While many believe that NFV is a panacea for the business case of VoIP, I think we need to take a step back. Yes, NFV will undoubtedly deliver benefits and likely lower costs. Yes, NFV allows service providers to be more flexible and cloud-like. But what NFV doesn't offer is business case transformation.
NFV is the same old business model; it's the latest way for vendors to sell stuff with the latest buzz-term that promises a better tomorrow (remember ATCA and IMS?). Service provider pays vendor X million and service provider cobbles the stuff together, delivers services and aims to see a ROI three to five years later. Sure it might cost less to run than previously and the ROI is pulled in, but the service provider outlays the cash regardless.
Out of balance
The voice market is still huge and essential. But given its growth prospects and vast competitive market, the risk-reward for rebuilding a voice network is out of balance. All the risk is on the service provider side. It's an upside-down business case.
NFV is software decoupled from hardware and designed to be make networks more flexible and scalable. NFV is key for push-button provisioning and programmability and extensibility of the network. I absolutely believe that it should lie at the heart of the next-gen voice network, but I don't think building that network cloud is right for all service providers for a number of reasons: money, complexity, time-to-market and money -- yes, I know I said money twice, so I’ll tackle that first.
With NFV, service providers still have to spend capex and will have fixed opex for the next-generation gear in their network; it may be lower cost than TDM or early-generation VoIP gear, but purchasing that stuff still requires a significant cash outlay to buy the software. In addition, service providers still have to pay annual maintenance fees and power costs, and employ large engineering and operation staff to build and operate that network. They are paying for it whether they have one subscriber or one million.
Every dollar spent on NFV means less to spend on the big strategic technology initiatives that are high-growth and centered on positioning a company for being relevant and strong five-plus years from now. So service providers really need to ask themselves where they want to spend their capital and focus? I'd bet more would say gigabit broadband, LTE, WiFi, IoT versus a flat-to-declining voice market.
How is this different from the last time with VoIP 1.0 and IMS? I don't think it is. The NFV business case is still "build it and they will come" with a three-to-seven-year ROI hinged on uncertain ARPU, subscriber take rates, and shifting regulatory and competitive landscapes. The risk profile has not changed. The business model is still the same: It's on the service provider to make it profitable. The vendors still make their bucks even if they fail.
Already, consumers and SMBs alike have embraced the cloud for a range of applications. In fact, Gartner pegged the public cloud services market to total $131 billion worldwide in 2013, up from $111 billion in 2012, and it's looking to be on its way to north of $200 billion in a few years' time.
However, when it comes to carriers, the cloud remains largely about hosted UC and VoIP services they deliver to customers. I think it can go a step further as a service delivery solution/infrastructure replacement solution as well, because ultimately, the cloud is the third path for voice.
In the past, service providers had two choices: build a network or white label someone else's service. Now cloud is an option, and that means they can cloud-source the NFV technology and benefits, and with a better business model.
As I said before, NFV is technology evolution, not a business case transformation, and The New IP is centered on this transformation, not technology for its own sake. So when it comes to VoIP, it should be selectively applied. Not all networks need to be rebuilt when they already exist in the cloud. After all, I think "cloud-leveraged" is better than "cloud-like" when it comes to the mature market of voice.
— Kevin Mitchell, Vice President, Marketing and Product, Alianza, special to The New IP