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Virtual network functions market to triple by 2025

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Growth of virtual network functions (VNFs) will be driven by virtual customer premises equipment (vCPE).

In a new study, ABI Research says vCPE will become a critical solution for service providers to keep pace with changing industry trends toward software-defined networking (SDN) and network functions virtualisation (NFV).

Renenue generating

vCPE deployments for businesses are among the most important revenue-generating segments of VNFs and will triple the VNF market by 2025, generating more than $15 billion (€12.61 billion) in revenue globally.

The increasing use of SDN and NFV are among key drivers for vCPE deployments.

Khin Sandi Lynn, Industry Analyst at ABI Research, said, “Powered by SDN and NFV, network services such as routing, security, WAN optimization, etc., no longer need dedicated physical appliances.

“These services are being delivered through vCPE. Since services are software-defined and delivered remotely, [this] approach enables service providers to lower CapEx and OpEx. [They] can deliver additional virtual network functions (VNFs) as required and achieve agile service provision.”

Multi-vendor installations

ABI found service providers are rolling out vCPE deployments for enterprise using white box vCPE hardware and VNFs supplied by multiple vendors.

Operators including Comcast, Vodafone, BT and Orange have recently announced vCPE services targeting enterprise customers.

RAD, Lanner, Dell, Advantech are among the major vCPE hardware providers while solution vendors such as Cisco, Nokia, Ekinops, Juniper Networks, and many others provide routing, security, and SD-WAN solutions for vCPE deployments.

Residential market

In the residential segment, the vCPE approach with VNFs is still limited, although some cloud-based siloed solutions for in-home Wi-Fi management and security, such as Plume’s OpenSync, have been deployed.

The cost for vCPE hardware and VNFs, as well as a fragmented residential CPE market, creates challenges for vCPE deployments in the residential market.

Despite these barriers, the increasing number of broadband households and growing number of smart homes creates a large opportunity for the vCPE market, ABI reckons.

SDN-enabled home gateways and VNFs can play an important role for the quick and efficient provision of smart home services in the residential segment.

vCPE applications including firewalls, WAN connectivity optimization, and control will be among the important revenue-generating segments of virtual network functions.

Lynn concluded. “As vCPE adoption accelerates, service providers need to make optimal selections of hardware and software partnerships to assure cost-efficient and seamless vCPE deployments, supporting fully automated VNF onboarding, provisioning, and maintenance in order to achieve business success.”