Developing a business strategy that’s grounded on NFV realities, not promises
Apr 18, 2016
Embracing the opportunities of disruption
What is the big promise of NFV for Service Providers? All too often I hear people talking about cost reductions. But the reality is that most organizations won’t achieve the full potential from this approach alone. Why is that?
With NFV the cost structure changes. Instead of purchasing discrete appliances companies move to buying software licenses, operating systems, and COTS based servers. Swapping one for the other alone does not necessarily reduce cost.
However, there are savings to be captured, typically in the operational expenditure area. From a cost perspective, the major benefit of having a virtualized architecture is the process automation it makes possible. Software appliances can quickly be configured, provisioned, and replicated from a central source. Consequently, network administrators can manage more devices, leading to greater productivity and the resultant cost savings.
That’s great, but if the promise of cost savings is not justification in itself for adopting virtualization, why should Service Providers bother with it? At Juniper, we believe there are two compelling reasons – faster time-to-market and reduced risk.
Because a virtualized environment allows software appliances to be quickly configured, provisioned, and replicated, service providers can launch new services like managed security or Cloud CPE in record time – days and weeks instead of months and years. Not only that but they can start small and scale quickly as more customers come on board. Something that is very difficult to do in a physical environment.
In addition, with NFV, Service Providers can provide customers with greater flexibility and choice by allowing them to try new services on-demand and activate them instantly using self-service portals.
And CFOs love it. Decreases time to revenue. Opens new opportunities. Lowers cost structures to operate. But wait, it gets better…
In the financial world optionality is a term that describes the additional, optional investment opportunities after an initial investment has been made. For example, an investment may only deliver a short-term pay-off but the optionality value may be enormous, making it an extremely attractive opportunity. In fact, this is exactly what NFV offers.
In a physical world introducing a new service requires significant investments in additional hardware and appliances. If that services fails or doesn’t reach critical mass the hardware and appliance becomes redundant. It’s a big risk in terms of time, money, energy, and reputation. Consequently, it stifles innovation, because companies must be absolutely sure that any new service they introduce will succeed.
The agility of a virtualized environment overcomes these problems. If the service fails, the virtual appliances are simply repurposed and used for other services. The same management and orchestration system can also be reused for the next service. So financial risk is reduced, which is why CFOs love it.
It is not a green field area therefore successful Service Providers will effectively bridge physical and virtual worlds by automating workflows and rapidly developing new services to complement their existing business. A fundamental challenge is how to manage this transformation for positive business outcomes while maintaining the existing business, develop new capabilities and minimize risks.
The bottom line is that a virtualized environment encourages innovation by enabling service providers to adopt a fail fast approach, allowing them to experiment with new services knowing that the financial consequences will be minimal should they fail. These elements are the foundation of business transformation that NFV unlocks.
According to Pierre-Louis Biaggi, Head of the Network Solutions Business Unit, Orange Business Services:
“We know the network can deliver significant value to our customers, but it’s the innovation in the network that really makes exciting things possible—with virtualization and automation.”
The key promise of NFV is a world of new opportunities through digital disruption and, at Juniper Networks, we’re helping many companies take advantage of that new world. Watch this webinar to hear more from industry experts. If you would like to learn more please visit the Big NFV Idea.