Led mainly by Tier 1 service providers in North America, the telecommunication industry was unsettled during the past two years by several disruptive technologies. Technologies such as SD-WAN, SDN, NFV, uCPE and whitebox solutions have crossed the chasm, while technologies like 5G and intelligent networks are still works in progress.
We expect that during 2018 and onward through 2019 that these technologies will be adopted across most service providers segments, opening growth opportunities to expand managed services revenues for the communication service providers (CSPs) as well as for over-the-top managed service providers. These technologies will be used to reduce operational expenditures as well as improve connectivity, while serving as growth channels.
1. SD-WAN: hype continues with move towards standardization and open uCPE implementations
SD-WAN is one of the disruptive technologies that has emerged in recent years. Even though WAN optimization solutions and other technologies to similar SD-WAN have existed for more than a decade, the existing SD-WAN concept and take-off is a result the efforts of a handful of emerging companies that have driven the technology adoption into the situation that no service provider can escape from deploying SD-WAN.
All available solutions are based on proprietary technologies without any standard interfaces or available interoperability. These solutions can be considered as vertical solutions mostly deployed on dedicated appliances with limited openness.
During 2018 and 2019, there will be a push for standardizing SD-WAN and defining interoperability requirements. As an example of this, the MEF 3.0 framework is pushing towards this direction, which has the support of many major Tier 1 service providers.
As the move from appliances to uCPE-based implementation gained momentum in 2017, there was a lot of competition among service providers to be the first to introduce SD-WAN services. We believe that during 2018 the demand for SD-WAN service will accelerate with additional focus on the market demand for open whitebox and uCPE solutions.
2. MPLS and carrier Ethernet are here to stay
Cloudization, centralized network services and SAAS all require high bandwidth and high quality connectivity. For these, SLA-based connectivity is a mandatory requirement to ensure the business continuity and proper user experience of these services for which MPLS and Carrier Ethernet solutions can provide the most reliability.
The assumption that SD-WAN solutions will reduce the number of overall MPLS lines may be found wrong. This is due to the need for robust, SLA-based underlying connectivity. Moreover, it will be compensated by the demand for higher bandwidth and an increased number of businesses that need to rely on connectivity for their business continuity. Therefore, the MEF3.0 framework takes the SLA capabilities of Carrier Ethernet solutions into new levels by defining more flexible and more robust SLA measurements and assurances.
3. It’s NFV time: moving from engineering led to service led deployment
NFV deployments were led during the previous few years by engineers that drove technology innovation. These engineers focused on core networks and utilized NFV to allow more efficient, agile networks that ease the engineering divisions to react to new requirements. We expect that in the coming year that NFV deployment motivation will be led by business requirements with the service focus aiming to harness NFV to offer more services and increase service provider revenues.
Supported with the correct business models, we expect to see significant higher adoption of NFV by many of the service providers that were previously not in the game. We believe that the trend of invest-as-you-grow models, supported by the uCPE deployment model, is the preferred approach for service-led deployments as opposed to centralized deployments in an invest-first model led by technology driven approaches.
4. New network function vendors
The hesitation of traditional physical network functions vendors to introduce appealing VNF pricing models, mainly due to the risk of revenue cannibalization from the traditional appliances, has opened an opportunity for new VNF vendors. Without the right licensing and pricing models for VNFs, NFV services will be CAPEX challenged, mainly in the short term, which is causing service providers to look for good enough alternatives that support their business cases.
VNF solutions for emerging security functions, routing and SD-WAN are already available, tested and are showing good results. The major inhibitor for these new VNF adoptions may be the general awareness for these solutions along with the requirements from IT managers to be served by the known vendors. With time, these will be managed through correct pricing models and will gain the appropriate levels of trust.