After a slower start than initially anticipated, the Network Function Virtualization (NFV) market will experience moderate growth through ongoing NFV investments by major telcos. North America will lead the market, accumulating USD 13 billion in NFV-related investments during 2022, while Europe will experience the highest growth rate at an estimated 53 percent CAGR between 2017 and 2022, predicts ABI Research. Early adopters claim several benefits of NFV-enabled systems, which include reductions in network CapEx and OpEx, service agility, and reduced deployment times for new network elements.
Total NFV market revenues will reach USD 38 billion in 2022. Hardware spend – including servers, storage devices, and switches – will reduce with time, while software and services will have higher growth rates of 55 percent and 50 percent, respectively. Although the market is evolving and technical expertise is starting to mature, the standardization and multi-vendor involvement challenges will remain stagnant for the next couple of years. Software and services vendors will have opportunities to identify NFV use-cases in enterprise verticals and use these to offer end-to-end integrated systems.
Early contracts and market trends illustrate the biggest winners are likely to be the established vendors, including Ericsson, Huawei, and Nokia, as well as specialists like Amdocs and Netcracker, with systems integration becoming more important each day. Several vendors also place heavy and risky bets on open source software, which may increase business opportunities but may also create difficult choices for them in the future, particularly if telco interest in specific open source projects fizzles out. For the time being, NFV is mostly considered as a cost-cutting exercise, since new revenue opportunities require a transformation in a much broader context, which is more likely to be driven by 5G, after 2020.