According to the Market Statsville Group (MSG), the global network functions virtualization (NFV) market size is expected to grow from USD 24.1 billion in 2022 to USD 228.4 billion by 2033, at a CAGR of 22.7% from 2023 to 2033.
The increasing adoption of cloud computing and IoT has resulted in the evolution of business needs in terms of agility. Subsequently, network complexities and cloud-based services have increased significantly in the past few years. Network function virtualization has emerged as one of the essential tools for organizations to address these issues associated with the network infrastructure. In light of increasing data-intensive applications and the need for cloud-based services, the demand for network function virtualization solutions and services is expected to increase substantially over the coming years, contributing to market growth. The growing number of network complexities, the ever-increasing demand for cloud-based services, deployment of IoT, security agility, cloud migration, increasing demand for network virtualization and automation, and the need for advanced network management are some of the key factors supporting the growth of the global network function virtualization market.
Network functions virtualization (NFV) involves strategies for virtualizing network services that traditionally run on proprietary, dedicated hardware. It incorporates cloud and virtualization technologies to drive the rapid development of new network services with scalability and automation. It involves decoupling network functions from proprietary hardware appliances and running them as software in virtual machines (VMs). NFV has greatly benefited the global IT industry in modernizing its enterprise networks. It has the ability to virtualize classical network functions like switching, routing, firewalls, and so on. Furthermore, NFV enhances scalability and flexibility by enabling service providers to offer new network applications and services on-demand without needing extra hardware resources.
The lockdown has promoted the work-from-home and distance learning trend, raising the importance of enterprise virtual private network (VPN). Due to this, tremendous pressure was exerted on the existing communication set-ups and significantly increased the network traffic. For instance, according to OECD (Organization for Economic Co-operation and Development), between December 2019 and March 2020, bandwidth increased by 22.3%, more than four times that of the prior quarter. Germany experienced an increase from 11.2% to 16.5%, while Italy, one of the most severely affected countries in Europe, handled 39.9% more bandwidth between December 2019 and March 2020, up from only 1.8% growth in the prior quarter. Besides, according to UNESCO, approximately 850 million students are attending online and virtual classes across the globe. Hence, the increase in network traffic and the adoption of NFV increased, thus, driving the market's growth during the pandemic.
Network function virtualization (NFV) demand in the BFSI is increasing rapidly, directly giving rise to the demand for NFV and driving the market growth. BFSI is set to grow exponentially due to the rising per capita income, introducing of new products, technological innovation, expanding distribution, networking, and increasing customer awareness of financial products. BFSI Industry has continued to be a top priority focus industry for economic development based on inclusive growth. There is rapid growth in digital transformation in the banking and finance sector. The key motive to digitally transform the BFSI sector is to automate and digitize processes in the banking & fintech organizations and to streamline critical processes of the organization. Further, to manage the data flow with efficiency. The rising network traffic and data complexities have led to an increased need for advanced network management and NFV systems.
In addition, the digital transformation in the BSFI sector increases the demand for NFV for it being helpful in many areas, such as better risk management processes, automation of repetitive tasks, and others. Enterprises across the globe are fast deploying various technology-based solutions to improve business efficiency and deliver a better customer experience. The increased focus from the government on the development of a digital and cashless ecosystem has also notably altered the IT requirements and functioning of companies in this sector.
Moreover, owing to the sensitive and confidential nature of the data used in the banking sector, data privacy, and cybersecurity have become crucial for the efficient functioning of enterprises in the industry. Adopting NFV technologies to introduce more automation into managing the infrastructure not only help to reduce risk but also open the door to technological and commercial innovation. These benefits make NFV demanding in the banking, finance, and insurance sector and drive the market's growth.
Network Function Virtualization (NFV) offers various benefits, including the cost-effective transition of telco hardware functionalities to a software platform, which can address the issue of vendor lock-in. However, these benefits come with the trade-off of some security risks. NFV makes virtual mobile networks susceptible to various security threats, which may impede the market growth. Security concerns related to NFV are crucial, particularly when it comes to its applicability across different industries and verticals. It largely impacts the system's resiliency and the overall quality of the offered services. Some of these security concerns pertaining to the key architectural components of NFV infrastructure being virtual infrastructure manager (VIM). The hypervisor is the main element of VIM and is already under various security attacks, such as VM/guest OS manipulation and data exfiltration/destruction.
Therefore, when the hypervisor is compromised, other vulnerabilities can rise exponentially. Since While NFV provides an automated approach to network function provisioning, it can also create security vulnerabilities such as exploitation of automated network configuration and orchestration, malicious misconfiguration, and exploitation of SDN (software-defined networking) controllers. Virtual Network Functions run over virtual resources such as Virtual Machines. The security threats associated with Virtual Network Functions (VNFs) arise from the combination of security risks inherent in physical networking and virtualization technologies. The unique threats associated with Network Function Virtualization (NFV) emerge when these two sets of risks intersect.
The Internet of Things (IoT) has been increasingly creating new market possibilities in several industries' sectors, such as smart manufacturing, smart cities, and smart homes, linking the digital and physical worlds. A key threat in an IoT system is to ensure network performance and cost-efficiency when a plethora of data is generated and increased. That can be enabled via a new approach to providing services more agile and cost-efficiently by adopting Network Function Virtualization (NFV) technologies within an IoT environment. This creates new opportunities for the NFV market and drives the market’s growth.
In recent years, IoT has become an essential paradigm to reduce human intervention as much as possible. Many objects can sense, communicate, and share information to create a smart world where everything is connected. However, the rapid growth of connected devices poses several special issues about the big amount of generated data. Particularly, it includes data availability, accuracy, security, collisions, and more. Network function virtualization is proposed to manage IoT networks since the traditional systems do not support the new dynamic behavior of data due to their limited features. Network functions virtualization (NFV) helps service providers deliver secure network resources to meet the unique and evolving needs of Internet of Things (IoT) applications and the related challenges of big data. IoT use cases have tremendous breadth, ranging from municipal traffic networks and electric and gas utilities to consumer wearables, home networks, and medical devices.
The study categorizes the network functions virtualization (NFV) market-based on component, network function, end-users and application area at the regional and global levels.
Based on the component, the market is divided into solutions, orchestration and automation, and professional services. The orchestration and automation segment accounted for the largest market share of around 46.8% in 2022 in the global network functions virtualization (NFV) market. Orchestration and automation are essential components of the NFV architecture. They enable network operators to streamline network services' deployment, management, and scaling, resulting in faster time-to-market and reduced operational costs. Orchestration and automation provide a centralized framework for managing the virtualized network functions and the underlying infrastructure that supports them. This framework includes a set of software tools and platforms that automate the provisioning, configuration, and optimization of network services. The increasing competition in the telecommunications industry is driving network operators to optimize their operations and reduce costs, making orchestration and automation a critical component of their strategy.
Based on the regions, the global network functions virtualization (NFV) market has been segmented across Europe, North America, the Middle East & Africa, Asia-Pacific, and South America. North America accounted for the largest market share of around 33.7% in 2022. The United States is the largest market for NFV in North America, with a significant presence of major market players in the region. The country's favorable regulatory environment and advanced technological infrastructure have enabled the rapid deployment of NFV solutions. The growing demand for software-defined networking (SDN) and NFV technologies in the United States is driven by the need for agile and flexible network infrastructure solutions that can adapt to changing business needs. Another factor driving the demand for NFV solutions in North America is the increasing adoption of edge computing. Edge computing allows for deploying network functions closer to end-users, reducing latency and improving network performance. The growing demand for edge computing is driving the need for NFV solutions to support distributed computing and network virtualization.
The network functions virtualization (NFV) market is a significant competitor and extremely cutthroat in the sector is using strategies including product launches, partnerships, acquisitions, agreements, and growth to enhance their market positions. Most sector businesses focus on increasing their operations worldwide and cultivating long-lasting partnerships.
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