Telcos are poised to snag pole position in what will be a $150 billion network-as-a-service (NaaS) market, but must act now to overhaul their businesses and fend off competition from cloud and interconnection providers, ABI Research argued in a new report.
NaaS encompasses a range of software-defined networking services like SD-WAN as well as WAN services, VPN, bandwidth on demand, transport and cloud access.
According to the analyst firm, NaaS adoption is set to skyrocket over the next eight years, with 90% of enterprises having migrated at least a quarter of their network infrastructure to a NaaS model by 2030. Telcos have an opportunity to capture around half ($75 billion) of the overall NaaS market value, but must refine their operational and go-to-market models to make the most of the opportunity.
“Telcos must seize the opportunity to dominate the NaaS market, as revenue generated from connectivity provision will continue to decline,” ABI analyst Reece Hayden stated. “A lot still needs to be done to bridge technological, cultural and structural gaps. Although it seems like an expensive and risky uphill battle, developing NaaS will be crucial to the long-term upside.”
Specifically, ABI said telcos need to virtualize their network infrastructure to enable delivery of cloud-native services; restructure their business and operating models to embrace partnerships and reduce internal fragmentation; and refine their go-to-market strategies with vertical and enterprise size-specific sales approaches. If telcos miss the boat, then cloud companies like Amazon Web Services, Google Cloud and Microsoft Azure as well as interconnection players like Megaport and Packet Fabric will be “waiting and willing to catch it,” Hayden said.
ABI’s forecast follows one from Fortune Business Insights in May, which pegged the value of the NaaS market at $9.58 billion in 2021. North America alone accounted for $4 billion of that total, its data showed. Fortune Business Insights predicted the overall market figure would rise at a compound annual growth rate of 31.9% to reach $80.73 billion by 2029, a total well below the $150 billion mark ABI said the market would hit by 2030.
According to Fortune Business Insights, WAN services will dominate the market with more than 65% share thanks in part to rapid and growing adoption of SD-WAN. LAN services, meanwhile, are expected to grow at their fastest pace during the 2022 to 2029 timeframe as demand for on-demand ports and Wi-Fi hotspots rises.