OpenContrail, ALU Nuage SDN controller, Huawei’s ONOS Softcome controller, NEC Programmable flow-controller etc
 
EV Cloud
NFV SDN will enable EV to have their own cloud for  Tier 2/3 Telcos  MVNOs ,Enterprise customers etc. In stead of deploying and managing physical boxes on-premise, EV can share its products’ virtual instances with customers, saving significant Capex and Opex. Cloud enabled managed services will open new business opportunities for both Telcos and Vendors, as shown in figure below:

Summary
In NFV/SDN world, EVs will compensate their loss in hardware by offering cloud specific software products as Neutron Plugin, SDN Applications and its hypervisor agents. Software based products will require cyclic upgrades and feature enhancements, as in traditional network, which will keep Telecom ecosystem evolving. EVs who can adapt changed conditions, will survive.  Surely NFV/SDN will break the closed telecom ecosystem and bring new players (e.g. Affirmed Networks) who will challenge established Telecom Equipment Vendors. Innovation will thrive and competition will be stiff

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