Network functions virtualization (NFV) is an initiative to virtualize the network services that are now being carried out by proprietary, dedicated hardware. If successful, NFV will decrease the amount of proprietary hardware that's needed to launch and operate network services.
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The goal of NFV is to decouple network functions from dedicated hardware devices and allow network services that are now being carried out by routers, firewalls, load balancers and other dedicated hardware devices to be hosted on virtual machines (VMs). Once the network functions are under the control of a hypervisor, the services that once require dedicated hardware can be performed on standard x86 servers.
This capability is important because it means that network administrators will no longer need to purchase dedicated hardware devices in order to build a service chain. Because server capacity will be able to be added through software, there will be no need for network administrators to overprovision their data centers which will reduce both capital expenses (CAPex) and operating expenses (OPex). If an application running on a VM required more bandwidth, for example, the administrator could move the VM to another physical server or provision another virtual machine on the original server to take part of the load. Having this flexibility will allow an IT department to respond in a more agile manner to changing business goals and network service demands.
NFV is different from software-defined networking (SDN) but is complementary to it; when SDN runs on the NFV infrastructure, the SDN forwards the data packets from one network device to another while the network routing (control) functions run on a virtual machine in, for example, a rack mount server. The NFV concept, which was presented by a group of network service providers at the Software Defined Network and OpenFlow World Congress in October 2012, is being developed by the ETSI Industry Specification Group (ISG) for Network Functions Virtualization.