“With its acquisition of Metaswitch Networks and Affirmed Networks, we expect Microsoft to offer its own Network Function Virtualization (NFV) services to MNOs in the near future.” says Axel Meiling, Partner at Digital Oxygen.

Traditionally, most of an MNO’s network functions require dedicated hardware. With NFV, these components can be virtualized, reducing costs but also making the operator more flexible: If e.g. more capacity is needed, operators can spin it up on demand.

The natural first step for MNOs to switch to NFV will be gateways – network components that enable the communication with other operator networks and are anyhow close to the network’s borders.

GRX/IPX providers offer services like interconnectivity between networks, data, and financial clearing. As MNOs move to the cloud, interconnectivity between these networks will be provided within the cloud. As a consequence traditional GRX/IPX providers will become obsolete. While this shift requires a critical mass of MNOs relying on interconnectivity in the cloud, the strong advantages make this a very likely development.

For Meiling, this will only be the first step towards a full move-to-the cloud for MNOs: “Once operators have a foot in the cloud door with gateway and interconnectivity services, the shift of core network functions to the cloud is just a matter of time.”

The discussion paper is available for download at: www.digital-oxygen.com/publications.