Prior to the development of Network Function Virtualization (NFV), many telecom services were run on proprietary hardware that was not only costly, but difficult to scale to adapt to increased capacity demand. With NFV, MNOs can benefit from CAPEX savings and enhanced scalability to meet and exceed the expectations of customers. And when used as an enabler of cloud computing, MNOs can experience operational efficiencies and go beyond traditional telecom services with the private cloud, whilst the public cloud also helps to mitigate risks when trying out new services and enables a huge degree of agility that could lead to first-to-market competitive advantage.

So what is NFV?
The concept of NFV is deceptively simple. Instead of running core network functions on specialized hardware, entire classes of network node functions are redesigned to run in a virtualized environment using Commercial-Off-the-Shelf (COTS) hardware.
This accomplishes two objectives simultaneously. First, COTS hardware is less expensive than specialized hardware, translating to an immediate CAPEX saving. Second, because the network functions are virtualized, they can be elastically scaled to meet fluctuations in demand. These objectives — the use of COTS hardware and demand-based scaling — are two of the central characteristics of cloud computing.

NFV and operational efficiencies
NFV and cloud computing can positively impact MNO operations ina few ways. MNOs may realize intrinsic operational efficiencies by deploying NFV-based, private cloud solutions within their own networks. By using a private cloud, MNOs will minimize their dependence on network functions running on proprietary hardware supplied by third-party vendors. In addition, the scalability afforded by NFV can result in increased operational efficiency by the reallocation of computing resources based on the current demand for particular services. In what is likely an oversimplification, a private cloud could be thought of as a pool of computing resources that can be dynamically assigned to various functions as needed.

Beyond traditional telco services
Not only does a private cloud offer the promise of increased efficiency in delivering current MNO services, it may also open the door to other business opportunities for MNOs. Such opportunities could take the form of cloud-based unified communication for the enterprise or developing mHealth platforms. There are already examples of MNOs taking this approach to expand services offerings beyond traditional telecom services.

NFV and the public cloud
In addition to supplying new services from their own private cloud, MNOs can also take advantage of offering services from a third-party, public cloud. At a very high level, a public cloud is an NFV-enabled platform that is designed to offer the same service to multiple customers. For example, an MNO may want to offer a new service such as Voice Over WiFi (VoWiFi), but does not want to invest in the infrastructure necessary to offer it from a platform within their own network center. Instead, they contract with a third party that provides VoWiFi to multiple operators via a public cloud.

Leveraging the benefits of the public cloud
A strategy of delivering core services through a public cloud has several benefits for MNOs. The most obvious may be the CAPEX savings of not needing to invest in new hardware infrastructure. And since there’s no new hardware or software in the MNO’s network to operate and maintain, technical resources that would have been dedicated to managing the new platform can instead focus on other revenue-generating activities. In essence, the technical management of the service is switched from tracking Key Performance Indicators (KPIs) to monitoring adherence to Service Level Agreements (SLAs).

Mitigating risk
Delivering a new service via the public cloud is also an excellent hedge strategy against a new service that fails to deliver on all of its potential. If that situation occurs, it may benefit the MNO not to be encumbered by a large physical platform residing in their network for a service that didn’t meet forecast adoption. In a sense, the risk of launching a new service is mitigated since the CAPEX exposure is minimized.

Competitive advantage
The greatest benefit of delivering new services via a public cloud may not be the CAPEX savings or even the mitigation of risk; rather, it may be the agility it provides the MNO to offer new services before the competition. In a digital world now characterized by new services appearing with increasing frequency, a service provider that is able to be first-to-market will enjoy a competitive advantage.
NFV is one of the enabling technologies of cloud platforms that has the potential to dramatically redefine the nature of service delivery by MNOs. Operators that embrace this change have the potential to transform themselves from a communication provider to a digital services provider with long-term business benefits.