Network virtualization is the process of abstracting network resources, that were traditionally delivered in hardware, to software. You can combine multiple physical networks to one virtual, software-based network, or it can divide one physical network into separate, independent virtual networks.

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In general, implementation of 5G will see a transition away from hardware-centric networks, and towards software-centric networks. 4G and other previous generations mainly relied on specifically designed hardware to perform certain network tasks. A task which under a 4G network would have been done through such a piece of hardware, might under 5G be done by software running on a generic server.

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This could potentially shift the vendor market as, currently, vendors are heavily specialised in hardware. A stronger software focus might open up the market for new players, including US companies.\xa0

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Network virtualisation overlaps with a push for more open software. Currently, mobile networks generally run on proprietary software from vendors that integrate well with their own hardware. Due to the trend towards virtualisation, more open software is entering the market that integrates well with other components, such as in the area of radio access networks (RAN). The Open RAN movement is pushing for this area to be more open-source, and is being backed by important players including Facebook (through the Telecom Infra Project).\xa0Sections of the US government\xa0see Open RAN as a way to outcompete Chinese vendors who currently dominate the market, and want to heavily invest in it.