Near-Term Signs and Critical Periods: SDN and NFV Before the Flex Point

If SDN and NFV are going to create market waves, the obvious question is whether vendors are going to ride them or be swept away.  Given the immature state of both technologies, there’s not a lot of clear indicators to read on that topic, but there do seem to be a few signposts emerging from the fog, and I’ll try to describe what I see on them.

First, I think it’s clear from the strong showing Huawei is making that operators (except in the US where a political decision prevents them from selling) are increasingly adopting Huawei because they’re usually the price leader.  Huawei is also driving the prices lower in deals that they don’t get.  My view is that this demonstrates that neither SDN nor NFV are seen by operators as proven strategies.  We’d be virtualizing things, not buying price-leader products, if virtualization were proven.

Second, it’s just as clear that nobody can stand up and say “SDN and NFV are never going to amount to a hill of beans!”  Operators believe in the future of these two technologies even if they can’t prove them in the present.  Juniper, for example, has done a turnaround from a couple of years ago, when they were calling “service chaining” SDN and are now calling virtual routing a VNF.  Huawei, who is winning in the current cost-cutting paradigm, is still pushing hard to be a player in SDN and NFV.  You have to be able to show relevance, at least, in an SDN and NFV future or your stuff is hit with the label of “stranded cost.”

What these two points show is that we’re in a really funny state, market-wise.  It would be incorrect to say that either SDN or NFV is a sure thing, but it’s obvious that operators are looking hard to find a reason to invest in both of them, and if the right business case emerges there will likely be a very rapid response among buyers.

What’s somewhat surprising to me is that NFV and SDN are both as much IT stories as networking stories, and IT incumbents haven’t pushed their own positions as hard as I’d have thought they would.  You can understand why Alcatel-Lucent, for example, would be charting a careful path to NFV to avoid killing more routing business in the near term than they’d gain in VNF or MANO business.  Dell, HP, IBM, and Oracle are all unencumbered by network business to lose, and all of them have server products that would augment VNF and MANO revenues in the event of a big NFV win.  Yet none of these players are really aggressive in marketing, and IBM seems almost disinterested.

I think that the lack of drama in the IT giants’ NFV positioning is responsible for the near-term focus on VNFs.  You need a truly systemic business case to drive systemic NFV or SDN deployment, and in order to get that you have to involve legacy infrastructure, operations systems, service creation, and even marketing and market targeting.  Give that list to a salesperson to sell through and they’ll respond by looking for a job with a faster payoff.  You need a strong marketing platform to push through a broad NFV success, and absent such a push from the vendors with the least to lose, we fall back on low apples.

The easiest places to push NFV and by association promote SDN are places with one of two characteristics.  First, they can be customer edge services.  Anything that is done at the service edge is customer-specific so it can be market-targeted pretty easily to manage cost/revenue exposure.  We see vCPE for that reason.  Second, they can be distributed-intelligence services which would mean mobile services and content delivery today and IoT in the future.  These services have multi-tenant value and so can be justified on at least a metro scale without pushing spending too far ahead of return on investment.

In the vCPE area, I think that the next place to watch for some serious action is the area of application delivery control and application acceleration.  These are typically presented close to the edge, and the former is closely related to the load-balancing needed for any VNFs to exercise horizontal scaling.  F5 did pretty well this last quarter, which shows that there’s a real need for the technology, and so I’d expect that we’ll see a lot of interest in this space among VNF hopefuls.

In the distributed-intelligence services space, I think we have three possible push points not yet really represented in the market:

  • IoT, which I’ve mentioned before. There really is a lot of value in IoT if you get your head out of 5G clouds and look not at how you connect the stuff but how you harness what we already can (and do) connect.  I think there are a number of vendors looking at an IoT service architecture, and I know there are operators who’d like to see it.
  • Content delivery, which is implicated in the area of greatest traffic growth and which cuts across OTT video and mobility trends to create a symbiotic architecture opportunity. We used to have a cloud CDN vendor in Verivue, and they got sold off.  True “cloud CDN” demands both SDN and NFV play a significant role, and with content as important as it is, this is a great shot.
  • Service application platform, because SDN connects service elements and VNFs deploy them, but you still need to have them for either to be useful. Logically speaking, we should have a “VNFPaaS” architecture that lets operators quickly assemble services from useful functions within a framework whose APIs and controls assure interworking and operationalization.  Right now every VNF is an island, and that’s no way to build an ecosystem.  We’d end up with the VNF equivalent of Darwin’s finches.

I think you can see the street signs, as I noted, but we’re missing that big overhead freeway sign.  For that, we’ll have to wait for Cisco to commit.  Cisco’s “let-me-show-you-just-enough” strategy for both SDN and NFV is a clear indicator that the sales champion of networking things that the current model (where Cisco is at least a major contender if not a winner) still has legs.  When Cisco starts to trot out major, and real, announcements in SDN and NFV we’ll know that the flex point, or at least the critical decision point, is near.

When might that be?  I think we’ll want to watch the signs this fall.  Operators typically do a fall strategic planning cycle that runs from mid-September into mid-November.  If they are going to do something radical in 2016 that cycle is where they’d likely show their hand.  I’ll be keeping an eye on things in that period, and you should too.