Does Virtualization Really Matter?

That was the question that an attendee at a recent conference sponsored by the Communications Technology Management, part of University of California’s Marshall School of Business, asked me last week.  With all of the industry discussion on the topic over the last year or two on the topic, I think it is always worthwhile to pause, assess, and reflect, as sometimes some of the simplest questions can be some of the hardest.

“Yes,” I told him, “but maybe not how you think.”

https://www.youtube.com/watch?v=J2CwIYQ9OrA

No question I’m proud of the advances Cisco has made in this area, from our announcement of the Evolved Services Platform in February to now having over 40 virtualized functions in our portfolio.  As far as we can tell, it is the largest, most expansive virtualized portfolio in the industry with so much of it not on a drawing board but already in use in customer network.

But while we’re proud of the aggressive execution of our strategy, far more relevant than the number of functions, however, is what they can enable.  I think this was the reason for the question and certainly the reason for my answer.
Take our announcement last week: enabling providers to offer managed Virtual Private Network and Virtual Security services to small and medium business (SMBs), a whole new and fast-growing market segment of largely untapped $62 billion worth of opportunity by 2018.

While many SMBs are looking for same class, quality and type of services as their much larger enterprise peers, it is not always cost effective for the SP to deliver them because while the necessary scale and price tolerance of an SMB deployment is low, the cost of customer acquisition, customer support, manual provisioning, etc. is not, often being more in range with that of a much larger enterprise deployment.  With an upside down cost to revenue model, it’s understandable service providers aren’t racing to address this need.

Leveraging virtualization, however, transforms this model and reorients it into something quite compelling.  By using virtualized functions, multi-vendor orchestration and provisioning tools that work across both virtualized and physical devices in a hybrid network, service providers can save up to 78% in operational costs, deliver a 200% return on investment over 5 years and decrease new managed service start-up time from months to less than 48 hours compared to past approaches.  With such benefits, service providers can pursue this market – with some racing ahead to do so – providing opportunity for them and dramatically enhanced capabilities to their SMB customers.

And it doesn’t just apply to business services.

Last month, we announced how we can enable broadcasters and media companies to be more efficient and agile with a virtualized video processing solution.  Instead of having to build out dedicated hardware to handle the processing requirements for each specific type of video, broadcasters can instead automate and orchestrate the production workflows in a much more elastic way with virtualized capabilities and automated orchestration across centralized compute functions, thereby completing the production in approximately half the operating costs and in a much more agile manner.

And earlier this year, we highlighted how we are virtualizing the mobile internet delivering M2M or Premium Mobile Broadband and even virtualizing the digital video recorders (DVR) from the living room and putting them into the cloud.

These are just a few of the service offers that we have announced to date, but with a virtualized tool box that is this big and continuing to grow paired with orchestration and expertise across cloud, mobile, video, and networking, we’ve barely made a dent in what’s possible to enable providers – and their customers – the ability to address and seize even more opportunities in the quarters ahead.

That’s why virtualization really matters.

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