The global network functions virtualization (NFV) market is expected to grow at a robust CAGR of 42 % from $2.7 billion in 2015 to $15.5 billion in 2020, according to a new report by IHS Markit.
The research firm says the strong growth in NFV markets in 2020 and beyond is mainly driven by service providers’ desire for service agility and operational efficiency.
Of the total spending, NFV software is set to account for bulk of revenue, as operators are making much larger investments in software than in server, storage and switch hardware.
“NFV software will comprise 80% of the $15.5 billion total in 2020 — or around $4 out of every $5 spent on NFV,” Michael Howard, senior research director for carrier networks at IHS Markit, says.
In 2020, only 11 % of NFV revenue will be attributable to new categories of software and services, while 16% will come from network functions virtualization infrastructure (NFVI) — servers, storage, switches — acquired in place of purpose-built network hardware such as routers, deep packet inspection (DPI) products and firewalls.
The remaining 73% will originate from existing market segments, primarily virtual network functions (VNFs), Howard adds.
“The main value of NFV is in its applications, that is, the VNFs,” he notes.
“The service provider NFV market is larger than the software-defined networking (SDN) market throughout our forecast horizon of 2020, due to the pre-existing and ongoing VNF market.”
The report tracks what service providers spend on NFV hardware and software to deliver software-based services to customers via the consumer virtual customer premises equipment (vCPE) and enterprise vCPE use cases.
The vCPE use case opportunity, including spending to deploy consumer and enterprise services, is forecast to reach over $1.5 billion worldwide by 2020.