Cross fertilization creates innovation. As technologies mature and are successfully applied in one domain, there is frequently potential for using those technologies favorably in other markets as well. However, native technologies in one market might be foreign technologies in a different market. Assimilation is a complex process and outcome is difficult to predict.
IP and Ethernet were initially developed for enterprise networks. As those technologies promised significant simplification with operator networks, the cross fertilization journey started. Today we can conclude that most of the expected savings and efficiency improvements have been achieved. However, some deviances need to be noted.
These days we are again looking at enterprise technologies that strive for adoption within operator networks. What can we learn from IP/Ethernet cross-fertilization for the introduction of Software-Defined Networking (SDN) and Network Function Virtualization (NFV) in carrier networks? Those same technologies are applied today in enterprise / data center networks and might have an even bigger impact on carriers than the “IP-fication” of their networks.
A Short History of Network Convergence
As enterprise IP and Ethernet technologies started to revolutionize operator networks, the promise of significant simplification by automation and network convergence replacing parallel networks made their introduction a no brainer. Network transformation required established TDM-style practices to be challenged and augmented by data-centric networking principles. The emergence of MPLS can be seen as a compromise combining advantages of connection-oriented technologies with principles of automation borrowed from data-centric network practices.
As the operators moved to converged IP/Ethernet networks previous business models were challenged. Voice over IP attacked an incumbent operator’s cash cow, which were voice services. Carriers looked for ways to monetize their multi-service platforms. IMS (IP Multimedia Subsystem) seemed to be the holy grail of IP service revenue generation as this technology allows monetizing individual IP streams.
However, this approach neglected the business fertility of an IP network providing global reachability without distance-dependent charging. OTTs started to harvest these fertile grounds. Operators were challenged with becoming a bandwidth provider with limited ability to extend business and faced increasing competition as de-regulation also attracted new players on their home turf.
In short, the introduction of enterprise technologies into operator networks created significant cost advantages and operational simplification. On the other hand, it opened the value creation to many new players. Operators were one of the key facilitators and enablers. Yet, others have capitalized more on this transformation.
SDN and NFV Promises
With SDN and NFV, new technologies and operational models knock at operator’s front door. Again, technologies mainly applied in enterprise environments promise significant advantages within operator networks. Virtualization is today widely applied in data centers as a means to flexibly share computational and storage resources among customers and applications. Underlying hardware is based on COTS devices in combination with increasingly open software technologies which virtualize and share those resources.
This technology finds a wide range of opportunities in operator networks. Dedicated network elements will be replaced by standard servers and software appliances. This provides cost savings in network design, implementation and operation. Mobile operators might pioneer NFV by replacing evolved packed core networks with COTS servers and software appliances operated in virtual machines (VMs).
Such virtualization of function will allow allocating functions wherever server and storage resources are available. The underlying connectivity network will need to be able to cope with this by dynamically aligning the topology with changing patterns of resource utilization. This will require an orchestrated use of network, storage and computational resources. The notion of “Software-Defined Networking” was coined to describe such highly synergetic, software-controlled co-operation of those IT resources.
Virtualization of compute and storage capacity is widely applied in today’s data centers. This allows the flexible allocation of resources to multiple tenants. Mega data centers create huge synergies by sharing these resources among thousands and even millions of concurrent users. Data and computing centers will be more efficient if the underlying connectivity network flexibly aligns with the resource allocation by applying Transport SDN. Integrated data center and network operators will have an edge over pure play data center or connectivity service providers. Hence, it does not come as a surprise that various DC operators consider building their own connectivity networks. However, carriers might have an advantage as construction of data centers is less time consuming than building connectivity networks with large coverage. SDN/NFV might allow the carriers to gain back the ground they lost to OTTs with IP-fication of their networks.
One aspect of transition from existing network architectures and technology layering towards an SDN- and NFV-centric environment should not be overlooked. Operators push for open interfaces as they do not want to get locked into single vendor solutions but benefit from the flexibility and speed of software-centric service creation. On the other hand, it is very obvious that migration from legacy to SDN/NFV-centric networks is a huge network transformation effort and requires sophisticated system integration competence. Hence, major operators and large system integrators in combination with fast moving technology suppliers will be best positioned for creating the most value from this transition. Solution providers with comprehensive end-to-end offerings might need to prove the openness of their solutions. It is quite likely that this model will be replaced by an open network solution combining products from various specialized technology providers. It might happen that present end-to-end solution suppliers will move towards SI-centric business models.
Wrapping it up
This blog looked at two major waves of enterprise technologies fertilizing operator networks. IP-fication replaced stove pipes and created converged multi-service networks but this innovation did not unfold the expected additional value streams for operators. SDN and NFV promise operational cost reduction and lower cost for network integration and implementation by open interfaces and highly standardized hardware. These technologies will also allow operators faster roll-out of new services. However, it extends the technology optimization domains from the network into the data center and creates competitive advantages for integrated network and DC providers. Such change in value creation will define the competitive landscape within the upcoming years. Operators of DCs are familiar with NFV and the SDN concept, hence, will have the early adopter advantage, while connectivity network providers might be faster in moving towards a fully orchestrated compute, storage and network environment.
On the supplier side - speed, creativity and openness of the solution might be key selection criteria by customers. Fast moving specialized technology providers may benefit from this while large scale end-to-end solution providers may end up moving their focus towards system integration.