CSPs are investing heavily in network functions virtualization (NFV), software-defined networking (SDN), 5G and the internet of things (IoT) to remain competitive as enterprises realize the benefits offered by these technologies. These are the findings from Technology Business Research’s (TBR’s) latest Enterprise Operator Benchmark and they do not come as a surprise.
Our own recent research, published in July, found that 65 percent of CSPs are already offering network as a service (NaaS) – services such as hosted firewalls and virtual private networks (VPNs). The report presents the results of a survey we conducted with 61 telecom professionals from 52 companies, including CSPs and their suppliers.”
According to TBR, overall operators’ revenue from enterprise communications services grew 6.6 percent year over year during the first quarter because of demand for VPN, Ethernet and software-defined services such as SD-WAN (wide area network).
“The main justification for investment in NFV and SDN by operators is the incremental revenue-generation opportunities and cost savings these technologies provide,” TBR Analyst Steve Vachon said in a press release. “Offering software-mediated network services is becoming a necessity for enterprise operators to maintain market share, as most benchmarked companies have either commercially launched or announced plans to offer SD-WAN services.”
IT services remained the largest enterprise segment in the first quarter with combined revenue among benchmarked companies rising 4.7 percent year over year because of growth in IoT, cloud and security. TBR notes that in the US pricing pressure is leading some operators to abandon the infrastructure-as-a-service market (Verizon selling off its remaining cloud business to IBM, for example), but our survey found 58 percent of CSPs offering IaaS. (Only 6 percent of our respondents were North American, which may explain the discrepancy. Larger percentages of our respondents came from Europe – 29 percent – and Asia – 26 percent).
Source: TM Forum 2017
AT&T pushes virtualization
AT&T’s second-quarter earnings reinforce TBR’s findings about operators’ deployment of virtualization technologies. AT&T CFO John Stephens told investors this week that the company has virtualized 47 percent of its network functions and is making progress toward a goal of virtualizing 55 percent by the end of the year. AT&T has been one of the most aggressive CSPs when it comes to virtualization.
“As the consumer segment becomes more challenging due to market saturation and pricing pressures, TBR believes the greatest revenue growth opportunities for AT&T exist within the company’s Business Solutions segment,” Vachon writes in a research note. “AT&T’s innovations in technologies including NFV/SDN, networking, security and cloud enable the carrier to create hybrid IT environments that can be tailored to better accommodate the unique needs of enterprises.”
Progress toward 5G
The Enterprise Operator Benchmark also examines key investment areas operators are targeting to enhance their enterprise portfolios including 5G, data centers and the deployment of IoT network technologies such as LTE-M, NB-IoT and LoRa. TBR contends that early 5G use cases will focus on enhancing delivery for existing services such as internet and cloud while supporting emerging technologies such as augmented reality and virtual reality and autonomous driving in the longer term.
Our research generally agrees with these findings. A majority of CSPs we surveyed (65 percent) said they believe enhanced mobile broadband will be the first new 5G service offered, followed later by services such as tactile internet, smart grid and digital health. Our respondents were slightly more optimistic about connected vehicles in the shorter term, although not nearly as bullish as the suppliers we surveyed.
Ultimately, 5G, NFV, SDN and cloud-based platform business models are all inextricably linked and represent the best (perhaps only) way forward for CSPs. By combining platforms and 5G, CSPs have an opportunity to move beyond providing just connectivity to become ecosystem curators and enablers of many different verticals from smart cities to connected cars, the industrial IoT and more. By some estimates, this market will be worth close to a trillion dollars within the next decade.
To learn more, check out our report 5G: Is platform the killer use case? You can get access to the executive summary here and the full report here. The summary is available for everyone to download, and the full report is available free to all employees of TM Forum member companies or may be purchased by non-members by contacting Annie Turner.