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July 27, 2015

SDN revolution set to diminish telco capex

As AT&T aims to reduce its capex through SDN, will this impact hardware vendors?

By James Nunns

AT&T is reducing its networking hardware expenditure thanks to the roll out of its Software-Defined Network.

The news, which will undoubtedly be welcomed by the giant telco, may be less welcome to vendors selling big networking hardware.

The company, which released its earnings last week, has been winding down its LTE rollout and is slimming down its capex from $20bn in 2014 to a predicted $18bn for 2015.

While SDN is more frequently looked at as being a way to make the telco giants more flexible in order to compete with OTT start-ups, the additional benefit is that it is reducing capex.

AT&T is far from the only company to invest in SDN, with companies such as Alcatel-Lucent launching their own SDN platform.

The move to SDN is part of an on-going drive to modernise legacy systems, with many telcos’ also investing in Network Functions Virtualisation.

Saar Gillai, SVP, NFV at HP, told CBR: "Cloudifying it doesn’t mean it has to run on public cloud but in a cloud paradigm, so they can gain better control of their CAPEX but also gain agility by moving to a cloud model.

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"Then eventually move to a DevOps model so they can compete and provide services against the competition, people like Skype and Netflix."

While the reduced expenditure for telco companies is good for them, it could impact vendors which have had a focus on providing networking hardware.

If the vendors are slow to respond to the changing market demand then they themselves could find themselves outpaced by a more agile vendor.

SDN has the potential to keep spending from the service providers remain flat and even decrease, which is unlikely to be welcomed by companies such as Ericsson and Cisco.

However, if recent product releases are anything to go by, the companies are placing themselves to be ready to take advantage of the SDN move.

The process is likely to be a long one, with Gillai explaining the route: "The first phase is you separate, you decouple the hardware from the software, then you virtualise so you can decouple but you can run off the software, then you cloudify which gives you automation and finally de-compose, which means you re-write the apps to make them more cloud oriented."

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