Network Functions Virtualization Is a Monster Channel Opportunity

Solutions providers can't ignore NFV. Here are six keys to success.

Lorna Garey

February 25, 2015

5 Min Read
Network Functions Virtualization Is a Monster Channel Opportunity

Lorna GareyNetwork functions virtualization is exactly what it sounds like: Functions traditionally run internally as separate services – such as a firewall, WAN optimizer and load balancer – are instead fully virtual and deliverable quickly and flexibly. Infonetics Research predicts that the SDN and NFV market will reach $11 billion by 2018, and solutions providers need to ensure they’re not caught unawares.

You can watch a video of NFV basics here, thanks to Brocade, or read about it and its relationship with SDN here, via 6Wind. But make no mistake — every major networking vendor, from Blue Coat to VMware to Oracle, F5 and Juniper, is scrambling to deliver products as virtual instances, and your customers will need help sorting through the options.

In a nutshell, NFV extends the software-defined model from the transport layer right up through applications. Think of a network edge with a load balancer, firewall and WAN optimizer, all delivered as virtual functions from a provider’s cloud rather than residing on hardware in a local data center. That dramatically lowers costs. And, the provider can now update versions and apply patches centrally and roll new versions out to customers immediately.

The main downside, for now, is that while the ETSI NFV group has made progress establishing standards, specs are not fully baked. However, that’s not stopping carriers, ISVs and network vendors from rolling out virtual network services. There are more than 230 members in ETSI’s NFV Industry Specification Group, including 37 major global service providers. Experts see little risk of any one big player derailing, or “embracing and extending,” the core NFV specs. 

Before deciding to resell network functions in a service model, check out six keys to success:

  1. Ask about portability of the specific virtual appliances you plan to resell across various vendors’ hardware and different hypervisors. Ask about use of northbound APIs from the controller to get the full picture before suggesting an option to customers.

  2. Ask potential providers how they orchestrate and manage VNFs to cope with the expected huge growth in this market predicted by Infonetics and other analysts. The key is automation — without the ability to automate common tasks, scalability will be elusive.

  3. Develop TCO worksheets. This is a major shift, especially for smaller companies with little experience with cloud services. The driver will be cost reductions and much more well-maintained services, so be prepared to demonstrate exactly how much savings are possible for various services by shifting from OpEx to CapEx over the expected lifespan of a conventional hardware appliance. The software is going to cost less overall, says Michael Howard, Infonetics’ co-founder and principal analyst, but there’s not enough history to peg the level. Include ancillary savings to be had by eliminating hardware and site visits. At least some of those savings can be passed along to customers. As we’ve learned from server virtualization, abstracting IT services as software can significantly reduce the time and overhead required to provision new resources or applications.

  4. Think about your own cash flow.  For resellers, the biggest adjustment will be around the revenue model. “Instead of selling hardware with a 7 to 10 percent profit margin, you can now go sell services and take a recurring revenue stream at a higher profit margin,” says Greg Ferro, a network engineer and architect, host on the Packet Pushers Podcast, and blogger at “You can sell a Check Point firewall appliance once, with margins that get tighter all the time and significant overhead to deliver and install the gear, or you can sell a firewall as a service that a provider can spin up in minutes. If you take 10 percent of a million-dollar deal, that’s $100,000. Taking 10 percent of services, sure, it takes longer to get to that number. But your costs are a lot lower — you’ve got no warehousing assets, no distribution, no shipping.” From a reseller perspective, it lessens your dependence on incumbent network gear vendors. That can spell opportunity.

  5. Keep a close eye on bundling.  Delivering services via NFV moves complexity to the carrier, which must have advanced SDN and cloud chops to maintain uptime. That level of expertise is expensive, and carriers will want to recoup some of the investment. We have seen, over time, carriers and cloud providers like AWS bundle basic services like firewalls and load balancers into their base offerings for small “incremental fees” that can add up.

  6. Don’t be territorial. Smart resellers will look to untapped markets. The nature of NFV, and cloud in general, means you can easily service clients in far-flung locations. “I’ve worked with companies that had 3,000 branches, where expensive routers were reduced to dumb input/output,” says Ferro. Moves, adds and changes could take six weeks. “Let’s say you’ve got a 10 Mbps Internet connection to a branch office in Idaho. Before, you had to put in an order to upgrade the connection, organize a cutover date, ship hardware, fly out an engineer. Now, all I do is call the carrier and ask for what I need.”

For solutions providers, what’s it worth to be able to offer that level of speed and flexibility?

In fact, that leads to another big upside for the channel: A physical appliance will be changed out only every three to five years. But it’s feasible to switch VNFs every six months, or three months. Customers are not locked in with a significant hardware investment, so the frequency of interactions can increase. And, virtualizing network services makes them much easier to update with security patches, bug fixes or new features, lessening the time spent on these tasks.

NFV will also make it easier for channel providers to sell higher-end services to small companies, and for enterprise customers to support remote and branch offices. “In fact, Cisco and Juniper are banking on NFV to help move their services down-market,” says Howard. “They’ll still use the channel for that; you still need customer touch,” he says, with the caveat that there may be more large named accounts.

One reseller op that Howard does not foresee taking off? Delivering VNF software that enterprises run internally: “Maybe some will, but why should a company get into that business when it can buy the function as a service and move from CapEx to OpEx?”

Follow executive editor @LornaGarey on Twitter.

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