According to ABI Research's latest Network Functions Virtualization Tracker and Forecasts report, after a slower start than initially anticipated, the network function virtualisation (NFV) market is set to experience moderate growth based on continuing NFV investments by major telcos.
ABI Research forecasts that North America will be the largest market, accumulating $13 billion in NFV-related investments during 2022, while Europe will see the highest growth rate with an estimated 53% CAGR between 2017 and 2022. The research firm notes that early adopters claim benefits offered by NFV-enabled systems including reductions in network capex and opex, service agility and faster deployment of new network elements.
ABI forecasts that overall NFV market revenue will reach $38 billion in 2022, although hardware expenditure, including servers, storage devices and switches, is expected to decline over time, while software and services segment spending is forecast to experience growth rates of 55% and 50%, respectively.
ABI notes that although the NFV market is evolving and technical expertise is starting to mature, the standardisation and multi-vendor involvement challenges will remain over the next two years. It adds that software and services vendors will have the opportunity to identify NFV use-cases for enterprise verticals and leverage these to deliver end-to-end integrated systems.
In terms of suppliers, ABI believes that the established vendors, including Ericsson, Huawei and Nokia, plus specialists such as Amdocs and Netcracker, will see early success, with systems integration becoming ever more important. It also notes that vendors are investing in open source software, which may increase business opportunities initially but could create difficulties in the future, particularly if telco interest in specific open source projects wanes.
ABI notes that currently, NFV is primarily seen as a means of reducing costs, but that new revenue opportunities will require a wider transformation which is likely to be driven by 5G after 2020.
Commenting on the report, Neha Pachade, senior analyst at ABI Research, said:
- "In 2015 and 2016 the market experienced some early successes, but mostly reconsiderations and failures with NFV… early adopters conducted proof of concept testing and NFV-integrated system demonstrations to understand the impact of NFV in the technical, operational and cultural domains".
- "Forecasts indicate that NFV will become a sizeable opportunity for vendors, although it is not yet clear whether it will cannibalise existing hardware-based product lines or create new market use cases".
