Network Function Virtualization Market Will Reach $38 Billion by 2022


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After a slower start than initially anticipated, the Network Function Virtualization (NFV) market will experience moderate growth through ongoing NFV investments by major telcos. ABI Research forecasts that North America will lead the market, accumulating $13 billion in NFV-related investments during 2022, while Europe will experience the highest growth rate at an estimated 53% CAGR between 2017 and 2022. Early adopters claim several benefits to NFV-enabled systems, which include reductions in network CAPEX & OPEX, service agility, and reduced deployment times for new network elements.

“In 2015 and 2016, the market experienced some early successes but mostly reconsiderations and failures with NFV,” says Neha Pachade, Senior Analyst at ABI Research. “Early adopters conducted proof of concept testing and NFV-integrated system demonstrations with the aim to understand the true impact of NFV in the technical, operational, and cultural domains. Our forecasts indicate that NFV will become a sizeable opportunity for vendors, although it is not yet clear whether it will cannibalize existing hardware-based product lines or create new market use cases.”

ABI Research estimates that total NFV market revenues will reach $38 billion in 2022. Hardware spend—including servers, storage devices, and switches—will reduce with time, while software and services will have higher growth rates of 55% and 50%, respectively. Although the market is evolving and technical expertise is starting to mature, the standardization and multi-vendor involvement challenges will remain stagnant for the next couple of years. Software and services vendors will have opportunities to identify NFV use-cases in enterprise verticals and use these to offer end-to-end integrated systems.  

“Early contracts and market trends illustrate the biggest winners are likely to be the established vendors, including Ericsson, Huawei, and Nokia, as well as specialists like Amdocs and Netcracker, with systems integration becoming more important each day,” concludes Pachade. “Several vendors also place heavy and risky bets on open source software, which may increase business opportunities but may also create difficult choices for them in the future, particularly if telco interest in specific open source projects fizzles out. For the time being, NFV is mostly considered as a cost-cutting exercise, since new revenue opportunities require a transformation in a much broader context, which is more likely to be driven by 5G, after 2020.”

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