NFV Deployment Tracker: Global review and update

Welcome to The NFV Deployment Tracker!

This report is the fourth analytical report in the ‘NFV Deployment Tracker’ series and is intended as an accompaniment to the third update of the Tracker Excel spreadsheet (to the end of June 2018).

The update extends the coverage of the Tracker worldwide: adding a comprehensive set of data on live, commercial deployments of NFV and SDN in the African, Latin American and Middle East markets to the existing data set on Asia-Pacific, Europe and North America. In addition, the spreadsheet contains updated and expanded data on deployments in the latter regions.

The expansion of the Tracker’s coverage worldwide presents an opportunity to gain an overview of global SDN and NFV development and deployment trends, and to assess the prospects for the technologies, and the services based on them, going forward.

Enter your details below to request an extract of the report

var MostRecentReportExtractAccess = “Most_Recent_Report_Extract_Access”;
var AllReportExtractAccess = “All_Report_Extract_Access”;
var formUrl = “https://go.stlpartners.com/l/859343/2022-02-16/dg485”;
var title = encodeURI(document.title);
var pageURL = encodeURI(document.location.href);
document.write(‘‘);

Previous editions and other NFV / SDN research

NFV Deployment Tracker: Asia takes the lead – April 2018
NFV Deployment Tracker: North America – SD-WAN tail wags NFV dog – January 2018
NFV Deployment Tracker: Europe – September 2017
Webinar: Keeping NFV on track – December 2017
NFV/SDN deployment pathways: Three telco futures – January 2018

Scope of information provided by the Tracker

The data in the NFV Deployment Tracker is sourced primarily from public-domain information such as telco and vendor press releases and reliable press reports regarding successfully completed deployments and the launch of live, commercial services based on virtualised network functions (VNFs) or SDN. We have also obtained some confidential information direct from operators, which we are unable to present in the detailed break-down of deployments by operator. However, this information has been added to an aggregated data set, which is also provided in the spreadsheet.

The data is therefore limited to verified deployments: production implementations of NFV and SDN powering live services, where we can be confident that the data on the VNFs and IT components involved is accurate and – as far as possible – up to date. We also include some information on deployments planned to be completed by the end of 2017 or by a date as yet unknown, where the information is in the public domain, and where the size and scope of the deployments merit their inclusion.

Contents:

Executive Summary
The volume and pace of SDN / NFV deployments continues to grow…
…but some fundamental challenges remain
The focus of deployments varies region by region
Operator trends
Vendor trends
Conclusion
Introduction
Welcome to the third update of the ‘NFV Deployment Tracker’
Scope, definitions and importance of the data
Analysis of the global data set
Constant growth – but SDN / NFV deployment is far from universal
Asia-Pacific ahead on number of deployments despite a slowdown in 2018
SD-WAN, SDN, core network functions and orchestration have driven the growth in 2018
Operator trends: Leading players rack up the deployments, leaving others lagging far behind
Vendor trends: a few major players dominate the scene – but telcos continue to look for alternatives
Conclusion

Figures:

Figure 1: Growth in the number of SDN / NFV deployments per year, 2012 to June 2018
Figure 2: Breakdown of total deployments by region, 2012 to June 2018
Figure 3: Deployments by region, 2014 to 2018
Figure 4: Global deployments by higher-level category, 2014 to 2018
Figure 5: Deployments in Europe by leading category, 2014 to 2018
Figure 6: Asia-Pacific deployments by higher-level category, 2014 to 2018
Figure 7: Deployments in North America by leading categories, 2014 to 2018
Figure 8: Global deployments of leading VNFs and functional components, 2014 to 2018
Figure 9: Total deployments of leading VNFs and functional components, Middle East
Figure 10: Leading VNFs and functional components, Latin America
1Figure 11: Leading operators by number of deployments, global
Figure 12: Leading vendors by number of deployments, global
Figure 13: Leading vendors by deployment category 25

Enter your details below to request an extract of the report

NFV Deployment Tracker: Asia takes the lead

Introduction

Welcome to the second update of the ‘NFV Deployment Tracker’

This report is the third analytical report in the ‘NFV Deployment Tracker’ series and is intended as an accompaniment to the second update of the Tracker Excel spreadsheet (dated March 2018).

The update provides a comprehensive set of data on live, commercial deployments of NFV and SDN in the Asia-Pacific market. Under ‘Asia-Pacific’, we include all of the countries of Central, Southern and South-East Asia, along with Oceania. In addition to the new set of data for Asia-Pacific, the spreadsheet contains updated and revised data on deployments in the European and North American regions.

In June 2018, the data set and analysis will be extended to all other regions worldwide, with the aim of providing the industry’s most comprehensive, authoritative source of information on live deployments of NFV and SDN.

Scope, definitions and importance of the data

Detailed explanation of the scope of the information provided in the Tracker, definitions of terms (including how we define a live ‘deployment’ and definitions of frequently used NFV / SDN acronyms) and an account of why we think it is important to track the progress of NFV / SDN are provided in the first analytical report of the series – so we will not repeat them here.

Analysis of the Asia-Pacific data set

Overall data and trends: Asia-Pacific is the largest global market for NFV

We have gathered data on 102 live, commercial deployments of NFV and SDN in Asia-Pacific between 2012 and 2018. These were completed by 33 telcos, including all of the major operators in China, Japan, South Korea and Australia. Deployments have been more limited in India: seven in total, including two global implementations by Tata Communications. Altogether, the data includes information on 203 known Virtual Network Functions (VNFs), functional sub-components and supporting infrastructure elements that have formed part of these deployments.

This means that Asia-Pacific is the largest market for NFV and SDN, measured purely in terms of number of deployments. The Asia-Pacific totals outstrip the updated numbers for both Europe (89 deployments and 182 VNFs / functional components) and North America (62 deployments and 126 VNFs / functional components). The number of operators that have completed deployments is also higher than that in Europe or North America.

Contents:

Executive Summary
Asia-Pacific is the leading global SDN / NFV market
Introduction
Welcome to the second update of the ‘NFV Deployment Tracker’
Scope, definitions and importance of the data
Analysis of the Asia-Pacific data set
Overall data and trends: Asia-Pacific is the largest global market for NFV
SDN, SD-WAN and core network functions have driven the growth
Operator trends: Innovators lead the way, closely followed by the Chinese giants
Vendor trends: SD-WAN and vCPE vendors lead the way
Conclusion

Figures:

Figure 1: Total NFV and SDN deployments in Asia-Pacific, 2012 to 2018
Figure 2: Asia-Pacific deployments by higher-level category, 2014 to 2018
Figure 3: European deployments by higher-level category, 2014 to 2018
Figure 4: North American deployments by higher-level category, 2014 to 2018
Figure 5: Leading VNFs and functional components deployed in Asia-Pacific
Figure 6: Leading Asia-Pacific operators by number of NFV / SDN deployments
Figure 7: Leading vendors by number of deployments

NFV Deployment Tracker – North America: SD-WAN tail wags NFV dog

Introduction

Welcome to the first update of the ‘NFV Deployment Tracker’

This report is the second analytical report in the ‘NFV Deployment Tracker’ series and is intended as an accompaniment to the first update of the Tracker Excel spreadsheet (to December 2017).

The update provides a comprehensive set of data on live, commercial deployments of NFV and SDN in the North American market (including the US, Canada and the Caribbean). In addition, the spreadsheet contains updated and revised data on deployments in the European region.

In March 2018, the data set and analysis will be extended to all other regions worldwide, with the aim of providing the industry’s most comprehensive, authoritative source of information on live deployments of NFV and SDN.

Enter your details below to request an extract of the report

Scope, definitions and importance of the data

Contents:

Executive Summary
Conclusion: strong growth in 2018 will be delivered by the continuing rise of SD-WAN and new consumer use cases
Introduction
Welcome to the first update of the ‘NFV Deployment Tracker’
Scope, definitions and importance of the data
Analysis of the North American data set
Overall data and trends
‘Service-led Innovation’ has driven the deployments
‘Technology Evolution’ deployments are less in evidence
Operator trends: AT&T and Verizon dispute first place, while other players focus on differentiated offers
Vendor trends: SD-WAN and vCPE vendors lead the way
Conclusion: A dynamic enterprise market – but consumer use cases still outstanding

Figures:

Figure 1: Total NFV and SDN deployments in North America, 2011 to 2017
Figure 2: North American deployments by higher-level category, 2014 to 2017
Figure 3: European deployments by higher-level category, 2014 to 2017
Figure 4: Leading North American operators by number of NFV / SDN deployments
Figure 5: Leading vendors by number of deployments (North America)

Enter your details below to request an extract of the report

NFV Deployment Tracker: Europe (September 2017)

This report is discussed in our free webinar recording: Keeping NFV on track – Assessing operator strategies and progress

Introduction

Welcome to The NFV Deployment Tracker!

This report is the first of a new series of statistical and analytical reports tracking the progress of NFV and SDN: ‘The NFV Deployment Tracker’. The ‘Tracker’ builds on an extensive body of analysis by STL Partners over the past two years on NFV and SDN strategies, technology and market developments.

This service will be updated on a quarterly basis and will provide a steadily growing database on live deployments of NFV and SDN by telcos worldwide. The data is presented in an Excel spreadsheet, accompanied by an analytical report presenting the key statistics and trends observed during the quarter.

At launch, the Tracker provides data on the European market; December’s update will also include comprehensive data from the North American market; and in March 2018, we will extend the coverage to Asia and the Rest of the World – while up-to-date information on the markets already included will be added on a continuous basis.

Enter your details below to request an extract of the report

Scope of information provided by the Tracker

In terms of size, the research has focused on Tier-One carriers, including the incumbent or former incumbent operators of every European state, along with leading competitive operators in major markets, Pan-European players and the leading cablecos. We have not included smaller local and regional players, Tier-Three providers and all but the largest Tier-Two carriers. We include all deployments within Europe, even if the parent company involved is headquartered outside of Europe (e.g. US-based Liberty Global, which owns cable assets across Europe). But we do not include deployments at non-European subsidiaries of Europe-based operator groups.

We have also not included activity around proofs of concept (PoCs), live tests or demonstrations of NFV and SDN. This is partly because a lot of this work never comes to fruition in terms of commercial deployments – at least not in quite the same combination of elements as the pre-commercial tests – and partly because the aim of the Tracker is to provide a reliable, comprehensive source of information on actual, commercial implementations of NFV and SDN, from which vendor and telco hype about the technologies has been eliminated.

Contents:

Executive Summary: NFV still on the roadmap, but horizons of deployment stretch out
Welcome to the NFV Deployment Tracker
Scope and importance of the Tracker
European data: Steady but unspectacular growth in deployments
Conclusion: NFV still squarely on the roadmap, but navigating the landscape is taking longer than scheduled
Introduction
Welcome to The NFV Deployment Tracker!
Scope of information provided by the Tracker
Definitions
What counts as a deployment?
Why is this information important?
Analysis of the initial European data set
Overall data and trends
Winners, losers and low-hanging fruit
Vendor trends
Operator trends
Conclusion
NFV is still very much on the roadmap, but the horizon of deployment is stretching out further than anticipated

Figures:

Figure 1: Definition of main abbreviations used in this report
Figure 2: Total NFV and SDN deployments in Europe, 2009 to 2017
Figure 3: Deployments from 2009 to 2017 broken down by higher-level categories
Figure 4: Deployments by leading network function and infrastructure category, 2014 to 2017
Figure 5: Number of deployments by lead vendor
Figure 6: Leading operators in terms of number of deployments

Enter your details below to request an extract of the report

Vendors vs. telcos? New plays in enterprise managed services

Digital transformation is reshaping vendors’ and telcos’ offer to enterprises

What does ‘digital transformation’ mean?

The enterprise market for telecoms vendors and operators is being radically reshaped by digital transformation. This transformation is taking place across all industry verticals, not just the telecoms sector, whose digital transformation – desirable or actual – STL Partners has forensically mapped out for several years now.

The term ‘digital transformation’ is so familiar that it breeds contempt in some quarters. Consequently, it is worth taking a while to refresh our thinking on what ‘digital transformation’ actually means. This will in turn help explain how the digital needs and practices of enterprises are impacting on vendors and telcos alike.

The digitisation of enterprises across all sectors can be described as part of a more general social, economic and technological evolution toward ever more far-reaching use of software-, computing- and IP-based modes of: interacting with customers and suppliers; communicating; networking; collaborating; distributing and accessing media content; producing, marketing and selling goods and services; consuming and purchasing those goods and services; and managing money flows across the economy. Indeed, one definition of the term ‘digital’ in this more general sense could simply be ‘software-, computing- and IP-driven or -enabled’.

For the telecoms industry, the digitisation of society and technology in this sense has meant, among other things, the decline of voice (fixed and mobile) as the primary communications service, although it is still the single largest contributor to turnover for many telcos. Voice mediates an ‘analogue’ economy and way of working in the sense that the voice is a form of ‘physical’ communication between two or more persons. In addition, the activity and means of communication (i.e. the actual telephone conversation to discuss project issues) is a separate process and work task from other work tasks, in different physical locations, that it helps to co-ordinate. By contrast, in an online collaboration session, the communications activity and the work activity are combined in a shared virtual space: the digital service allows for greater integration and synchronisation of tasks previously carried out by physical means, in separate locations, and in a less inherently co-ordinated manner.

Similarly, data in the ATM and Frame Relay era was mainly a means to transport a certain volume of information or files from one work place to another, without joining those work places together as one: the work places remained separate, both physically and in terms of the processes and work activities associated with them. The traditional telecoms network itself reflected the physical economy and processes that it enabled: comprising massive hardware and equipment stacks responsible for shifting huge volumes of voice signals and data packets (so called on the analogy of postal packets) from one physical location to another.

By contrast, with the advent of the digital (software-, computing- and IP-enabled) society and economy, the value carried by communications infrastructure has increasingly shifted from voice and data (as ‘physical’ signals and packets) to that of new modes of always-on, virtual interconnectedness and interactivity that tend towards the goal of eliminating or transcending the physical separation and discontinuity of people, work processes and things.

Examples of this digital transformation of communications, and associated experiences of work and life, could include:

As stated above, simple voice communications, in both business and personal life, have been increasingly superseded by ‘real-time’ or near-real-time, one-to-one or one-to-many exchange and sharing of text and audio-visual content across modes of communication such as instant messaging, unified communications (UC), social media (including increasingly in the work place) or collaborative applications enabling simultaneous, multi-party reviewing and editing of documents and files
Similarly, location-to-location file transfers in support of discrete, geographically separated business processes are being replaced by centralised storage and processing of, and access to, enterprise data and applications in the cloud
These trends mean that, in theory, people can collaborate and ‘meet’ with each other from any location in the world, and the digital service constitutes the virtual activity and medium through which that collaboration takes place
Similarly, with the Internet of Things (IoT), physical objects, devices, processes and phenomena generate data that can be transmitted and analysed in ‘real time’, triggering rapid responses and actions directed towards those physical objects and processes based on application logic and machine learning – resulting in more efficient, integrated processes and physical events meeting the needs of businesses and people. In other words, the IoT effectively involves digitising the physical world: disparate physical processes, and the action of diverse physical things and devices, are brought together by software logic and computing around human goals and needs.

‘Virtualisation’ effectively means ‘digital optimisation’

In addition to the cloud and IoT, one of the main effects of enterprise digital transformation on the communications infrastructure has of course been Network Functions Virtualisation (NFV) and SoftwareDefined Networking (SDN). NFV – the replacement of network functionality previously associated with dedicated hardware appliances by software running on standard compute devices – could also simply be described as the digitisation of telecoms infrastructure: the transformation of networks into software-, computing- and IP-driven (digital) systems that are capable of supporting the functionality underpinning the virtual / digital economy.

This functionality includes things like ultrafast, reliable, scalable and secure routing, processing, analysis and storage of massive but also highly variable data flows across network domains and on a global scale – supporting business processes ranging from ‘mere’ communications and collaboration to co-ordination and management of large-scale critical services, multi-national enterprises, government functions, and complex industrial processes. And meanwhile, the physical, Layer-1 elements of the network have also to become lightning-fast to deliver the massive, ‘real-time’ data flows on which the digital systems and services depend.

Virtualisation creates opportunities for vendors to act like Internet players, OTT service providers and telcos

Virtualisation frees vendors from ‘operator lock-in’

Virtualisation has generally been touted as a necessary means for telcos to adapt their networks to support the digital service demands of their customers and, in the enterprise market, to support those customers’ own digital transformations. It has also been advocated as a means for telcos to free themselves from so-called ‘vendor lock-in’: dependency on their network hardware suppliers for maintenance and upgrades to equipment capacity or functionality to support service growth or new product development.

From the other side of the coin, virtualisation could also be seen as a means for vendors to free themselves from ‘operator lock-in’: a dependency on telcos as the primary market for their networking equipment and technology. That is to say, the same dynamic of social and enterprise digitisation, discussed above, has driven vendors to virtualise their own product and service offerings, and to move away from the old business model, which could be described as follows:

▪ telcos and their implementation partners purchase hardware from the vendor
▪ deploy it at the enterprise customer
▪ and then own the business relationship with the enterprise and hold the responsibility for managing the services

By contrast, once the service-enabling technology is based on software and standard compute hardware, this creates opportunities for vendors to market their technology direct to enterprise customers, with which they can in theory take over the supplier-customer relationship.

Of course, many enterprises have continued to own and operate their own private networks and networking equipment, generally supplied to them by vendors. Therefore, vendors marketing their products and services direct to enterprises is not a radical innovation in itself. However, the digitisation / virtualisation of networking technology and of enterprise networks is creating a new competitive dynamic placing vendors in a position to ‘win back’ direct relationships to enterprise customers that they have been serving through the mediation of telcos.

Virtualisation changes the competitive dynamic

Contents:

Executive Summary: Digital transformation is changing the rules of the game
Digital transformation is reshaping vendors’ and telcos’ offer to enterprises
What does ‘digital transformation’ mean?
‘Virtualisation’ effectively means ‘digital optimisation’
Virtualisation creates opportunities for vendors to act like Internet players, OTT service providers and telcos
Vendors and telcos: the business models are changing
New vendor plays in enterprise networking: four vendor business models
Vendor plays: Nokia, Ericsson, Cisco and IBM
Ericsson: changing the bet from telcos to enterprises – and back again?
Cisco: Betting on enterprises – while operators need to speed up
IBM: Transformation involves not just doing different things but doing things differently
Conclusion: Vendors as ‘co-Operators’, ‘co-opetors’ or ‘co-opters’ – but can telcos still set the agenda?
How should telcos play it? Four recommendations

Figures:

Figure 1: Virtualisation changes the competitive dynamic
Figure 2: The telco as primary channel for vendors
Figure 3: New direct-to-enterprise opportunities for vendors
Figure 4: Vendors as both technology supplier and OTT / operator-type managed services provider
Figure 5: Vendors as digital service creators, with telcos as connectivity providers and digital service enablers
Figure 6: Vendors as digital service enablers, with telcos as digital service creators / providers
Figure 7: Vendor manages communications / networking as part of overall digital transformation focus
Figure 8: Nokia as technology supplier and ‘operator-type’ managed services provider
Figure 9: Nokia’s cloud-native core network blueprint
Figure 10: Nokia WING value chain
Figure 11: Ericsson’s model for telcos’ roles in the IoT ecosystem
Figure 12: Ericsson generates the value whether operators provide connectivity only or also market the service
Figure 13: IBM’s model for telcos as digital service enablers or providers – or both

Network slicing: The greatest thing since sliced bread?

If you don’t subscribe to our research yet, you can download the free report as part of our sample report series.

The Network Slicing research project was sponsored by HPE. This report and the analysis it contains were independently produced by STL Partners.

Service providers continue to face a decline in revenue

STL Partners has written for some time about the significant pressure faced by communications service providers (CSPs), both from operator rivals and players in adjacent sectors. Traditional telecoms revenue streams such as voice and messaging are shrinking, and as a result operator growth is slowing. Figure 1 shows that the average year-on-year revenue growth rate for 68 major telecoms groups worldwide has fallen since at least 2010.

Figure 1: 68 major telecoms groups – aggregate telecoms revenue, 2009-16

Source: Company accounts; STL Partners analysis

Much of this decline is fuelled by the impact of new competition: digital players such as Google, Facebook (including Whatsapp), Microsoft (including Skype and Skype-for-business) and Netflix, who are equipped to provide their own digital services, including voice- and messaging-enabled applications, without the headache of maintaining capital-intensive network infrastructure. It is now widely acknowledged that voice minutes and SMS bundles will continue to decline as a revenue stream as other players can offer the same, or better, capabilities ‘over-the-top’ to consumers and organisations for much less or free.

Data is not enough to ensure future growth

Of course, in order to use these new digital services, organisations and consumers do need network connectivity and, as a result, data consumption levels have shot up. Currently, the only players able to offer data connectivity are the communications service providers themselves, and therefore many have pointed to data as the primary source of new revenues which might offset the gap left by the decline in voice and messaging. In developed markets, in particular, some operators hope that it may be possible to ‘premiumise’ data services and drive higher average revenues per user (ARPUs). We do not believe that the evidence supports this and anticipate that plummeting data connectivity rates ($/MB) will neutralise growth in volumes resulting in low or no net growth in revenues.

In many developed markets, intense competition and strict regulation restricts the ability of operators to resist data price decline and squeeze more out of customers. Figure 5, for example, shows that despite mobile data consumption in the United Kingdom growing 243% between 2013 and 2015, ARPUs actually fell 4.5% over the period. More data, it is clear, does not automatically translate into more money.

Figure 5: UK mobile ARPUs and data volumes, 2013-15

Source: STL Partners, Ofcom

In Figure 6 below, we show our revenue forecast for a telecoms operator offering converged fixed and mobile telecoms services to both enterprise and consumer customers in a developed market. In this conservative estimate, data revenues grow slightly, but not enough to offset voice and messaging revenues falling by half.

Figure 6: Forecast revenues for converged telco in advanced market

Source: STL Partners analysis

It is STL Partners’ belief that the path to sustainable telecoms growth lies not just in better monetising connectivity, but rather in telcos developing new capabilities of their own, continuously innovating and launching new products and services that more readily meet the needs of their customer base. It is only by doing so, and by leveraging new technology and network assets where possible, that telcos will be able to truly compete with digital players. In essence, communications service providers must either evolve to overcome commoditisation or to embrace it. Either way, they cannot continue business as usual.

Virtualisation and slicing: enablers for change?

STL Partners has written previously about Telco Cloud, a concept in which telcos redefine themselves by adopting cloud business platforms and practices (similar to internet and content players), alongside virtualisation of their core assets. This could lead to increased service agility, and the ability to create new, network-integrated services. In turn, this could drive new revenue growth.

Network virtualisation is still at an early stage, but its adoption is increasingly seen as inevitable. Operators worldwide are already deploying NFV/SDN technology, some setting ambitious virtualisation targets over time. The forthcoming 5G standards, as well as IoT technologies, are being developed with virtualisation in mind, and technology vendors are increasingly evolving their software offerings. If managed effectively, virtualisation could be the catalyst for the transformation towards the digital service provider.

One way in which virtualisation might enable this change is through the concept of ‘network slicing’, under which network operators would be able to operate multiple logically separate virtual networks over a single network infrastructure. This paper examines what network slicing might look like in practise, and what that could mean for CSPs.

Slicing: a vision for fundamental transformation

Defining slicing is not about the ‘what’, it’s the ‘how’

Network slicing is a term that has been discussed quietly in the industry for some time, but it has gained prominence more recently in parallel with the industry’s developing new 5G standards. Slicing has recently become the focus of a public disagreement between industry players involved in driving 5G standards. In essence, one group of operators and vendors are keen on accelerating New Radio (NR) standards in 5G, whereas another group see this as potentially undermining future standards in end-to-end slicing. A related debate also exists within operators between the core network and radio access teams, but that is neither new, nor surprising. These debates are not about slicing, since most parties appear to broadly agree on its potential, but more about how 5G will be introduced: as an evolution of 4G or as a completely new network.

A few considerations

In recent years, network slicing has also gained prominence as a way of creating unified 5G networks, which cover multiple very-different use-cases with a single infrastructure. Turning a necessity into a virtue, this technical “fix” is now being seen as a possible basis for extra capabilities and new services. However, many of the benefits could – and should – be achievable before 5G.

While network-slicing can in theory extend all the way through core networks and down to the radio connection, it is still subject to the laws of physics: if there is no coverage, poor RF propagation, or limited overall capacity, there is a hard limit to what performance can be guaranteed. There are also boundaries at the device, 3rd-party server/cloud interface, or where other networks interconnect, which mean that “end-to-end control” doesn’t always mean an entire system.

It’s important not to fall into the trap of thinking that because we have a slicing “hammer” that all problems start to look like “nails”. Telcos have many other approaches to future service creation and revenue expansion, that lie outside the core network. Content partnerships, vertical-industry solutions, in-home automation and new forms of connectivity all offer opportunities. If network-slicing does not reach its aspirations, there are still plenty of other options for the industry to prosper.

Independently of the 5G debate, slicing can be considered part of a wider trend (in both fixed and wireless networks) towards a more software-centric infrastructure leading to more flexible networks. As more network resources become virtual (rather than physical), operators could readily allocate resources to a particular ‘network slice.’ Hence, slicing is arguably really about the orchestration of operator assets and how an operator is able to effectively manage its network.

This vision affirms that the ‘one size fits all’ model will not applicable for the future where a diverse set of requirements will need to addressed with more customised services: from (enhanced) mobile broadband (eMBB), to ultra-low latency types (uRLLC), to low-power machine-type communications for IoT devices (mMTC).

Taking the work done by industry organisations, such as The Next Generation Mobile Networks (NGMN) Alliance , 5G Americas and the Open Networking Foundation (ONF) into consideration, STL Partners has developed the following definition for network slicing as the basis for this paper:

‘Network slicing is a mechanism to create and dynamically manage functionally-discrete virtualised networks over a common infrastructure’

Executive Summary
Introduction
Slicing: a vision for fundamental transformation
Defining slicing is not about the ‘what’, it’s the ‘how’
How slicing could enable growth
New services from network slicing
Evidence of the demand for slicing
Examples of new services
The slicing business models
So, where is the money?
Scenarios for the telco of the future
The scenarios imply different business models and ways of making money…
How slicing might work in practice
Key challenges to achieving slicing
Early 5G trials and proofs of concept
The evolution to slicing
A tricky transition with major obstacles to address
Conclusion

Figure 1: Benefits of network slicing
Figure 2: How might (operator) assets translate into demand for slices?
Figure 3: ‘External’ slicing business models
Figure 4: 68 major telecoms groups – aggregate telecoms revenue, 2009-16
Figure 5: UK mobile ARPUs and data volumes, 2013-15
Figure 6: Forecast revenues for converged telco in advanced market
Figure 7: With slicing, networks can be adapted to customers and applications
Figure 8: Diagram of slicing
Figure 9: Network slicing compared with existing technologies and services
Figure 10: Potential benefits of network slicing for network operators
Figure 11: Google Chrome’s release channels – a model for network development?
Figure 12: How operating models could change under network slicing
Figure 13: How might (operator) assets translate into demand for slices?
Figure 14: Example 1 – Emergency Services VMNO
Figure 15: Example 2 – Low Power IoT Service
Figure 16: Example 3 – Pop-up Network
Figure 17: Example 4 – Global Streaming Service
Figure 18: Example 5 – Smart Meters
Figure 19: Example 6 – Renewable Energy
Figure 20: Example 7 – Mining
Figure 21: Slicing Business Models
Figure 22: Mapping out the scenarios
Figure 23: Where will revenues come from?
Figure 24: Traditional telco cost structure and operating model is set up to operate networks not innovate in services
Figure 25: Under the slicing scenarios, the cost structures shift accordingly
Figure 26: Challenges identified from interview programme
Figure 27: Phases of network transformation for slicing future

B2B growth: How can telcos win in ICT?

Introduction

The telecom industry’s growth profile over the last few years is a sobering sight. As we have shown in our recent report Which operator growth strategies will remain viable in 2017 and beyond?, yearly revenue growth rates have been clearly slowing down globally since 2009 (see Figure 1). In three major regions (North America, Europe, Middle East) compound annual growth rates have even been behind GDP growth.

Figure 1: Telcos’ growth performance is flattening out (Sample of sixty-eight operators)

Source: Company accounts; STL Partners analysis

To break out of this decline telcos are constantly searching for new sources of revenue, for example, by expanding into adjacent, digital service areas which are largely placed within mass consumer markets (e.g. content, advertising, commerce).

However, in our ongoing conversations with telecoms operators, we increasingly come across the notion that a large part of future growth potential might actually lie in B2B (business-to-business) markets and that this customer segment will have an increasing impact of overall revenue growth.

This report investigates the rationale behind this thinking in detail and tries to answer the following key questions:

What is the current state of telco’s B2B business?
Where are the telco growth opportunities in the wider enterprise ICT arena?
What makes an enterprise ICT growth strategy difficult for telcos to execute?
What are the pillars of a successful strategy for future B2B growth?

Executive Summary
Introduction
Telcos may have different B2B strategies, but suffer similar problems
Finding growth opportunities within the wider enterprise ICT arena could help
Three complications for revenue growth in enterprise ICT
Complication 1: Despite their potential, telcos struggle to marshal their capabilities effectively
Complication 2: Telcos are not alone in targeting enterprise ICT for growth
Complication 3: Telcos’ core services are being disrupted by OTT players – this time in B2B
STL Partners’ recommendations: strategic pillars for future B2B growth
Conclusion

Figure 1: Telcos’ growth performance is flattening out (Sample of sixty-eight operators)
Figure 2: Telcos’ B2B businesses vary significantly by scale and performance (selected operators)
Figure 3: High-level structure of the telecom industry’s revenue pool (2015) – the consumer segment dominates
Figure 4: Orange aims to expand the share of “IT & integration services” in OBS’s revenue mix
Figure 5: Global enterprise ICT expenditures are projected to growth 7% p.a.
Figure 6: Telcos and Microsoft are moving in opposite directions
Figure 7: SD-WAN value chain
Figure 8: Within AT&T Business Solutions’ revenue mix, growth in fixed strategic services cannot yet offset the decline in legacy services

SD-WAN: New Enterprise Opportunity for Telcos, or a Threat to MPLS, SDN & NFV?

Rapid growth in SD-Wan networks

Software-defined Wide Area Networks (SD-WAN) have catapulted to prominence in the enterprise networking world in the last 12 months. They allow businesses to manage their connections between sites, data-centres, the Internet and external cloud services much more cost-effectively and flexibly than in the past.

Driven by the growth of enterprise demand for access to cloud applications, and businesses’ desire to control WAN costs, various start-ups and existing network-optimisation vendors have catalysed SD-WAN’s emergence. Its rapid growth as a new “intermediary” layer in the network has the potential to disrupt telcos’ enterprise aspirations, especially around NFV/SDN.

In essence, SD-WAN allows the creation of an “OTT intelligent network infrastructure”, as an overlay on top of one or more providers’ physical connections. SD-WANs allow combinations of multiple types of access network – and multiple network providers. This can improve QoS in certain areas, reliability and security of corporate networks, while simultaneously reducing costs. SD-WANs also enable greater flexibility and agility in allocating enterprise network resources.

Why SD-WAN is at least in in part a threat

However, SD-WAN potentially poses major risks to traditional telcos’ enterprise offerings. It allows enterprise customers to deploy least-cost-routing more easily, or highest-quality-routing, by arbitraging differences in price or performance between multiple providers. It enables high-margin MPLS connections to be (at least partly) replaced with commodity Internet connectivity. And it reduces loyalty / lock-in by establishing an “abstraction” layer above the network, controlled by in-house IT teams or competing managed service providers.

SD-WAN has another, medium-term, set of implications for telcos, when considered through the lens of the emerging world of NFV/SDN and “telco cloud” – a topic on which STL Partners has written widely. By disconnecting the physical provision of corporate networks and a business’s data/application assets or clouds, SD-WAN may make it harder for telcos to move up the value chain in serving enterprise customers. Capabilities such as security systems, or unified communications services, may become associated with the SD-WAN, rather than the underlying connection(s); and would thus be provisioned by the SD-WAN provider, rather than by the telco that is providing basic connectivity.

In other words, SD-WAN represents three distinct threats for telcos:

Potential reduction in MPLS & other WAN services revenues
Potential reduction in today’s enterprise solution value-adds such as UCaaS & managed security services
Potential restriction of future telco enterprise SDN/NFV services opportunities to basic Network as a Service (NaaS) offers, with lower scope for upsell.

The current global market for WAN services is $60-100bn annually, depending on how it is defined; therefore, any risk of significant change is central to many operators’ strategic concerns.
Table of Contents

Executive Summary
Introduction
Background: Enterprise WANs
Shifting trends in WAN usage
The rise of SD-WAN
Overview – the holy grail of ‘good/fast/cheap’ in the WAN
SD-WAN technology and use-cases
SD-WAN vendors include start-ups and established enterprise market players
The role of service providers in SD-WAN
Bundling hosted voice/UCaaS and SD-WAN
Telcos Should take a Proactive Approach to SD-WAN
SD-WAN vs. SDN & NFV: Timing and Positioning
Future of SD-WAN and Recommendations
Recommendations

Figure 1: SD-WAN architecture example
Figure 2: SD-WAN & NaaS may help telcos maintain revenues in enterprise WAN
Figure 3: SD-WAN may reduce telco opportunities for SDN/NFV/cloud services
Figure 4: Different paths for SD-WAN service offer provision & procurement

Tag: SD-WAN

Network slicing: The greatest thing since sliced bread?

Service providers continue to face a decline in revenue

Figure 1: 68 major telecoms groups – aggregate telecoms revenue, 2009-16

Data is not enough to ensure future growth

Figure 5: UK mobile ARPUs and data volumes, 2013-15

Figure 6: Forecast revenues for converged telco in advanced market

Virtualisation and slicing: enablers for change?

Slicing: a vision for fundamental transformation

Defining slicing is not about the ‘what’, it’s the ‘how’

A few considerations

‘Network slicing is a mechanism to create and dynamically manage functionally-discrete virtualised networks over a common infrastructure’

Sample Reports