Cloud natives set to dominate
In the battle for the ‘soul’ of tomorrow’s mobile infrastructure, the 5G core (5GC) network run by an communications service provider will be increasingly likely to operate solely in the software layer, according to ABI Research, which insists that cloud-native EPC functions and 5GC are the most viable way to create value for telcos. With the ongoing adoption of cloud-computing powered packet core networks, it is the first time the industry has relied on the core network to introduce something above and beyond enhanced mobile broadband (eMBB) said the intelligence firm.
As a result, the world’s mobile network operators will add at least six per cent more cloud computing investment their core networks over the next five years, according to ABI Research, which predicts revenue for cloud vendors will reach $16 billion by 2027. Its logic is that modular and increasingly disaggregated systems are characteristically open, both across vertical technology stacks and horizontal smorgasbords of vendor options. For telcos like BT, Orange, Telefónica and Vodafone that want to build an open network as quickly as possible, the cloud is the best way to guarantee a consensus on the software, hardware and services that underpin the packet core buildouts that are fundamental to building a solid foundation.
“Today, much of the traffic going through the packet core is handled via physical network elements. With a growing 5G subscriber base and ongoing adoption of 5GC, the expectation is that 4G traffic shifts to 5G networks,” said Don Alusha, 5G Core and Edge Networks Senior Analyst at ABI Research. Today’s classic model for packet core equipment sales is becoming irrelevant and moribund equipment hardware sales bear this out. Sales of packet core boxes will total $3.9 billion in 2027, predicted Alusha and, if so, this would be a risible growth from the current market valued at $3.5 billion in 2022. With the cloudification of packet core networks, the commercial imperative for vendors like Cisco, HPE, and Juniper, is to depart from a finite supply of integrated equipment to models based on software where the supply is essentially infinite.
There is new value to be created in professional services, however. ABI Research forecasts that packet core services are expected to grow from $3 billion in 2022 to $5.2 billion in 2027 at a CAGR of 12%. “There is a growing market for services to help CSPs manage 5G rollouts driven by hardware and software separation, multi-vendor stacks, and expanded business scope drive. In that order. With 3G and 4G, packet core services revolve around one supplier providing their own software and hardware in an integrated fashion to ensure feature alignment, performance, and lifecycle management,” said Alusha. In the cloud packet core future though, the industry structure stands to be horizontally stratified. So, the supplier of the future will need to aid CSPs in all aspects of technology – from defining network architecture to managing workloads to building applications potentially coming from diverse suppliers.
The rules of buying and selling packet core are changing. How suppliers build products, drive revenue, the services they offer, and what they do to succeed in an increasingly cloudified ecosystem are all on the table. “For the next few years, the likes of Cisco, HPE, and Juniper must execute a ‘do both’ model. They need to run the current product playbook and layer in a new software-based selling strategy in line with new economic realities, said Alusha. Ultimately, suppliers must help, not sell. Helping will sell, but selling will not help. Success will go to the fittest, not necessarily the biggest, because size is weakened by commoditisation. “Innovation in the process – how things get done internally – will be as important as innovation in packet core products that vendors sell,” said Alusha.
These findings are from ABI Research’s Network Cloud Infrastructure market data report.