The carrier software-defined networking market is set to grow by a compound annual growth rate of 98 percent betweeen 2015 and 2020, as the trickle of virtualisation deployments become a flood.
A new report from IHS said the sector is still in the early stages of what is likely to be a 15-year transformation of mobile network operators' businesses.
Michael Howard, Senior Research Director and Advisor, Carrier Networks, IHS Technlogy, said: "Carriers have defined the vision, goals and architectures and are progressing through use cases, proof-of-concept projects, field trials and a small but growing number of commercial deployments. The partially proven promise keeps the industry moving as fast as it can, but we are still early in this long-term, 10- to 15-year transformation of service provider networks."
He said Europe and North America were two key markets for SDN deployments and will together account for 13 percent of the projected revenue.
Howard highlighted Japan as a key market for software defined networking, with NTT DOCOMO launching "real but small commercial deployments". The Japanese operator has also been working with NEC and Ericsson on NFV rollouts.
He said China was also a "strong" market for SDN, with additional commercial deployments expected this year.
He added: "Given these factors, the service provider SDN market, including hardware, software and services, is forecast to grow from $289 million in 2015 to $8.7 billion in 2020, with a 2015–2020 compound annual growth rate (CAGR) of 98 percent."
The report also claimed SDN and NFV would underpin the shift in spending from hardware to software. IHS said software and outsourced services would comprise 46 percent of SDN revenue in 2020.
SDN orchestration and controller software revenue would be worth $1.8 billion by 2020, although the report noted SDN apps will offer vendors the most value. It said orchestration and control would be constrained by high levels of competition.