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Network innovation and transformation: by how much will SDN/NFV crush costs?

Huge cost savings, according to Stu Bailey, Founder and CTO of Infoblox, a network automation and network device specialist. "From an economics perspective [SDN/NFV] just changes the way we think about networking," he says, and this clearly has huge implications for equipment providers as well as service providers.

"To now the market has been exclusively dominated by black-box, function-driven, hardware-value-centric networking. "

But now equipment providers are asking themselves the question: "Where are you going to play? Are you going to be an equipment vendor selling inexpensive 'white' boxes (commodity servers) - or are you going to be an independent networking software vendor?

"This is pretty exciting since this is a role that's never existed before in the last 20 years of networking: selling value added software at the control plane and up."

So are we getting back to the situation of about 30 years ago where the network operators drove the standards process and specified the networking kit and now they've watched Google and Amazon do the same in the data centre and thought, we should do that too?

"It's no accident that the leading SDN body - the Open Networking Foundation - has the likes of Google, Deutsche Telekom and Facebook on their board of directors," says Bailey.

"Whether they build their own servers or simply gain the ability to buy a network white box in the same way that they can buy network servers today - that radically changes the economic picture for a service provider."

"So either way that would radically reduce the capital requirement for a network operator building out or upgrading a network?" I ask.

"How could it not?" replied Bailey with a smile.

According to Bailey service providers must take the opportunity to think seriously about who they could partner with to really gain value from the change. In other words, partner up with little guy specialists (|ike Infoblox) don't just look to your traditional suppliers.

Those traditional buying habits, though, might prove to be an impediment. How does a technical director at a multi-billion dollar service provider tell his board that he's decided to place his company's crucial SDN bet on a small and little-known network software specialist?

This is a question I've certainly been asked," says Phil Harvey, formerly of networking website Light Reading, but now handling communications at Metaswitch. "And really it's about getting companies to work with each other. I'm not talking about forced marriages - we know they often don't work - but service providers can suggest partnerships between their incumbent equipment provider and companies like Metaswitch."

Metaswitch has open-sourced its IMS software and established Project Clearwater, designed to provide the basis for a free and open cloud-based IMS (IP Multimedia Subsystem) core.

IMS is the platform for mobile operators' next-generation' IP based services for messaging, voice and anything else requiring telco-interoperability. It was envisaged, of course, as a black-box network but it's become clearer over the past couple of years that this approach might be past its sell-by date - as a result vendors and SPs alike have been talking about 'collapsing' or virtualising the IMS network. Keeping the functionality but throwing out the expensive hardware.

"So having open-sourced our software, then people ask how are you going to actually make money?" says Harvey. "Well, once you have adopted the virtual IMS you're going to need other functions to support your business model - such as a session border controller. We sell those."

This is clearly a dangerous business model to compete against - ironically it matches the 'fremium' services SPs themselves feel they are having a tough time competing with when deployed against them by 'over the top' (OTT) players.

Metaswitch has gone the full cost-crushing distance with its IMS software - not only can it be virtualised but also cloudified on Amazon, which means that when offering an open source 'cloud-based' IMS service, the ongoing cost for the service provider of supporting a voice user (voice and messaging) in the cloud is an astounding 2 cents per user... per year, claims Harvey.

NFV will introduce a fundamental change to the operating model, agrees Dor Skuler, VP and General Manager of Alcatel-Lucent's Cloudband Business Unit.

It's not an all or nothing (end-to-end standards or nothing) scenario as is sometimes painted. Skuler sees clever operators doing things in careful stages where it makes sense - in IMS, border controllers and so on.

"In the beginning we'll start smaller and with simpler, less risky workloads," he says.

"The impact on SPs when NFV is deployed at scale will be profound," says Skuler. "On the one side the capex will go down, so instead of buying dedicated hardware per service with a lifespan of 10 or 15 years, they'll use commodity, very low-cost hardware and open source software where appropriate to reduce CapEx significantly. "

"But eventually you want to get to the point when things are 100 per cent automated," he maintains. Then "Opex will be reduced drastically because you won't need so many field people. I'll give you one unbelievable statistic. In the IT cloud space each engineer is responsible for 10, 000 servers. in our space each IT person is responsible for 10. .. even if we (in telecoms) get to 1 engineer in 1000 you'll see drastic improvements in Opex."

So where an operator or other player DOES decide to apply SDN/NFV - in a greenfield service scenario, say, with a new business model and new partner(s) - it should, on paper, be able to offer a huge cost and price advantage to customers - or even enable a free model which before wasn't feasible.

This sort of cost saving and the accompanying increase in agility and network control means that new business models involving new partners and players will emerge... to echo Stu Bailey, "How could they not?"

New business models are the subject of my next Network Innovation and Transformation.

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