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IHS predicts applications will account for majority of value.
The global network functions virtualisation (NFV) market will be worth US$15 billion (€13.6 billion) by 2020, up from $2.7 billion in 2015, predicted IHS Markit this week.
This represents a compound annual growth rate (CAGR) of 42%, the research firm said.
"We expect strong growth in NFV markets in 2020 and beyond, driven by service providers’ desire for service agility and operational efficiency," said Michael Howard, senior research director, carrier networks, at IHS Markit, in a research note on Tuesday.
Virtual network functions (VNFs) – the applications that run telecoms services – will account for 73% of the market’s value by 2020, according to IHS. NFV hardware, including servers, storage and switches, will account for 16%, while software will account for 11%.
"Operators are now starting to realise the benefits of NFV, making significant investments to take advantage of the flexibility, price and performance of virtualised network functions," said Jonathan Bell, vice president of VNF software maker OpenCloud.
Unsurprisingly as a VNF provider, Bell was keen to stress the importance for telcos to avoid vendor lock-in.
"Locking themselves into a big closed VNF environment waters down the original aims and benefits of virtualisation," he said. "To compete, operators need to have control over the composition of their VNFs, so they can utilise the various components to differentiate their services."
