Network Functions Featured Article

SDN, NFV, Network Virtualization All Gain Ground as Companies Cut Costs

November 18, 2016

Cutting costs is a vital part of any business operation; it's half of the profit equation, after all. When a company can reduce the drag of expenses on its upward-bound revenue rocket, that means greater profitability. Even if profits merely stay static, reduced expenses increase profitability by requiring less revenue to meet expenses. Basic accounting talk aside, cost-cutting is a big deal, and for many firms, network functions virtualization (NFV) is a way to get those costs cut.

It's not just NFV, of course, but its close cohorts like software-defined networking (SDN) and virtualized network functions (VNFs) that are also stepping in to add value, based on reports from Thanks to the ongoing craving for cost-cutting and the relevant value these fields have to offer on that front, the ecosystem for SDN, NFV, and VNFs should see a compound annual growth rate (CAGR) of 46 percent through 2020. When 2020 arrives, meanwhile, these systems are expected to account for $18 billion in revenue.

Enterprise users, data center operations, and others have been getting involved in recent days. With such systems in place, these organizations are offering more and better services to telecom service providers, and generating new sources of revenue even as the service providers find means to cut costs and draw in new customers.

With mobile traffic proving something of a difficult market—it's hard to keep levels even close to stable, with some periods being slow and others being almost impossibly overstuffed—to manage, more of those service providers are looking to SDN, NFV and VNFs as a means to help better handle the unexpected spikes in traffic, and most spikes actually are unexpected. Using these services not only manages traffic, but does so in a fashion that helps keep capital expenses down—being largely virtualized, these services don't have much in the way of infrastructure needed—but also manages operational expense since the bills are fairly predictable.

Businesses want to cut costs, wherever it's possible to do so, but not if that means sacrificing service. Too much of that and the revenue side of the equation starts taking hits. That side of the equation is already subject to too many things out of a business' control, like consumer behavior and confidence, so businesses tend to focus on that which they have control over: the amount of cash spent. With SDN, NFV and VNFs delivering value and helping to lower expenses, while also providing potential return on the revenue side, the end result is a major draw for businesses.

NFV, VNF and SDN are likely to continue gaining ground as more companies discover the value firsthand. The chance to cut costs and improve service is too valuable to pass up, and that means a lot more adoption of these tools likely to follow.

Edited by Alicia Young

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