The global network-as-a-service market size was valued at USD 10.5 billion in 2021. It is expected to reach USD 140 billion by 2030, growing at a CAGR of 33.2% during the period (2022–2030). The increasing digital transformation through data and networking technologies, such as IoT, blockchain, cognitive, and advanced analytics, intensifies the adoption of connectivity advances in various industries. Network-as-a-Service (NaaS) offers companies greater flexibility and even performance gains in their network infrastructure. Companies can be more cost-conscious with on-demand purchasing and pay only for the necessary networking services. Network-as-a-Service (NaaS) can also help companies that want greater flexibility in provisioning without having to rearchitect networks or redo contracts from the ground up. The enterprise propensity toward digitalization is further driving demand for robust network services, and many companies are looking to enhance their network capabilities, which is where NaaS is gaining traction.
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The need for cloud-based solutions is booming due to the growing use of the technology and consumer propensity towards the cloud, as this technology allows users to access the data from remote areas. The increasing realization among organizations about the necessity of saving money and resources by shifting their data to the cloud rather than creating and maintaining on-premise infrastructure is boosting the demand for cloud-based solutions among enterprises.
According to the CISCO Global Cloud Index, 94% of all workloads and computing instances will likely be processed by cloud data centers by 2021, while traditional data centers will process only 6%. This indicates the future worldwide potential for cloud-based contact center adoption. It is anticipated that crucial industries, such as banking will progressively use cloud-based service provision. This is due to the IT sector's continuing quest for optimized infrastructure and the ability of solution builders to source application and infrastructure components from multiple providers to construct a hybrid cloud-based solution. This is anticipated to boost the market growth.
SDN is designed to make a network more flexible and easier to manage. It centralizes management by abstracting the control plane from the data forwarding function in discrete networking devices. According to Cisco 2020 Global Networking Trends, SDN has seen wide adoption across data centers (64%), WANs (58%), and access networks (40%). Moreover, the integration of SDN with existing network infrastructure provides myriad benefits, such as reducing the complexity of statically defined networks, automating network functions much more accessible, and allowing for simpler provisioning and management of networked resources, among others.
Furthermore, many end-user organizations are integrating their network infrastructure with SDN. For instance, in September 2020, Defense Information Systems Agency (DISA) is planning to deploy software-defined wide-area networking (SD-WAN) capabilities across the Department of Defense (DoD) enterprise. In October 2020, Arkphire announced a new initiative in partnership with technology giant Cisco to equip Arkphire with the expertise and capabilities to support the next generation of networking technologies. Arkphire will develop a dedicated Cisco-based Software-Defined Networking (SDN) center of excellence, employing up to 20 engineers, to help organizations evolve their network from a connectivity-driven infrastructure to a business-outcomes-driven one in the Great Britain region. Accordingly, SDN integration with existing network infrastructure is expected to drive the market.
Although the NaaS provides excellent benefits, specific challenges, like reliability concerns, may obstruct the market's growth over the forecast period. Hiring a third-party networking infrastructure vendor to host critical business infrastructure involves believing that the providers' business may endure the relationship with them. In case of any failure by the providers to sustain the competition in the market, the enterprises relying upon them may have to replace critical infrastructure entirely, without which it is not possible to conduct business.
Moreover, the security risks are also likely to concern the organizations. A third-party company may govern its work. To date, the third-party managers have handled the provision of services with utmost care. However, the threat of data breaches is always on, which also challenges market growth. Moreover, a skills gap for IoT and cloud solutions is compounded by solution complexity. Almost half (47%) of the Microsoft "IoT signals" respondents lacked skilled workers. Around 38% of IoT adopters cited complexity/technical challenges to using IoT as a barrier to furthering their IoT adoption. Existing cloud solutions' complexities and lack of resources challenge the market growth.
The need and integration of network automation and other technologies in the telecom industry are becoming highly prevalent. In addition, the telecom operators have been investing in offering seamless connection and emerging technologies, such as 5G. For instance, South Korea has been planning to invest more than KRW 30 trillion (USD 26.2 Billion) over the next four years to support the deployment of 5G infrastructure in the country, according to South Korean President Moon Jae-in.
Furthermore, in March 2020, the country's three leading players, SK Telecom, KT, and LG Uplus, agreed to invest KRW 4 trillion (approximately USD 3.2 billion) in the first half of 2020 to cover the cost of the installation to deploy 5G infrastructure in subways, railroads, department stores, and universities to enhance 5G service coverage in South Korea. As a result, it creates an immense opportunity and opens a new avenue for the industry players to innovate and invest in NaaS solutions.
The global network-as-a-service market share is segmented by type, application, industry vertical, and region.
Type-wise, the global network-as-a-service market is segmented into LAN-as-a-Service and WAN-as-a-Service.
WAN-as-a-Service is the dominant segment and is estimated to grow at a CAGR of 34.4% during the forecast period. WAN-as-a-service offerings replace legacy WAN configurations that rely on hardware, use connectivity protocols like multiprotocol label switching, and are challenging to scale up. As WAN-as-a-service is offered via the cloud, customers require only Internet connectivity and can configure the WAN using software instead of hardware appliances. Software-Defined (SD)-WAN is a shift in how a Wide Area Network is deployed and managed. Such instances drive the segment growth.
LAN-as-a-Service is poised to be the way forward for enterprises. It could provide a scalable infrastructure without scaling a network's overhead processes and cost. Organizations can focus on their core business instead of spending their time and resources on non-core areas. It offers a solution for all start-up and growing businesses that run networks as a critical part of their operations. LANaaS drives benefits by off-loading services, allowing enterprises to focus on other prominent areas. Such factors drive market growth.
Application-wise, the global network-as-a-service market is segmented into Cloud-Based Services (vCPE), Bandwidth on Demand (BoD), Integrated Network Security-as-a-Service, Wide Area Networks (WAN), and Virtual Private Network (VPN).
Wide Area Network (WAN) is the dominant segment and is estimated to grow at a CAGR of 32.4% during the forecast period. As businesses worldwide embrace the WFH option, the demand for collaboration and conferencing solutions experienced significant uptake. To complement this, technologies such as SD-WAN and virtualized infrastructure setups offer reliable technical solution alternatives for companies in the new business paradigm of teleworking. This is expected to become the norm, even post the pandemic period, implying that the demand and spending on fiber infrastructure will increase. The advent of the Open Wi-Fi Movement is estimated to spur the growth of connected devices during the estimated period. Similar trends are expected to boost the adoption of the network as a Service solution for deploying WAN across enterprises.
Cloud-Based Services (vCPE) is the fastest-growing segment. The significant reasons for migrating to the cloud are scalability, increased effectiveness, speedier implementation, mobility, and disaster recovery. In August 2020, Arista Networks announced a new SaaS offering for the CloudVision platform. Arista's new CloudVision as-a-Service is a fully managed software service that automates networks spanning the client to the cloud to help users achieve faster time-to-value, enhanced scaling, and continuous network assurance. Such global trends and innovations are expected to boost the adoption of cloud-based services across enterprises over the forecast period.
Industry vertical-wise, the global network-as-a-service market is segmented into Healthcare, BFSI, Retail & E-Commerce, IT & Telecom, Manufacturing, Transportation & Logistics, and Public Sector.
IT & Telecom is the dominant segment and is estimated to grow at a CAGR of 31.8% during the forecast period. Network infrastructure in IT & telecom plays a crucial role as most processes depend on these sectors' networks. Network services are chains made up of interconnected virtual and physical network functions. These are the critical building blocks of 5G networks. Thereby, with the invention of new technology such as 5G, the telecom sector will witness significant adoption of the NaaS platform.
Retail & E-Commerce is the fastest-growing segment. The retail & e-commerce players are indulging in merger and acquisition activities to support their network infrastructure. Overall, with the growing market for retail & e-commerce, the NaaS market is expected to witness growth, as players in the segment will deploy these solutions to reap maximum benefits and focus on their primary activities rather than on networking infrastructure.
Region-wise, the global network-as-a-service market share is segmented into North America, Asia-Pacific, Europe, and LAMEA.
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North America dominates the global market and is estimated to grow at a CAGR of 31.9% during the forecast period. The demand for NaaS in Canada is growing mainly due to new product roll-outs, acquisitions, mergers, and partnerships, which are shaping the market landscape in North America overall. There is a rise in malicious cyber activity targeting information technology (IT) service providers, causing a leak of client information. Due to rising network infiltration, Canadian Centre for Cyber Security has been guiding businesses. This has, in turn, led to companies getting very selective while choosing their respective network service providers. With increasing automation and connected device deployment, the market demand is expected to increase significantly. Also, with a large base of small businesses in Canada, the adoption of NaaS is expected to gain a significant trend in the coming time.
Asia-Pacific is the fastest-growing region. China is witnessing the widespread adoption of 5G and 5G mobile networks that must support many different service types such as health, automotive, logistics, energy, and public safety. Network slicing allows offering programmable network instances that match individual use cases' requirements, subscriber types, and applications. Network slicing is a crucial enabler for network operators to expand existing businesses and create new ones. Slices could be offered to third parties such as health, automotive, and public safety with a suitable API for providing network as a Service (NaaS). India, among the fastest-growing economies in Asia-Pacific, is seeing strong growth in demand for next-generation connectivity solutions. As businesses tap digitization for enhanced agility and development, the country is witnessing multiple partnership activities in the NaaS landscape.
Europe is the second-largest region. It is estimated to reach USD 35 billion by 2030, growing at a CAGR of 32.2%. The country is witnessing several partnership activities resulting in the expansion of the NaaS platforms and product innovation. For instance, in February 2021, PacketFabric entered a strategic partnership with UK-based Colt Technology Services to directly integrate the Colts on Demand offering with PacketFabric's Network as a Service (NaaS) platform. This is poised to benefit PacketFabric's enterprise customers from real-time network connectivity to 100 prominent data center locations across Europe.