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Network-as-a-Service: Network for rent

Network-as-a-Service (NaaS) providers enable companies to scale up without building expensive network infrastructures.

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Quantumrun Foresight
November 17, 2022

Insight summary

Network-as-a-Service (NaaS) is transforming how businesses manage and use network systems, offering them a flexible, subscription-based cloud solution. This rapidly growing market, driven by demand for efficient, scalable networking options, is shifting how companies allocate IT budgets and adapt to market changes. As NaaS gains traction, it could prompt a broader industry and governmental response to ensure fair competition and consumer protection.

Network-as-a-Service context

Network-as-a-Service is a cloud solution that allows enterprises to use networks externally managed by a service provider. The service, like other cloud applications, is subscription-based and customizable. With this service, businesses can jump into distributing their products and services without worrying about supporting network systems.

NaaS allows customers who are unable to or don’t want to set up their networking system to have access to one regardless. The service usually includes some combination of networking resources, maintenance, and applications that are all bundled together and rented out for a limited time. Some examples are Wide Area Network (WAN) connectivity, data center connectivity, bandwidth on demand (BoD), and cybersecurity. Network-as-a-Service sometimes entails delivering a virtual network service by holders of the infrastructure to a third party using an Open Flow protocol. Because of its flexibility and versatility, the global NaaS market is increasing rapidly.

The market is expected to have a compound annual growth rate of 40.7 percent from USD $15 million in 2021 to over USD $1 billion in 2027. This impressive expansion is driven by various factors, such as the telecom industry’s readiness to adopt new technology, the sector’s vital research and development capabilities, and the rising number of cloud-based services. Technology companies and telecom service providers are adopting cloud platforms to decrease costs. In addition, enterprise adoption of cloud solutions enables them to focus on their core strengths and strategic objectives. Furthermore, NaaS can be readily deployed, saving time and money by eliminating the need to maintain a complicated and expensive infrastructure.

Disruptive impact

Multiple organizations and small businesses are rapidly adopting NaaS to reduce the expense of acquiring new devices and training information technology (IT) personnel. In particular, SDN (Software Defined Network) solutions are increasingly adopted in enterprise segments due to a growing demand for efficient and flexible networks. Software Defined Network solutions, Network Function Virtualization (NFV), and open-source technologies are anticipated to gain further traction. As a result, cloud solutions providers are using NaaS to expand their customer base, particularly businesses that want greater control over their network infrastructures.

ABI Research predicts that by 2030, approximately 90 percent of telecoms firms will have transferred some portion of their international network infrastructure to a NaaS system. This strategy allows the industry to become a market leader in this space. Furthermore, to provide cloud-native services and stay competitive, telcos must virtualize their network infrastructure and heavily invest in automating various processes throughout the service.

Additionally, NaaS supports 5G slicing, which plays a significant role in value addition and monetization. (5G slicing enables multiple networks to operate on one physical infrastructure). Moreover, telecom companies would reduce internal fragmentation and improve service continuity by restructuring the business and using models to focus on openness and partnerships across the industry.

Implications of Network-as-a-Service

Wider implications of NaaS may include:

An increasing number of NaaS providers aiming to service new companies interested in using cloud solutions, such as startups, fintechs, and small and mid-sized businesses.
NaaS supporting various Wireless-as-a-Service (WaaS) offerings, which manages and maintains wireless connectivity, including WiFi.
External or internal IT managers deploying services to outsourced workforces and systems, leading to more cost efficiencies.
Increased network stability and support for remote and hybrid work systems, including enhanced cybersecurity.
Telcos using the NaaS model to become the ultimate network consultant and provider for enterprises and non-profit organizations like higher education.
NaaS adoption driving a shift in IT budget allocation from capital expenditures to operational expenditures, enabling greater financial flexibility for businesses.
Enhanced scalability and agility in network management through NaaS, allowing businesses to rapidly adapt to changing market demands and user needs.
Governments potentially reevaluating regulatory frameworks to ensure fair competition and consumer protection in the evolving NaaS-dominated market landscape.