Alcatel-Lucent has collected a number of important NFV deals recently. The company won a pair in China (China Mobile and China Unicom) and also won an expanded deal with European innovator Telefonica. There seems to be a common element in these deals—voice services and mobility. I think that says a lot about NFV and how it will deploy.
Up to now, we’ve seen what I’ll call an NFV-directed vision of NFV deployment, meaning that NFV benefits were expected to directly drive a roll-out. Operators might differ in terms of the specific benefit targeted or their path to realizing it, but in all cases it was an NFV benefit doing the heavy lifting.
I’d suggest that Alcatel-Lucent’s recent success is due in large part to a shift in NFV drivers. What we’re seeing is actually more a cloud-centric vision of the future, a future where what we’re trying to achieve is cloud hosting of multi-tenant elements or services rather than an NFV-centric deployment of service-specific functional instances. NFV’s benefit is not in “enabling” this but in making it efficient and agile.
In my view, the original mandate for NFV—capital cost efficiencies—has been largely ineffective at moving the ball. There’s not enough savings to be had even under ideal conditions, and those ideal conditions could be achieved only if we somehow made the more complex VNF-based services operationally effective enough to be as cheap or cheaper to run as legacy equivalents. That leaves operations efficiency and service agility as the benefits essential to NFV success. The point now seems to be that these benefits aren’t conclusively linked to NFV.
There is little credibility to the notion that customers would pay for NFV itself—they’d pay for services that NFV deploys. Those services, in the form of VNFs, provide what’s sold to users and NFV provides how the sale is realized through deployment and lifecycle management. A lot of this view has been expressed through past assertions that VNFs were critical in NFV—you need functions and features to build service value.
If there’s little chance customers would buy NFV there is zero credibility to the notion that you can create agility or operations efficiency for just a piece of a service. We’re going to have legacy elements forever. We’re going to have services made up of many VNFs, even many of what could be called “images” that are cooperative collections of VNFs assembled to create services quickly. Because of scope limitations in the ISG from the first, management of legacy elements is out of scope and management of complex services has yet to be conclusively addressed.
The reason these points are relevant is that operators absolutely need relief from their revenue/cost-per-bit margin compression. That induces them to look for solutions to the new-service and efficient-operations problems. Alcatel-Lucent offers (in its virtual IMS and Rapport platform) a strong voice and collaboration services framework that builds easily on mobile investment but also introduces a true value proposition for IP voice services for non-mobile applications. They have, in Motive, an operations framework that can orchestrate and manage services end to end regardless of the mix of legacy and VNF elements. So what we’re seeing is Alcatel-Lucent exploiting its strengths, and pulling NFV along with it.
You might wonder why that’s true, and here I think we come to an important point. Hosted service or application features need to have as much automatic management and deployment features as you can introduce or they quickly fall into the same margin-compression problem we have for bit services. Furthermore, it’s clear that in cloud computing as in NFV overall, you can’t make a durable value proposition if you can’t build highly dynamic services that are increasingly directed at people not at sites. That means extemporaneous service delivery, which by even the standards of “traditional” standardized NFV could be difficult to achieve. Alcatel-Lucent knows, as most NFV leaders do, that some superset of ETSI NFV is going to be critical, so they want to control as much of the early opportunity as possible so they have a commanding lead when things get moving.
This isn’t a shift that’s limited to a single vendor and a couple operators. I’ve blogged all this year about the fact that NFV is taking a more operations-centric tack in the real world, even though that shift is much harder to detect in the progress of current PoCs or in vendor announcements. The vendors who have the greatest NFV traction (Alcatel-Lucent, HP, and Oracle in alphabetical order) are all vendors who have an exceptionally strong operations story. An operations story that is in fact outside the scope of official NFV. Oracle, who in my view is functionally in third place on the list, is nevertheless the vendor growing fastest in recognition by operators, because they’ve made an operations-first strategy their cornerstone.
The shift Alcatel-Lucent’s recent wins highlights just may be a leading indicator of a face-off on NFV in the near future. Alcatel-Lucent is the only network vendor of the leaders, and thus Alcatel-Lucent has network/service assets (like Rapport and IMS) that can easily be pushed into near-term opportunities for new services and new revenues. That’s harder for the other two vendors because they lack the incumbent service infrastructure position. However, vendors like HP and Oracle could frame a broader story through partnerships. I think we can see a little of that in HP’s IoT approach, which I think has tremendous potential both as a service element and as a blueprint for handling multi-tenant features deployed through NFV.
This year is critical for the operators because most say that in 2017 their revenue-and-cost lines will cross over for connection services. That can’t be remedied without some significant shift in infrastructure policy in 2016, and it’s hard to see how an operator could drive that sort of change without having some direct and positive field trial experiences in 2015. These guys have got to get going, they’re not going to wait for mature standards because they can’t, and they’re going to follow the path of greatest reward and least risk. That path may lead away from traditional NFV issues into OSS/BSS, service creation, mobility, content delivery, and (yes) IMS. If it does, then Alcatel-Lucent is going to have a lot of reasons to be happy.