Light Reading's Sarah Reedy posted a thoughtful article on NFV (Will NFV Save CapEx, OpEx, or None of the Above?) and its (empty?) promise. We see NFV as necessary (we are using that in our cloud voice platform) to build the elastic, scalable infrastructure. But NFV technology by itself lacks an elastic business model (vendors want to sell you something and generally not for less). The cloud-based approach to using NFV is the true path forward as it fundamentally transforms the business model to risk-free, success-based pricing vs build it and (we hope) they come.
Let's face the facts:
Voice revenue is in decline (or at best flat)
Voice has become a check-list feature/commodity that telcos/MSOs/ISPs need to bundle
Costs per user are on the rise
Networks are aging and need to be replaced at significant expense and distraction
NFV purports to reduce equipment cost and complexity by implementing well-defined network functions on virtualized machines running on commercial off-the-shelf servers in a data center or in the cloud. NFV promises to reduce TCO by eliminating proprietary hardware, consolidating equipment, and containing ongoing power, cooling, and space costs. But it does not go far enough given the market dynamics of voice. This may be adequate for the largest telcos and cable providers, but certainly not all.
Service providers still have to buy software and equipment and then build and operate the voice network. The expense and risk still outweigh the potential investment returns and opportunity costs. NFV does not fundamentally transform the business model for VoIP. NFV means CAPEX and ongoing OPEX no matter who is using the network. Virtualized IMS offers a small fix to the challenges plaguing voice today.
Plus, traditional voice infrastructure vendors have revenue to protect. How motivated can they be to be disruptive and transformative when it comes to cost? Marginal cost reductions are quite possible when it comes to CAPEX, but will they provide break-through economics? We doubt it.
My peer at Level 3, JP Gonzalez, wrote a brilliant piece (Challenging Service Provider Capital Assumptions) along these same lines; if service providers are to create break-through potential and truly change how they operate, he suggests that they re-examine their assumptions on building VoIP networks. NFV doesn't challenge those assumptions; it merely says build the VoIP network a different way using the same guiding principles. So now what? JP offers hope: "several positive developments in cloud can provide service providers with a viable alternative to traditional models."
Cloud voice platforms—or as Gartner says "cloud sourcing"—provide that alternative and utterly change the risk profile and dramatically lower the costs to offer VoIP in the all-IP era. The cloud approach to using NFV means zero CAPEX and reduced operational burden (money and people that can be focused on big-impact growth initiatives) using a success-based SaaS model that ultimately does transform the business model for VoIP. Plus it's greener; zero costs for power and cooling.
In a straight forward, simple equation: service providers pay for the revenue they receive after they receive it. For some services, buying and building makes sense. For voice, we think cloud sourcing NFV is the smart approach.
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About Kevin Mitchell
Kevin Mitchell is Alianza's Vice President of Marketing. He once penned analyst reports and marketed VoIP gear but now he is infatuated with transforming voice from the cloud.