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May 22, 2015

Telecoms must “re-imagine” networks for €39 billion windfall

NFV and SDN could lead to huge OpEx reductions.

By

New technologies could help telcos realise savings in the tens of billions.

The report from Arthur D. Little and Bell Labs Consulting, the research and advisory arm of Alcatel-Lucent, suggests that the efficiency impact of onboarding network function virtualisation (NFV) and software-defined networking (SDN) for operators could bring in €14 billion, equivalent to 10 percent of total operational expenditure (OpEx).

These upgrades might not be so eagerly anticipated by the employees of the companies, as over €3.4 billion of these savings would come from cutting labour costs. The biggest savings would be made in outsourcing costs, at €6 billion, while €5 billion would be saved in power and real estate costs.

In addition, on top of these efficiency savings, telecoms operators could save €25 billion by changing and simplifying their operational models.

The report comments: "Over time, networks build up operational complexity…rewriting the operating model is about taking advantage of flexible new technologies to streamline operations in the business layer from marketing, sales, back-office and associated IT."

The impact for fixed operators would be slightly higher than for mobile, with the two categories seeing savings of 27 percent of fixed OpEx and 25 percent of OpEx respectively.

"The time is now for Europe’s telecommunications industry to bring networking into the cloud era, it will not be trivial to execute programmability and automation at the scale required for success, but the prize is significant" said Jesús Portal, Partner at Arthur D. Little.

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Cassidy Shield, Managing Partner, Bell Labs Consulting, added: "Moving to the new ‘cloud network’ is no longer a question of ‘if’ for service providers but the real questions are ‘how and when’. The answers and strategies can be very different based on the technology structure and business model for each operator but there is no doubt the planning needs to start now."

The report examined operators in 35 European countries with adjusted revenues of 250 billion euros in 2013 and annual OPEX of 150 billion euros.

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