The global NFV and SDN market will grow at a 116% CAGR through 2021 to nearly $158 billion, according to a report by Technology Business Research.
TBR said early adopters, such as AT&T, began to ramp up investment in 2015 as transformation became their top strategic priority.
“A growing group of Tier 1 operators is leading the charge in implementing NFV and SDN. This group is driving a significant amount of development in the NFV and SDN ecosystem and is pushing the vendor community to rapidly adapt to this new architectural approach to networks,” explained TBR telecom senior analyst Chris Antlitz.
Antlitz added that “NFV- and SDN-related spend volume is forecast to ramp up in 2017, at which time use cases will be more defined and the cost benefits of using NFV and SDN will be more apparent.”
“This will prompt holdout operators to jump on the bandwagon and aggressively pursue transformation with these technologies to avoid being left behind,” the analyst said.
The report further said most spend on NFV and SDN will stem from redistribution of legacy infrastructure capex as operators implement virtualized environments and decommission legacy infrastructure gradually.
There will also be some external opex spend incurred as operators lean on vendors for maintenance, professional and managed services to support, integrate and operate software-mediated environments.
Operators are testing NFV and SDN by transitioning domains that are relatively easy to convert first, such as CPE, routing and switching, optical transport, EPC and IMS. Some of the more challenging domains, such as the wireless and fixed access layers, will be among the last domains to be virtualized.
On average, operators in the U.S. and Europe will drive three-quarters of NFV and SDN spend each year through most of the forecast period, with APAC operators projected to ramp up spend in 2019. Though most operators based in Japan, South Korea, and China are implementing NFV and SDN, spend will be eclipsed by what select operators, namely AT&T, Verizon, CenturyLink, BT, DT, Orange, Vodafone and Telefonica, invest in the US and European markets.
CALA- and MEA-based operators will be laggards in NFV and SDN, with major transformations coming after evolution in most other regions is underway. America Movil, Telefonica, Etisalat and MTN are exceptions in these developing regions.