6 concrete ways NFV can save you money


  • NFV can help manage rapid demand growth while reducing expenses
  • NFV simplifies operational processes leading to reduced OPEX
  • NFV better utilizes hardware capacity and enables new cost models

Cloud computing and network functions virtualization (NFV) can help manage rapid demand growth while reducing capital and operational expenditures (CAPEX and OPEX). No wonder service providers are paying attention.

These savings significantly lower service providers’ total cost of ownership (TCO) and increase agility — critical to thriving in today’s challenging telecom environment. Virtualizing applications also simplifies complex processes, such as healing, scaling, and software upgrades, providing further agility and flexibility.

Such benefits can increase customer satisfaction and reduce churn, which may prove to be the tipping point when service providers evaluate whether to move certain applications to a cloud platform.


Much has been said about how virtualization and the cloud may be used in the telecom industry to improve the infrastructure and operations TCO. Initial efforts centered on virtualization’s ability to optimize hardware. Lately, the focus has shifted to operations.

While virtualizing some network functions will undoubtedly bring CAPEX savings, NFV’s greatest contribution will be that it enables a new way of approaching telecommunications. This means much more than just optimizing inefficiencies inherent in current processes.

Service providers can — and should — take advantage of NFV technology to redefine their current operations. This will require 3 major steps:

  1. Map out every current process in detail
  2. Analyze what can be automated (that is, handled by an NFV platform) to reduce complexity
  3. Redesign operations to be much simpler and more agile

Cost drivers for NFV

Many parameters may be considered when developing a business case to analyze the impact of migrating an application to NFV (Figure 1).

There are 3 categories of cost drivers:

  1. CAPEX: one-time investments in fixed assets with a useful life extending beyond the taxable year
  2. Infrastructure OPEX: ongoing costs directly related to the infrastructure (e.g., maintenance)
  3. Process OPEX: ongoing staffing costs directly related to the daily management of activities or processes required to provide services or applications

Main NFV cost drivers

Figure 1. Main NFV cost drivers

6 areas of cost saving enabled by NFV

1. Capacity growth
Traditional approaches to adding capacity follow a 4-step process (Figure 2) to deploy a new server infrastructure.

Traditional deployment process

Figure 2. Traditional deployment process

The NFV deployment process (Figure 3) differs from the traditional process in a number of ways.

NFV deployment process

Figure 3. NFV deployment process

Costs for deploying NFV are slightly higher initially due to the professional services needed during deployment. However, this is a one-time cost. As the service provider becomes more familiar with the infrastructure, it will likely use its own operators and perform these tasks in house. With NFV, applications can share infrastructure, so the service provider’s operations team will only need to be familiar with a very limited number of infrastructure elements.

In succeeding years, total server replacement and growth process costs are greatly reduced. NFV’s virtual scaling and automated application deployment capabilities reduce capacity growth process costs significantly.

2. Software upgrades
Today, upgrading with both new programmed software releases and ad-hoc patches follows 4 phases:

  1. Plan
  2. Obtain the new software
  3. Test the new software
  4. Install and configure

The last phase generally consumes the most time and resources.

Introducing an NFV platform doesn’t typically change the way the provider plans and obtains software. However, NFV offers a reduced timeline and lower costs to stage tests and create environments. Service providers can use “sandbox” testing environments without dedicated equipment. This lets them create simplified test cases which can be executed in parallel, and reduces testing time by about one-third.

NFV simplifies installation and configuration.

Traditionally, service providers open maintenance windows at night to install and configure a predefined number of servers individually. With NFV, the service provider can upgrade 4 servers per night in a 5-hour maintenance window. The lead time maintenance window grows over time as the service provider increases the number of physical servers to keep up with growing traffic needs (Figure 4).

Example of lead times to upgrade software

Figure 4. Example of lead times to upgrade software

NFV changes the whole process. The total number of servers is no longer relevant for installation and configuration. Application recipes are used to push upgrades automatically, in a matter of minutes, to all servers in parallel. This automation provides dramatic gains in agility.

3. Healing process
Device failures can result in loss of service for many users and increase churn. To reduce this risk, service providers traditionally deploy fully redundant architectures. This costly security buffer requires double the amount of physical infrastructure, with much of it standing idle.

A device failure is not the only issue that can require a healing process. Service providers also need to be able to address OS failures, application failures and distributed denial of service (DDOS) attacks.

Traditional healing process
Today’s healing process consists of 3 stages:

  1. Issue identification
  2. Trigger and execute solution process
  3. Perform ‘Post-mortem’ root cause analysis (RCA)

Lead times to identify and solve a problem vary depending on the issue at hand. It tends to be simpler and faster at the hardware and operating system layers, whereas actually solving an issue tends to be faster at the application layer. DDOS attacks are the fastest both to identify and solve, but tend to consume more of the operations team’s time because they are so common.

RCA is performed by operators once service continuity has been assured. Identifying the root cause of a problem allows service providers to make the changes necessary to avoid reoccurrences.

NFV healing process
With NFV, devices run as virtualized functions and are protected by the self-healing properties of the hypervisor and orchestration layer. The healing process is fully redefined as the business continuity process is decoupled from the problem itself. To provide end-to-end application resiliency and reliability, NFV platforms incorporate mechanisms for automated healing, based on the monitored infrastructure and application-level KPIs. When failures occur, the system automatically creates a new instance with the same specifications to ensure application availability at all times.

By simplifying the healing process and developing a simple solution using automated virtual scaling capabilities, NFV can significantly reduce healing costs.

4. Floor space, power and cooling
Real estate, power and cooling are OPEX infrastructure costs. They are directly related to the number and characteristics of physical infrastructure items managed for a specific deployment. Provided all constants remain equal, reducing physical hardware will lower the total costs of real estate, power, and cooling by the same proportion.

The main drivers for these costs are:

  • Real estate: number and size of infrastructure items and square foot cost
  • Power: rate of energy consumption and cost per kilowatt hour
  • Cooling: a factor of 1:1 of power consumption

With NFV, real estate costs are reduced because the technology requires fewer physical infrastructure items. With traditional approaches, load balancers and other networking equipment such as switches are placed separately from servers.

Power costs are reduced because NFV makes it possible for service providers to replace older servers sooner. Older servers consume about twice as much energy as new ones.

Lastly, cooling costs are generally calculated as a 1:1 ratio to power costs, hence, cooling costs decrease in the same proportion as encountered with power.

5. Maintenance and software licenses
Maintenance is also an OPEX infrastructure cost. It’s directly related to the number and characteristics of physical infrastructure items managed by the operations teams. Many traditional infrastructure elements require a yearly maintenance fee, including servers and the network equipment, such as load balancers, switches, and routing ports.

While any chosen NFV system will have associated licenses and maintenance fees, there will be considerably fewer licenses than when using a traditional approach. This is because far fewer infrastructure elements are required, and NFV platforms can be shared between applications or services as capacity needs change.

6. Hardware infrastructure
Virtualizing physical assets improves resource utilization by creating virtual machines, each with its own operating system on a single physical hardware asset. An NFV platform goes a step further. It enables dynamic placement of the virtual machines, which further improves hardware optimization.

Traditional deployments operate in a “siloed” architecture. Servers are dedicated to one application, resulting in an inefficiently high number of servers.

NFV enables a new model, where all underlying hardware forms a pool of resources shared by all the applications running on the same platform. Furthermore, the ability to share the infrastructure permits a new cost model. The cost of idle capacity should not be allocated to a specific application, but is available for other applications on demand.

Service providers can expect significant reductions in server costs with NFV, since it uses far fewer servers than traditional approaches. More importantly, physical appliances, such as load balancers, can be eliminated.

This article is excerpted from the Alcatel-Lucent strategic white paper entitled "Business Case for Moving DNS to the Cloud".

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