What NaaS is and why it is important

Catherine Hammond

Hello, and welcome to the Analysys Mason podcast. 

My name is Catherine Hammond. I'm a research director for Enterprise Services, and I'm here today with Gorkem Yigit from our Networks and Cloud research team. Gorkem leads our Network-as-a-service Platforms and Infrastructure programme. He recently wrote a piece entitled ‘What is network-as-a-service and why is it important?' and that's exactly the topic that we're going to be discussing in this podcast. 

Thanks for joining me, Gorkem.

Gorkem Yigit

Thanks, Catherine.

Catherine Hammond

So, network-as-a-service or NaaS, as it's usually referred to, is quite a hot topic in the world of telecoms networks. Perhaps you could start by explaining a little bit about what is driving the demand for NaaS. What's the problem that it's trying to solve?

Gorkem Yigit

Yes, sure. Let's start with the core issue. Traditional enterprise connectivity services are just not cutting it for some modern enterprises anymore. Historically, these connectivity services were delivered as a static and endpoint-heavy type of solution, and they are often tied to rigid procurement cycles like every three, five, or even seven years. Also, enterprises would typically work with operators on just a couple of layers in the connectivity stack, like layer 2 or layer 3 connectivity, underlay kind of services. 

Enterprise networking needs have evolved dramatically because of the shift from on-prem data centres to hybrid environments that include multiple public clouds, SaaS applications and edge locations, many enterprises are now demanding a new level of flexibility. AI is also coming into the picture, potentially adding new challenges. So enterprises need more seamless, dynamic, and programmable connectivity across this new complex landscape. They want connectivity to be created and scaled up or down on demand, all while maintaining the same SLA guarantees or even better SLA guarantees in both underlay and overlay connectivity. 

It's also not just about connectivity anymore; the enterprises desire to source other services, such as security, all in a more consistent and flexible manner and using as few service providers as possible. 

So essentially, enterprises want their networking to offer the same agility and user experience they are used to with their public cloud services. Traditionally, networking has lagged behind cloud compute or storage types of services, so, instead of being an enabler, it often became the bottleneck, and that’s where the shift to NaaS comes in because it's about changing that dynamic and making the network a true driver of enterprise agility.

Catherine Hammond

Great. Yes. Enterprises looking to buy networks in a similar way to buying other cloud services and to be able to buy them in a way that enables those enterprise services to be used more effectively. 

So, NaaS is defined in a number of different ways. I think you noted in your article some MEF work to try to develop some industry-wide consensus. In your view, what are the main characteristics and features that make up a NaaS solution?

Defining NaaS characteristics

Gorkem Yigit

As I said, the concept of NaaS is still evolving. There are different viewpoints in the industry on what NaaS is, what it should be and what its defining characteristics are. Organisations like MEF are doing a great job to drive the industry toward a more common definition. In our NaaS Platforms and Infrastructure programme, we align closely with MEF's NaaS efforts. But having said that, we have a broader scope, especially for the network APIs, monetisation and automation capabilities. 

So, going back to your question, if I were to describe NaaS broadly, it’s essentially a next-generation network services platform, and there are a few key characteristics that define it. I will start with any-to-any connectivity. NaaS should allow enterprises and developers to connect any applications, users or branches across any data centre, public cloud and edge location. This needs underlay networks and overlay networks like multi-cloud routing and application layer networking. All this should be on a single platform with end-to-end SLAs. 

Then, there is the self-service demand because NaaS should enable on-demand automated provisioning of services so that enterprises can configure and scale the connectivity as needed with minimum delays or manual efforts. 

Next, I would say the single pane of glass type of management. NaaS should offer a unified platform for managing all services that the enterprise is buying. On top of that, it should provide visibility, control, and then the tools to monitor performance, reliability, and security. 

Flexible pricing models are kind of table stakes for NaaS now because the commercial model for NaaS should adopt a cloud-like, consumption-based approach, meaning that enterprises should only pay for what they use, whether that's based on users, bandwidth or specific use cases. Another key area is APIs and programmability. NaaS should expose capabilities through open APIs based on standards like Camara, MEF, and TM Forum. Software development kits (SDKs) are also important for enterprises to ease integration with their systems as well as on the customisation. 

Finally, I would say value-added services marketplace because it's going to play a very important role beyond connectivity. So, NaaS should include marketplaces for additional services like security, SD-WAN, and unified comms. Enterprises should be able to add these services on demand to address their specific needs when they need them. 

These are just the fundamental traits to address the enterprise's needs. But NaaS also require a network capable of supporting these capabilities. I would say there are three key layers in a NaaS-ready type of network, and it all starts with a software-defined automated underlay network because these are the foundation for connectivity services that we have today. So private internet, ethernet, cloud interconnect. These networks are needed for those SLA guarantees, quality of service and privacy. NaaS, in a way, repositions these traditional capabilities as essential for cloud and data centre connectivity. It's not really about these traditional services anymore because, on top of this, you've got cloud native overlay networks. This is to handle those distributed applications and multi-cloud environments. Overlays are the ones that provide more application-centric solutions like cloud routing, security, optimisation and ensuring cross-cloud connectivity. APIs tie everything together and make the network more programmable and adaptable because there are internal APIs that automate and orchestrate operations, you also have external APIs like Camara, which expose these network capabilities to enterprises and developers.

So, in summary, NaaS is more than just a connectivity solution, it's a platform to transform networking into more flexible, scalable, and programmable services that meet the needs of enterprises.

Catherine Hammond

Yes. Quite a broad suite of capabilities that stretch beyond networking and enable networking to support all those additional services that enterprises want to consume. 

From the work I've done, the idea of rationalising the number of suppliers that enterprises are dealing with, bringing in that marketplace to buy the cloud and security services as well and manage that through, is really important for many enterprises.

Gorkem Yigit

Exactly.

Catherine Hammond

So, there are lots of different players active in the NaaS markets. If we think about the value chain. In my research, I focus particularly on the telecoms operator, the traditional network operator and how they play with enterprises. Maybe we could start with them. What do you think is the opportunity for the traditional operator regarding NaaS? Are there any particular challenges that they face?

Opportunities for telecom operators

Gorkem Yigit

Yes. NaaS is just the natural progression for telecom operators because they already have the advantage of extensive network assets and established customer relationships. So all these give them a very strong starting point. However, the problem is that there are still some significant challenges they will need to address because many operators still deal with a lack of automation, flexibility, and programmability in their networks and their network operations. This is due to the fragmented systems and reliance on legacy network technologies. There are ways operators can overcome these hurdles, and we are already seeing a few strategies emerge.

For example, some operators are building new NaaS platforms from scratch, BT’s Global Fabric is an example of this. This allows operators to create something tailored to their NaaS needs. It can be very resource-intensive and time-consuming to build this from scratch. We are also seeing other operators transforming their existing networks and operations to align with NaaS. A good example of this is Orange and its Evolution Platform. This is more of a middle-ground approach, so leverage what you already have while you are modernising it for more agility and automation. There also may be some other strategies; acquisitions are one, and we know that some operators are thinking about, or already doing, white-label NaaS platforms. There are some examples of this in North America; one Tier 1 operator is doing it with F5. There are others that go further, they invest or purchase NaaS providers, for instance, PCCW, who acquired Console Connect years ago, this is a good example of this. 

And finally, maybe the simplest solution for some operators is that they may just resell their partner NaaS solutions. That's the quickest way to enter the market, but of course, it offers limited amounts of differentiation. 

Beyond all of this, one thing that I'd like to highlight is operators have some unique opportunities to stand out in this NaaS market because they have some assets that other service providers or their competitors don't have. These include private networks, 5G standalone cores, and edge infrastructure. So, by exposing these through APIs, they can support advanced use cases that other enterprises are demanding. So, this combination of connectivity and programmability with the unique assets that operators have potentially could give them a significant edge in the NaaS space.

Catherine Hammond

Yes, exactly. And I think sometimes operators do see NaaS as a threat more than an opportunity. But as you say, they have some unique characteristics. Also, as you say, there are a number of different options that they can follow to create their proposition. 

So that's telecom operators. Who else are the major players in the market, and what opportunities do they have?

Major players in the NaaS market

Gorkem Yigit

The NaaS value chain includes a variety of players that are both competing and partnering with each other. 

There are some specialised B2B connectivity providers. There are some software-defined cloud interconnect players (SDCIs) and co-location internet exchange providers. There are some new startups, especially in the multi-cloud networking space. And, of course, public cloud providers, we can consider them on the value chain as well. 

If we zoom in, especially on the multi-cloud networking side of it, which we expect is going to be a significant market, reaching around $4.3 billion in the next four years, it's not just about site-to-site connectivity in the underlay, like layers 2 and 3, but it's application-to-application kind of connectivity, spanning all the layers from 3 to 7. This space represents a new territory for traditional operators; players like Aviatrix, Prosimo, and Alkira are currently dominating this space. Also, we are seeing some incumbent vendors like F5 and IBM targeting this opportunity. So, we are seeing traditional operators partner with these vendors in some cases, but we also know that some operators are developing these capabilities in-house, too. 

Going further in the multi-cloud space, there are others, like co-location providers, Equinix and SDC, as I mentioned, other names include Megaport, PacketFabric and InterCloud; all of these players built their NaaS solutions for multi-cloud connectivity from the outset. So, they are highly automated and agile, and they can pose strong competition to the traditional carriers in this space. Also worth noting is that public cloud providers like AWS, Google, Azure, and Oracle are also entering this NaaS landscape from the cloud connectivity point of view because they've got extensive backbones, and they're now offering some wide area network services. We are hearing some enterprises are approaching them, not just for cloud connectivity, but also to use these backbones to build global wide area networks. So, this shift suggests that public cloud providers are also becoming a significant part of the NaaS ecosystem as enterprises seek alternatives or potential competition to traditional service providers.

Catherine Hammond

So lots going on in the market, lots of players jostling for position, but as you say, also partnering with one another to bring propositions to market. Is there anything in particular that you expect to see from the NaaS market in 2025?

Future predictions for NaaS in 2025

Gorkem Yigit

Yes, let's do some crystal ball. First off, I think we are going to see more consolidation in the NaaS market because, right now, it's pretty crowded and fragmented. To be honest, no single operator or vendor can really meet all the NaaS requirements we discussed today. So many players are going to continue to grow their capabilities organically to fill these gaps, they’re also going to partner up. These partnerships are going to be facilitated by increasing standardisation in the industry, but the market is heading towards more consolidation. This will happen both at the service provider and technology vendor levels because the market needs better integration, greater scale, and, ultimately, the ability to offer more unified and comprehensive services. Beyond consolidation, I think AI is going to play a much bigger role going forward. On the one hand, AI will enhance NaaS offerings by driving greater automation, operational efficiencies, and better customer experience; this is more internal. On the other hand, the rise of AI itself is going to influence how NaaS is delivered to enterprises because there are already lots of discussions around the challenges of handling AI traffic. So things like bandwidth, latency, quality of service for transporting AI training and imprinting data. After that, there are some concerns around AI data, security, and privacy, so it is clear that AI will shape what NaaS can do and also how it should be designed to support enterprise needs. 

Finally, as I mentioned several times, APIs, we are going to see a bigger push in the development and adoption of APIs. Industry-standard APIs like MEF or TM Forum are already gaining traction for service and network automation and also cross-operator integrations. I think this momentum is going to continue to grow as NaaS continues to evolve. At the same time, there has been increasing focus on external APIs for enterprises and developers. So, these APIs, like Camara, will enable more programmatic interactions between applications and networks. Self-service portals are pretty much table stakes, but the next step is applications speaking directly to the network for what it needs. The idea is really to create better monetisation opportunities, better utilisation of network assets, and provide more advanced customer experiences to end users.

Catherine Hammond

Interesting times for the market, indeed. Thanks, Gorkem. It's been really interesting. 

If you'd like to know more about this topic, you can take a look at Gorkem's article in full. We'll make sure that there's a link to that in the show notes. For our customers, there's also a growing number of other reports available on our Knowledge Centre, including several profiles of some of the operators that Gorkem mentioned and the approach that they are taking to NaaS, profiles on BT, Orange, PCCW, and others. So do please take a look if you're a customer. 

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