It can be said that all industries, and all businesses for that matter, are in a state of transformation. Economic systems by their very definition are always in motion. But every so often, a number of critical factors align that begin to shift the competitive position of industry players to such a point where adaption to new market realities is required to maintain viability. The proliferation of IP-based standards and breakthroughs in computer processing have brought the telecommunications industry to such a point. For more detailed information on this topic, tune into the Network Transformation podcast series.
Communications networks were originally designed to support specific capabilities and services, namely voice traffic, from one location to another in a point-to-point model. In the last couple of decades, the advent of data communications allowed machines to connect across the network; and with the birth of the Internet, the communications paths became point-to-multipoint. Moving into the networks of today, a wide variety of devices are connected to each other and much less dependent on location. Welcome to the cloud model of networking.
Service providers have always maintained strict standards of quality, availability, and reliability, and equipment manufacturers have designed and built very rugged pieces of equipment—from the hardware, to the software, to the silicon—to comply with these requirements. This has led to very proprietary systems with a singular focus—one for voice, one for data, etc. But with the dawn Internet Protocol (IP) in the communications networks, service providers have started to demand interoperable products, built on open standards, and the ability to provision them with multiple services over one network.
State of the market
This has been a significant change in how telecom equipment manufacturers conduct business, but the rewards of providing this equipment are significant. Over the last several years, service providers have made tremendous capital investments in their infrastructure. This build out enables increasingly more capacity that is both supporting and fueling the growth of traffic traversing the network.
While the capabilities of these networks is nothing short of astounding, the business challenge for the service providers, however, is to extract a sufficient amount of revenue from the services deployed on their new networks. So far, they are not seeing the appropriate return on investment in terms of incremental revenue and profit to maintain this level of investment.
This economic challenge is becoming so pronounced that service providers need to take a different approach by reducing the cost of running their networks and developing new services and new revenue streams. Technology that has matured itself in the data center from the world of IT is now proving to be a capable foundation for taking on these telecommunications challenges. Services can now be provisioned in software, significantly lowering the cost base, and allowing new service introduction much more quickly and affordably.
Software Defined Networking (SDN) grew from academia as a study on how the control and user plane, in a network switch for example, could be separated for centralized control via a user interface. On the other side, Network Functions Virtualization (NFV) grew out of the service provider community in an effort to virtualize networking functions and run them on a standard computing platform, allowing a series of virtual machines to work together. This can be achieved independently of SDN; but when trying to optimize new services in a network, the ability to control them from a central location becomes extremely attractive and this where we see the marriage of the two.
A great example of using software in the network is the virtualization of customer premise equipment, and hosting it in the network as a virtual device. This tremendously reduces the cost of provisioning the hardware and managing the service-based upgrades that formerly would have required a service visit by a technician. Software-based networks also allow service providers to insert a form of analytics on delivered traffic with time of day, route, and geo-location data as an incremental service category that can be provided to a specific customer at a specific time.
Software-based services represent the next frontier in network transformation from both a capability and business perspective. Expect to see further innovation in networking occurring at this nexus point.