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Beyond NFV – The Third Order of Business Value
Mar 25, 2014

In the last year or so we have been speaking to a large number of our service provider customers about the value of Network Function Virtualization (NFV) and Software Defined Networking (SDN) and something about it feels very familiar to me.

 

At times over the last year, I’ve often felt that the current push towards NFV in the network industry is something similar to the early days of server virtualization in the Information Technology world.  On the surface of it this might seem obvious, as some of the technologies are common in both cases, but there is more to it than that.

 

The IT world has gone through what I consider to be three orders of business value related to virtualization and, ultimately, cloud computing.  The first stage was all about saving money on hardware.  The hypervisor came along and brought with it the ability to consolidate server workloads.  Fewer physical servers could be used to deliver the same number of applications and deliver huge savings on hardware.  This first order of business value could be labeled, “hardware savings”.

 

The second order of business value came with a realization that the virtualized server pools could be used to deliver new application stacks in greatly reduced time.  This was a revolution for the IT team; they could bring up and dispose of application stacks at will, within minutes. Empowered with this technology, they could be more responsive to the needs of their organizations.  Let’s call this order of business value, “reduced time and cost to service”.

 

The third stage is the one we are in presently. Now we are beginning to establish self-service access to virtualized infrastructure so that people who work in the business units can have access to them without even needing to contact the IT team. These users have fundamental knowledge of what brings top line business value and are the best groups to drive new application innovation.  Let’s call this stage, “business innovation”.

 

It’s true to say that each one of these stages is individually useful.  However, it is the third of these that will most likely allow for the creation of new applications that can contribute to the top line revenue of a company.   By equipping those with the greatest knowledge of core business with the capability to build their own applications and create previously unimagined services they might create true business value. 

 

Think about Amazon as a platform, for example.  A significant number of successful companies have taken to that platform and created previously unheard of businesses.  The tenants of this platform do not expect Amazon to build an entire customer-facing service for them; they take the foundation and use it to make the service they have imagined into a reality.

 

Turning back to the telecommunications industry.  Service providers we have been speaking with are also starting to realize that there may well be a third order of business value as they look at what the combination of SDN and NFV can do for them.

 

The earliest discussions with these providers about NFV and SDN focused on saving money on equipment and consolidation of hardware platforms.  One leader I spoke to was on a mission to take every brightly colored appliance that was, in his mind, nothing more than an x86 box with a vendor sticker, and move these functions to virtual machines.  This was clearly a first stage objective and an effective, near term way, to cut cost.  This was the first order of business value for SDN and NFV: “hardware savings”.

 

Time moved on.  We started talking about more efficient ways to deliver traditional network-based services, in a more agile manner. The questions became more about how existing services could be virtualized and how they could be delivered with a more rapid entry into the market place.  By taking this approach, service providers could not only deliver services more easily but could start realizing revenue from them much sooner.

 

These are, no doubt, very compelling and worthwhile reasons to pursue network transformation.  These types of discussions fall under the second order of business value: “reduced time and cost to service”.  Even then, these discussions have taken on a familiar tone, one we have often seen in our dealings with service providers over the years, “Juniper, please tell us which services we can implement”. 

 

What has become clear in our most recent discussions is that this type of thinking is not going to provide the most significant differentiation for our customers.  After all, a service we can virtualize for Telco A, we can also virtualize for Telco B.  The choice of whether to virtualize or not sometimes comes down to whether your competition has done so yet or whether you want to gain a temporary advantage in cost and time to market by being first to do so.   What it does not do, however, is unleash the market intelligence and innovative thinking of your own organization in the creation of entirely new services.

 

So, most recently we have been discussing the third order of business value that can be derived from the creation of a virtualized services oriented network. That third order of business value comes from harnessing the creative talent of the product teams of the providers themselves.  It is from this source of knowledge and experience that a Telco will create new, differentiated, customer-relevant services. 

 

A virtualized services oriented network will enable all of the speculative and left-field ideas that come from customer-facing teams to be tried, without requiring significant capital investment or protracted network engineering projects.  Ideas can be trialed with little risk and expanded or disposed of with ease, depending on how they play in the market.  We are now talking about the third order of business value for NFV and SDN : “business innovation”.

 

It is from this third order of business value that organically grown, innovative services will be born and where true differentiation will arise.  Of course, saving money on multi-colored appliances is valuable, as is reducing time and cost to revenue on traditional network services in virtualised form, but it is the in-house ideas given a platform that will really create differentiation and recast the telecommunications providers as service innovators.