We always hear about the progress of new technologies, largely because “news” means “novelty” and there’s therefore little interest in how people are doing the same tired stuff they did yesterday. Unfortunately this tends to set up what I’ve called (yes, irreverently with respect to our friends in the Fourth Estate) a “Bulls**t bidding war” where the guy who lies in the most entertaining way wins. In the SDN and NFV space, one impact of this has been to create the impression that both technologies are rushing toward universal deployment. That’s not true.
Since the dawn of network investment, both operators and enterprises have looked at new technologies in a generally systematic way (operators, not surprisingly, do it better than enterprises, and big enterprises better than SMBs). If you survey network buyers, as we’ve done for 25 years or more now, you find that the buyer will have three distinct “phases” of technology evolution. The real progress a technology is making toward deployment is related to which phase it’s in.
When a technology is in the validation of operations practices phase, the last phase in our trio, the buyer is in the process of optimizing the way the technology will be used to both sustain expected network services and optimize the business case that’s driven things this far. Most often this phase is marked by a field trial where the technology is used in a live network, with live services and users. Field trials are expensive, risky, and aren’t undertaken until you’re pretty sure you have the right answer, so when something reaches this stage it’s pretty much a matter of dotting and crossing, as they say.
What precedes this phase is the validation of the business case phase. Here the goal is to determine if a technology option can actually create the combination of costs and benefits needed to justify its deployment. There was, at one time, a very solid link between this phase and the concept of a request for proposal (RFP) because one obvious step in building the business case is establishing the cost. Lab trials may also be conducted here, aimed at cementing the properties of the technology and providing a better estimate of operations impacts.
The first phase in the evolution is the technology assessment phase. This phase is where a technology is given a kind of preliminary sniff test. Where could it be applied? How much of current costs could be impacted? What practices would have to be changed? Requests for information (RFIs) are typically issued in this phase, and some buyers will conduct lab trials here.
If you ask buyers where they are with respect to technologies like SDN and NFV, most put themselves in the technology assessment or validation-of-business-case phases. On that basis alone, we’d have to say that predictions about SDN and NFV sweeping the universe are a bit premature (the same is true for the cloud, as I’ve noted in earlier blogs). But with SDN and NFV we have another wrinkle, which is that of scope.
Say I spend a half-billion per year on capex. Say I have an SDN project that will enter the third and most important phase in 2014. I’d then have a half-billion in spending on the line, right? Nope. My application of SDN or NFV or anything else is likely limited to a part of my network, a part of my capital budget. In today’s world in particular, network buyers are unlikely to propose a network transformation project that fork-lifts everything, and they certainly won’t run a deployment that way. Field trials end up growing to cover more “fields”, usually by targeting the places where the best benefit case can be made. At some point (Verizon’s FiOS comes to mind) you reach a point where additional investment in the new (FTTH in this case) can’t be justified, so you quit. The point is that in most cases, buyers know darn well that they aren’t going to shift entirely to a new technology. Even getting our hypothetical project into deployment would likely impact only a fraction of our half-billion in capex.
How big a fraction? It depends on who’s doing the project, but the average estimate of the portion of network budget likely to be impacted by SDN or NFV deployment between now and 2018 is just a titch under 20%. And note that “impacted” doesn’t mean “new-SDN/NFV-kid-gets-20%-of-my-budget” either. It just means that purchasing decisions impacted by the new technology tally to that level.
Suppose we say, “How do I get more, faster?” which is clearly the question vendors have to address. The buyers themselves have the answer. You need to do two things: give me a clear business case for the “ultimate” deployment you propose and give me specific steps to manage risks and costs as I move toward that deployment.
What both enterprises and operators tell us is that vendors tend to believe that technology is self-justifying. You need the next big thing, you need to carry more traffic, and so forth. Because vendors don’t provide much assistance in building a business case, projects tend to hang up in the second phase because it’s not clear how to get them paid for.
We see this particularly with NFV. Today, nearly all the network operators put themselves in the first of the three phases of the NFV project, and nearly all those who are beyond that (in the second phase) are running trials that have a very limited functional scope. Service chaining to shift CPE to virtual CPE is the largest trial target, and operators tell us that this is because they think it’s an easy one to assess. Most operators don’t believe the application would amount to even 20% of their capital budget (the current expectations average only 11%) and most who have expectations say they think they’re likely overestimating capital impact rather than underestimating it.
The big challenge with both SDN and NFV, if you explore the current phase of buyer activity, is that there is a significant disconnect between the scope of deployment needed to make the business case and the scope of the expected near-term deployment. This has come about for both SDN and NFV because the simplistic idea that either technology would be justified by reductions in capex have not proved out in live projects. You need other benefits, and in the case of NFV operators figured that out before the specs were even finalized. Today everyone touts service agility/business agility and operations efficiency as their goals, but the solutions out there are point solutions that because of their narrow scope can’t create radical changes in the broader network practices. That means no difference in either agility or operations efficiency, and no large-scale business case.
We’re focusing too much on the stairway and not enough on what’s at the top. Fixing that is going to be a challenge for vendors, because they want instant gratification. Those who get too focused on that are going to end up un-gratified.