Software to account for bulk of revenue as telecom industry transitions from hardware
The global network functions virtualisation (NFV) market, which includes NFV hardware, software and services, will be worth $15.5 billion by 2020, according to the report from research firm, IHS Markit.
“Between 2015 and 2020, the service provider NFV market will grow at a robust compound annual growth rate (CAGR) of 42%, from $2.7 billion in 2015 to $15.5 billion in 2020,” said Michael Howard, senior research director, carrier networks, at IHS Markit.
NFV represents the shift in the telecom industry from a hardware focus to a software focus, with operators making much larger investments in software than in server, storage and switch hardware. “NFV software will comprise 80 percent of the $15.5 billion total in 2020, or around $4 out of every $5 spent on NFV,” said Howard.
In 2020, only 11% of NFV revenue will be attributable to new software and services. Altogether, 16% will come from NFV infrastructure (NFVI) — servers, storage, switches — acquired in place of purpose-built network hardware such as routers, deep packet inspection (DPI) products and firewalls.
The remaining 73% will originate from existing market segments, primarily virtual network functions (VNFs).
The main value of NFV is in its applications, that is, the VNFs, stated Howard: “The service provider NFV market is larger than the software-defined networking (SDN) market throughout our forecast horizon of 2020, due to the pre-existing and ongoing VNF market,” he noted. “We expect strong growth in NFV markets in 2020 and beyond, driven by service providers’ desire for service agility and operational efficiency.”
This latest NFV report tracks, for the first time, what service providers spend on NFV hardware and software to deliver software-based services to customers via the consumer virtual customer premises equipment (vCPE) and enterprise vCPE use cases. The vCPE use case opportunity, including spending to deploy consumer and enterprise services, is forecast to reach over $1.5 billion worldwide by 2020, said IHS Markit.