5620 SAM ROI Report

Report for AlcatelLucent
Return on investment of
the AlcatelLucent 5620 SAM
Business services segment
17 January 2011
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Contents
1 Executive summary 1
1.1 Key findings 1
1.2 Recommendations and conclusions 2
2 Introduction 4
2.1 Objective of the report 5
2.2 Approach/methodology 5
2.3 Disclosures 6
3 ROI analysis for the 5620 SAM in the business services segment 8
3.1 Highlights of CSP interviews 8
3.2 ROI modeling 10
3.3 Costs used in the model 12
3.4 Benefits used in the model 13
3.5 Risk assessment 17
3.6 Summary of the ROI model 18
4 Recommendations and conclusions 20

Appendix A: Glossary
Appendix B: AlcatelLucents 5620 SAM NMS portfolio: an overview of NMS
Appendix C: Analysys Masons experience in ROI development

Return on investment of the AlcatelLucent 5620 SAM
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Analysys Mason Limited 2010.
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or
transmitted in any form or by any means electronic, mechanical, photocopying, recording or
otherwise without the prior written permission of the publisher.
Analysys Mason Limited maintains that all reasonable care and skill have been used in the
compilation of this publication. However, Analysys Mason Limited shall not be under any liability
for loss or damage (including consequential loss) whatsoever or howsoever arising as a result of the
use of this publication by the customer, his servants, agents or any third party.

Analysys Mason Limited
818 Connecticut Avenue NW
Suite 300
Washington DC 20006
USA
Tel: (202) 331 3080
Fax (202) 331 3083
washington@analysysmason.com
www.analysysmason.com

Return on investment of the AlcatelLucent 5620 SAM | 1
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1 Executive summary
Analysys Mason Limited (Analysys Mason) was commissioned by AlcatelLucent to develop four
business cases looking at customer perceptions regarding the return on investment (ROI) in relation to
provisioning, assurance and operational flexibility for the 5620 Service Aware Manager (SAM) portfolio.
This report corresponds to the business case for the business services segment covering the
functionality/benefits offered by the 5620 SAM product.
Data points for this report were obtained from benchmarks developed by Analysys Masons research
and consulting divisions. In order to validate and refine the data points, we conducted interviews with
seven communications service providers (CSPs): Kordia, an incumbent sub-Saharan CSP,
Exponential-e, Cable & Wireless Worldwide, Virgin Media Business, an incumbent eastern-European
CSP and TELUS. Due to the variation across CSPs, we normalized the data and applied it to a
normalized composite CSP, detailed in Appendix A. A composite costs-and-benefits approach was
used to develop the quantitative ROI analysis.
1.1 Key findings
In the business services segment, the benefits associated with the 5620 SAM product were evident. In
spite of using conservative metrics, the ROI analysis yielded very positive results, with an expected
90% ROI over three years, and under 20 months of payback period. In the worst-case scenario, the
ROI for the 5620 SAM is estimated to remain at a healthy 68% over the three-year period of the
business case.
We cannot imagine trying to manage a network of more than 10 to 15 nodes without the 5620 SAM.
Making one change in the 5620 SAM and having it configure the nodes is critical to our operations.
The 5620 SAM templates allow us to work in a controlled way, protecting against human error, and
ensuring adherence to our ISO9001-compliant processes. Exponential-e.

The 5620 SAM is one of our strategic OSS systems and will be for as long as we continue to deploy
ALU network infrastructure. And its service templates ensure services are deployed in a constant
manner. Virgin Media Business.
Ref: 17233-32
1.2 Recommendations and conclusions
Analysys Masons qualitative analysis of the ROI values on the 5620 SAM yielded the following
recommendations and conclusions:
The 5620 SAM has had success from pull-through sales from the AlcatelLucent 7xxx Service
Router (SR) platform, as the CSPs interviewed chose this hardware platform for their IP-NGN
network transformation.
In mature markets where Tier 1 service assurance systems such as InfoVista, IBM Tivoli Netcool
and EMC Ionix IT Operations Intelligence (formerly Smarts) already exist in the CSP
environment, the 5620 SAM OSS integration (SAM-O) adapters provided a winning proposition.
Of the CSPs interviewed, it was noted that the weighing of network management systems (NMS) in
the evaluation of Requests for Proposals (RFP) has increased to >20%. This is a notable change from
where ~90% was typically weighted on the equipment and technology that is ~10% on NMS.
The high ARPU generated by business customers in the business services segment led to a large
portion of the 5620 SAM benefits being attributed to customer net revenue.
Resource reduction and time reduction were the next largest benefits for the 5620 SAM in this
ROI analysis.
Provisioning was the main area where benefits were realized by the 5620 SAM in the business
services segment.
Figure 1.1 shows the consolidated results of the ROI analysis for the composite CSP over the business
case period (three years).
ROI parameters Realistic ROI model
(WACC = 12%)
Optimistic ROI model
(WACC = 7%)
Pessimistic ROI model
(WACC = 22%)
Mature market
Total costs (present value) (2 033 748) (2 128 453) (1 880 683)
Total benefits (present value) 3 865 550 4 306 005 3 167 480
NPV 1 831 802 2 177 552 1 286 797
IRR 28% 28% 28%
Payback period 1.63 years 1.63 years 1.63 years
ROI 90% 102% 68%
Figure 1.1: Consolidated modeling results for the business case, in USD [Source: Analysys Mason, 2010]
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Figure 1.2 and Figure 1.3, respectively, illustrate the results of the baseline/realistic ROI analysis for
the composite CSP.

ROI analysis
(pessimistic)
1.286.797
ROI analysis
(realistic)
1.831.802
ROI analysis
(optimistic)
2.177.552
0
500.000
1.000.000
1.500.000
2.000.000
2.500.000
N
e
t

p
r
e
s
e
n
t

v
a
l
u
e

(
U
S
D
)

Figure 1.2: Consolidated
ROI analysis [Source:
Analysys Mason, 2010]

1.500.000
1.000.000
500.000
0
500.000
1.000.000
1.500.000
2.000.000
2.500.000
3.000.000
Year0 Year1 Year2 Year3
C
a
s
h
f
l
o
w

(
U
S
D
)
Total costs
Total benefits
Cumulative running totals

Figure 1.3: Cashflow of
the realistic ROI analysis
[Source: Analysys
Mason, 2010]
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2 Introduction
Analysys Mason Limited (Analysys Mason) was commissioned by AlcatelLucent to develop four
business cases looking at customer perceptions regarding the return on investment (ROI) in relation to
provisioning, assurance and operational flexibility for the 5620 Service Aware Manager (SAM)
portfolio, as follows:
business services segment covering the functionality/benefits offered by the 5620 SAM
mobile backhaul segment covering the functionality/benefits offered by the 5620 SAM
residential broadband services covering the functionality/benefits offered by the 5620 SAM
a general business case focusing on the specific benefits of the AlcatelLucent 5650 Control
Plane Assurance Manager (CPAM) product.
Analysys Mason and AlcatelLucent have agreed on a joint approach whereby AlcatelLucent will be
able to provide a number of customer contacts over an extended period of time for Analysys Mason to
acquire substantial data points to develop these respective business cases.
This report corresponds to the business case for the business services segment. The remainder of this
document is laid out as follows:
Section 2 describes the objective of this report, the methodology employed by Analysys Mason to
carry out the work, and relevant disclosures one should bear in mind when reading this document
Section 3 presents the assumptions, parameters, insight and results of the quantitative and
qualitative ROI analysis for this business case
Section 4 presents our recommendations and conclusions.
The report includes a number of annexes containing supplementary material:
Appendix A includes a glossary of terms used in this document
Appendix B provides an overview of AlcatelLucents 5620 SAM network management system
(NMS) portfolio
Appendix C provides an overview of the skills and experience of the Analysys Mason team that
contributed to this report.
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2.1 Objective of the report
The objective of this business case is to provide general results on the ROI, benefits and savings for
the following 5620 SAM values that are specific to communications service providers (CSPs) in the
business services segment:
provisioning values related to process and assurance
assurance values related to proactive assurance and troubleshooting
operational fit and flexibility values related to the integration of operations support systems
(OSS), service portal and strategic flexibility.
AlcatelLucent has recognized that there is a requirement for its sales teams to have additional
collateral that provides a market-based view on the potential ROI in the 5620 SAM product area.
This document has been produced in a format and style suitable for a high-level business audience.
2.2 Approach/methodology
Our approach to developing the business case for the business services segment is illustrated in Figure 2.1.
Kick-off and detailed project plan
Secondary research
Primary research with selected
operators interviewed by phone
Overall analysis
Draft business case reports
Final business case reports
Detailed planning session with Alcatel
Lucent to agree project parameters
Desk research to localize and tailor
questionnaire design
Direct interviews with Tier 1 CSPs
First full draft of business case report for
included segments
Final full draft of business case report
for included segments
Full analysis of interviews

Figure 2.1: Analysys
Mason approach
[Source: Analysys
Mason, 2010]
1. We gathered data on existing CSP operational and financial benchmarks from our research and
consulting divisions, including data on operational efficiency and optimization at the OSS level of
the 5620 SAM portfolio.
2. We had briefings with AlcatelLucent and undertook documentation reviews on all the Alcatel
Lucent network management products, including the 5620 SAM (-E, -A, -P, -O), the 5650 CPAM,
Ref: 17233-32
the 5670 Reporting and Analysis Manager (RAM), the Service Portal, the 5750 Subscriber Services
Control (SSC), the 5780 Dynamic Services Controller (DSC) and the 9900 Wireless Network
Guardian (WNG). This allowed us to probe the value AlcatelLucent expected its CSP customers to
gain from using these products.
3. We developed a metric-based questionnaire for the CSPs to respond to. This questionnaire formed the
basis of a subsequent follow-up interview (of approximately 4060 minutes long) to crystalize the
answers in the questionnaire, as well as getting a more complete background of the CSPs
environment. Seven of the eight CSP interviews were successfully conducted for this business case,
based on contacts provided to Analysys Mason by AlcatelLucent. The one unsuccessful interview
was because of a lack of information from the contacts supplied by AlcatelLucent on the CSPs
5620 SAM implementation for managing business services.
4. We collated our own internal benchmark data and data points attained during the CSP interviews to
develop a flexible financial model for representing a composite CSP organization. The details of the
CSP model are presented in Section 3, whereas Appendix A provides details of the composite CSP.
5. We combined the quantitative analysis of the financial model with qualitative insights from the
CSP interviews to present a complete view in this business case.
We used an underlying costbenefit analysis in our model to derive the following key business
investment indicators for implementing the 5620 SAM product in this composite CSP environment:
ROI
net present value (NPV)
internal rate of return (IRR)
payback period.
2.3 Disclosures
There are a number of disclosures one should bear in mind when reading the present document:
The study was commissioned by AlcatelLucent and delivered by Analysys Mason.
AlcatelLucent reviewed, and provided feedback to Analysys Mason on, the deliverables
produced as part of this study. However, Analysys Mason maintains editorial control over the
study and its findings, and does not accept changes to the study that contradict Analysys Masons
findings or obscure the meaning of the study.
The customer names for the interviews were provided by AlcatelLucent.
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Analysys Mason has made assumptions specific to this business case based on benchmarks we
have acquired globally in our research and consulting divisions. However, we have noted that
these are assumptions and are not absolute. As such, we have used a number of parameters in the
CSP model which allow the reader to input their own data/estimates to obtain a more accurate ROI
output based on specific environments.
Analysys Mason has provided the model to AlcatelLucent under the agreement of it being a trade
secret.
This study is not meant to be used as a competitive product analysis.
Analysys Mason Limited 2010. All rights reserved. No part of this publication may be reproduced,
stored in a retrieval system or transmitted in any form or by any means electronic, mechanical,
photocopying, recording or otherwise without the prior written permission of the publisher.
Analysys Mason Limited maintains that all reasonable care and skill have been used in the
compilation of this publication. However, Analysys Mason Limited shall not be under any liability
for loss or damage (including consequential loss) whatsoever or howsoever arising as a result of
the use of this publication by the customer, his servants, agents or any third party.
Ref: 17233-32
3 ROI analysis for the 5620 SAM in the business services
segment
In this section we present the assumptions, parameters, insight and results of the quantitative and qualitative
ROI analysis for the business case of the business services segment. It is structured as follows:
Section 3.1 provides highlights from the CSP interviews conducted
Section 3.2 describes the parameters of the ROI modeling
Section 3.3 details the costs used in the model
Section 3.4 details the benefits used in the model
Section 3.5 provides a risk adjustment calculation of the model for optimistic and pessimistic
scenarios from the baseline model
Section 3.6 summarizes the results of the ROI model.

In developing the business case, we investigated the following main parameters:
the costs associated to the 5620 SAM product
the benefits of using the 5620 SAM product versus a command-line interface (CLI) benchmark
the weighted average cost of capital (WACC) for the next three years
the number of nodes managed by the 5620 SAM product
the composite CSP environmental parameters (see Appendix A).
3.1 Highlights of CSP interviews
Analysys Mason and AlcatelLucent agreed on a joint approach whereby AlcatelLucent would
provide a number of customer contacts over an extended period of time for Analysys Mason to acquire
substantial data points to develop these respective business cases.
Seven of the eight CSP interviews were successfully conducted for this business case, based on
contacts provided to Analysys Mason by AlcatelLucent. The one unsuccessful interview was due to a
lack of information from the contacts supplied by AlcatelLucent on the CSPs 5620 SAM
implementation for managing business services.
Ref: 17233-32
Below we provide the highlights of the seven relevant CSP interviews we conducted in developing
this business case:
Kordia It owns an extensive telecom network in New Zealand. Kordias OnKor is a fully
managed IP network solution, allowing enterprises to selectively outsource their wide area
network (WAN) operation, and maintain complete network visibility and control. The 5620 SAM
product has been instrumental in improving the visibility of the network protocols, dramatically
reducing the time taken to isolate problems: When services are restored quickly with the aid of
the 5620 SAM, there is much less time spent (a) documenting the outage, (b) explaining to clients
what happened, and (c) how we are preventing a reoccurrence.
An incumbent sub-Saharan CSP This CSP has an extensive IP network to ensure that its
virtual private network (VPN) solution can be installed, maintained and managed anywhere within
its enterprise target market. The main benefit of the 5620 SAM product for this CSP is all-in-one
trusted view and high reliance: 5620 SAMs fault correlation generally saves lots of time during
fault finding. Also being able to see a service from AZ on a single view in the 5620 SAM shortens
the fault finding time and understanding of a service.
Exponential-e This is a next-generation provider of Ethernet solutions for the WAN in the UK.
Exponential-e designs and deploys bespoke Ethernet WAN solutions for businesses, connecting
companies local area networks (LANs) regionally, nationally and internationally into a single
cohesive LAN-like WAN. The main area of benefit from using the 5620 SAM is the time and
resources savings for provisioning complex services: We cannot imagine trying to manage a
network of more than 10 to 15 nodes without the 5620 SAM. Making one change in the 5620 SAM
and having it configure the nodes is critical to our operations. The 5620 SAM templates allow us
to work in a controlled way, protecting against human error, and ensuring adherence to our
ISO9001-compliant processes.
Cable & Wireless Worldwide This is one of the worlds leading critical communication
companies, providing a range of high-quality managed voice, data and IP-based services and
applications to large corporates, multinational companies, governments, carrier customers and
resellers across the UK, the AsiaPacific region, India, the Middle East and Africa, Continental
Europe and North America. The 5620 SAM provides good control over the network, effective
management of global changes and policy consistency, and the reuse of scripts, with the Service
Portal being the most instrumental tool: The Service portal is the tool which provides speed and
automation in the provisioning and managing global changes and policy consistency.
Virgin Media Business It has the UKs largest nationwide next-generation network. Virgin
Media Business has a strong product portfolio that includes market-leading Ethernet services; as a
result, some of the UKs most demanding customers choose to work with them including nearly
250 local councils and over 60% of the UKs health and emergency services. The AlcatelLucent
Ref: 17233-32
OSS Connected Partner Program is noted as very important, which saves huge effort when
integrating the 5620 SAM (SAM-O adapters) to other OSS applications (namely IBM Netcool and
InfoVista). The Alcatel-Lucent OSS Connected Partner Program is very important to us. The
details of the integrations to other OSS applications (namely IBM Netcool and InfoVista) are off
loaded to ALU and these other OSS vendors. This saves us a huge amount of effort.
TELUS This is the largest telecommunications company in Western Canada and the second
largest in the country. It provides a wide range of wireline and wireless telecommunications
products and services including data, Internet Protocol (IP), voice, video and entertainment
services.
An incumbent eastern European CSP This CSP is the largest integrated telecom, IT and TV
services provider in their respective nation. They operate a data center, which provides a full IT
services package that enables enterprise customers to outsource all their IT operations to one IT service
provider. The 5620 SAM provides a simple reporting tool to plan and manage resources, as well as
planning and implementing massive network topology changes: 5620 SAM is a good tool to plan and
implement massive network topology changes.
The interviews revealed a number of common drivers for implementing the 5620 SAM product:
cost-effective NMS bundled with network equipment as these CSPs moved to a greenfield
IP/MPLS network using the AlcatelLucent 7xxx Service Router (SR) platform
reduction of long troubleshooting times
improve configuration change management efficiencies
breakdown EMS/NMS, provisioning and assurance silos
easier integration with other OSS applications, primarily service assurance systems.
3.2 ROI modeling
We constructed a robust ROI model for organizations considering the implementation of the
5620 SAM product for delivering business data services. The model was developed based on a
composite CSP derived from the interviewed CSPs, which operated predominantly in mature markets.
For this composite CSP, a granular quantitative costbenefit analysis was undertaken, which is
described in turn below.
3.2.1 The composite CSP organization
Analysys Mason consolidated the characteristics of the various CSPs interviewed to develop a composite
CSP model. This composite CSP was defined to be a national fixed CSP in a mature market with a multi-
play proposition (voice, data and video) delivering both business data and residential broadband services.
For this ROI business case, we have only segmented the business services segment.
Ref: 17233-32
Analysys Mason defines this mature market environment as being competitive with high service
maturity and high level of customer penetration; that is, there were few new business customers
available, with the others being existing customers from other CSP competitors.
Figure 3.1 summarizes the composite organization used for developing the business case.
Attribute Description
CSP market This CSP played in a mature market, based on the interviews secured and data
points collected
Deployment type Greenfield IP transformation to the AlcatelLucent 7xxx platform from a legacy CLI
NMS and IP platform which is no longer relevant hence referred to as greenfield
Type of services
offered
All typical business services: IP/MPLS-based services, point-to-point Ethernet
virtual leased line (VLL)/ePipe or virtual private wire service (VPWS), multi-point
Ethernet services (such as IP VPN, virtual private local area network services (VPLS),
hierarchical VPLS or multicast VPLS), border gateway protocol (BGP) peering,
composite services, and mirroring services
Number nodes
managed
300 nodes for an average-size network with primarily AlcatelLucent 7xxx nodes and
few other third-party (generic network elements, GNEs) nodes mixture
Number of main
customers
80 customers, who have multiple services at several sites
Average ARPU
per customer
USD70 000 per annum, which is conservative in some mature markets
Operations period 3 years since the 5620 SAM has been implemented and used in the environment
Drivers for
implementing the 5620
SAM
Cost-effective NMS bundled with network equipment as these CSPs moved to a
greenfield IP/MPLS network using the AlcatelLucent 7xxx platform
reduction of long troubleshooting times
improve configuration change management efficiencies
breakdown EMS/NMS, provisioning and assurance silos
easier integration with other OSS applications, primarily service assurance systems
Preferred provisioning
method
5620 SAM graphical user interface (GUI), scripting or service templates this is the
difference compared with CLI
Preferred assurance
method
5620 SAM with OSS integration to north-bound service assurance systems, such as
InfoVista, IBM Tivoli Netcool and EMC Ionix IT Operations Intelligence (formerly Smarts)
Preferred
troubleshooting
method
5620 SAM with OSS integration to north-bound service assurance systems, such as
InfoVista, IBM Tivoli Netcool and EMC Ionix IT Operations Intelligence (formerly
Smarts) with limited CLI troubleshooting
Figure 3.1: Summary of the composite CSP organization [Source: Analysys Mason, 2010]
In general, the benchmark assumptions we used in developing this composite CSP were deliberately
conservative to develop a more realistic business case for the next three years taking into consideration
the current economic environment.
We felt that the number of employees and annual revenue of this composite CSP were not required for
this analysis: the interviews confirmed that these two elements have no impact on the ROI of the
5620 SAM analysis.
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3.2.2 Modeling assumptions
Figure 3.2 lists some of the general modeling parameters used for developing the business case.
Assumptions Unit Rationale
Discount rate 12% We have adjusted down the WACC from 14% based on the new cost of
capital in 2010 and the one projected for the next three years
Length of analysis 3 years For OSS/BSS projects, the ROI is typically achieved within three years
Salary assumptions for
a mature market
These are based on benchmarks that Analysys Mason has acquired from working
with CSPs in mature markets. We have applied a 1.7 loading factor to obtain real
operations costs
Operations Manager USD212 500 The work of this resource level was very limited in relation to the benefits
of the 5620 SAM, but provided an upper limit for a mixed salary
Senior Engineer USD131 750 This benchmark was used most frequently in the model as this resource
level was indicated as the main area of benefits Level 3 support
Field Engineer USD97 750 This resource level was used wherever applicable. This was very low
as these resources are mainly used for network roll-out rather than
network management
Admin/Customer Service
Representative (CSR)
USD63 750 This relates to benefits from call-center support because of better
network management and quality of service using the 5620 SAM
Figure 3.2: General modeling assumptions [Source: Analysys Mason, 2010]
3.3 Costs used in the model
Figure 3.3 describes the costs used to develop the ROI model.
Costs Value (USD) Rationale
Servers 90 000 This is a redundant server cluster with storage, delivery and
installation costs
Licenses 612 181 (Year 0)
425 677 (yearly)
This is a calculated total based on average node software license and
maintenance costs, estimated at USD1419 for a range of nodes. For
300 nodes, the annual license cost was USD425 677. On average, the
annual license cost was ~70% of the initial installation and configuration
cost for the CSPs we interviewed; hence, the Year 0 capital expenditure
(capex) for the 5620 SAM product was USD612 181
Internal integration 206 125 (Year 0) This includes the integration costs into the existing operations
environment with existing north-bound OSS, primarily service
assurance. This was taken to be the average of the top-tier resource
salaries excludes admin and other resources
External integration 103 063 (Year 0) Because of economies of scale in suppliers, this was taken to be
50% of the internal integration cost (above)
Operations Nil Using operational benefits and savings nullifies the operations costs
Figure 3.3: Costs used in the model [Source: Analysys Mason, 2010]
Ref: 17233-32
Figure 3.4 summarizes the total costs associated with the 5620 SAM product over the business case period.
Costs Year 0 Year 1 Year 2 Year 3 Total Present value
Servers (90 000) (90 000) (90 000)
Licenses (612 181) (425 667) (425 667) (425 667) (1 889 181) (1 889 181)
Internal integration (206 125) (206 125) (206 125)
External integration (103 063) (103 063) (103 063)
Operations - - - - - -
Total costs (1 011 369) (425 667) (425 667) (425 667) (2 288 369) (2 033 748)
Figure 3.4: Total costs cashflow, in USD [Source: Analysys Mason, 2010]
3.4 Benefits used in the model
Figure 3.5 defines the benefits used to develop the ROI model.
Benefits Description Examples of these benefits
Time
reduction
Time reduced by having the 5620 SAM product
versus a CLI benchmark related to combined
provisioning, assurance and troubleshooting
benefits
Time savings regarding provisioning
Time savings regarding diagnosing
Time savings regarding device configuration
Time savings regarding network auditing
Time savings regarding capacity planning
Time savings regarding troubleshooting
Mean time to resolve (MTTR)
Time savings regarding OSS integration
Productivity The value of improving operational efficiencies
using a CLI benchmark versus the 5620 SAM.
These are translated into time or resource
savings in a dollar value. An example of this
will be the reduction of provisioning steps using
the 5620 SAM scripting
Increased provisioning per day
Reduction in provisioning steps
Reduction in misconfiguration
Optimization of configuration
Proactive discovery of unknown issues
Increased accuracy of alarms
New services The benefits of actually launching new services
to both new and existing customers, which
includes using the 5620 SAM for
configuration/provisioning of the new service to
go live as well as the assurance of the
configurations and service delivery

Customer
revenue
The net benefits of acquiring new customers and
retaining existing ones. This is tightly linked with
the ability of the 5620 SAM to provide and
manage the service more quickly and accurately.
It is noted that for greenfield implementation the
majority of new customers will be from the actual
network (AlcatelLucent 7xxx SR platform) and
30% will be attributed to customer revenue
benefits provided by the 5620 SAM
Increase in the number of new customers
Retention of existing customers (churn
avoidance)
Ref: 17233-32
Benefits Description Examples of these benefits
Resource
reduction
The 5620 SAM benefits associated with
removing the need for more operational
expenditure (opex) as the network and
customer base increases
Reduced resources for provisioning,
troubleshooting and assurance tasks
Less customer care support required
Performance
benefits
The 5620 SAM benefits related to service
performance metrics for noting an
improvement in the quality of service (QoS)
and a reduction in complaint calls. This favors
customer acquisition and retention
Increased service performance
Decreased bottlenecks
Improved service uptime
Reduced customer complaints
Figure 3.5: Definition of the benefits used in the model [Source: Analysys Mason, 2010]
We provided AlcatelLucent with the detailed Excel worksheet for this model together with this
report. Below we provide quotes from some of the CSPs interviewed that illustrate, in each case, the
benefits of having the 5620 SAM product.
Time reduction
CSP Quote
Kordia It takes 10mins to de-provision services with the 5620 SAM, which would usually take
4 hours to create the script and 2 hours to review, test and implement.
Exponential-e With 5620 SAM, we realized >50% time savings when compared with CLI management.
Incumbent sub-
Saharan CSP
Fault correlation, using the 5620 SAM, generally saves lots of time during fault finding.
Figure 3.6: Quotes related to time-reduction benefits [Source: Analysys Mason, 2010]
Productivity
CSP Quote
Cable & Wireless
Worldwide
5620 SAM provides good control over the network, effective management of global changes
and policy consistency, and the reuse of scripts contribute to our benefits of the 5620 SAM.
Kordia We have used the 5620 SAM to make some global changes with significant savings,
especially for removing old fully meshed services.
Incumbent
eastern-European
CSP
A key benefit is 5620 SAMs support from other OSS providers, namely EMC Smarts.
Many third-party products offer an integrated 5620 SAM adapter for system integration.
Anonymous quote
from CSP
participant
The Service Portal is being tested and is expected to bring more consistency and increase
productivity and efficiency in the provisioning and assurance.
Figure 3.7: Quotes related to productivity benefits [Source: Analysys Mason, 2010]
Ref: 17233-32
New services
CSP Quote
Exponential-e The 5620 SAM provisioning benefits varied on the complexity of the services. More
complex services have more time and resources savings. For example, a complex service
could take two to three days to provision; however, it takes two to three hours with the
5620 SAM.
Figure 3.8: Quotes related to new services benefits [Source: Analysys Mason, 2010]
Customer revenue
CSP Quote
Cable & Wireless
Worldwide
The 5620 SAM have contributed significantly to the total customer growth because of its
flexibility to deploy new services and create composite services more quickly.
Exponential-e Expecting to go live with the 5670 RAM to do application-level reporting as well as offer the
reporting service to customers at a nominal cost monetizing its intrinsic reporting capability.
Figure 3.9: Quotes related to customer revenue benefits [Source: Analysys Mason, 2010]
Resource reduction
CSP Quote
Incumbent sub-
Saharan CSP
Integration with the 5620 SAM that is still forthcoming is expected to drastically reduce
man-hours. At the very least we are expecting halving of man-hours required in the
provisioning space while assurance will remain the same.
Incumbent sub-
Saharan CSP
With the 5620 SAM, we expect the current numbers of assurance operators to remain the
same as the network grows, thereby increasing efficiency.
Virgin Media
Business
The AlcatelLucent OSS Connected Partner Program is very important to us. The details
of the integrations to other OSS applications (namely IBM Netcool and InfoVista) are off
loaded to ALU and these other OSS vendors. This saves us a huge amount of effort.
Incumbent
eastern-European
CSP
5620 SAM provides a simple reporting tool that allows planning and managing resources.
Exponential-e We see a factor of 2.5 improvement for provisioning services with the 5620 SAM.
Kordia Root cause analysis could be up to one month of a level-3 resource, but with the 5620
SAM it is now one day with 3040mins escalation for complex faults, at most.
Figure 3.10: Quotes related to resource-reduction benefits [Source: Analysys Mason, 2010]

Ref: 17233-32
Performance benefits
CSP Quote
Incumbent sub-
Saharan CSP
The 5620 SAM provides faster provisioning with scripting and eliminating
misconfigurations in the process, finding efficiency.
Kordia Our alarm accuracy increased by 50% with the 5620 SAM.
Figure 3.11: Quotes related to performance benefits [Source: Analysys Mason, 2010]
Figure 3.12 summarizes the total benefits related to the 5620 SAM over the business case.
Benefits Year 0 Year 1 Year 2 Year 3 Total Present value
Time reduction - 97 357 210 941 292 072 600 370 462 978
Productivity - 46 440 92 880 148 609 287 929 221 285
New services - 452 4523 4523 9498 7229
Customer net revenue - 392 000 1 176 000 1 960 000 3 528 000 2 682 589
Resource reduction - 82 350 274 499 274 499 631 348 487 738
Performance benefits - 385 1155 3465 5005 3731
Total costs - 618 984 1 759 998 2 683 167 5 062 150 3 865 550
Figure 3.12: Summary of the total benefits related to the 5620 SAM over the business case in USD
[Source: Analysys Mason, 2010]
Most of the 5620 SAM benefits were attributed to customer net revenue from customer growth and
churn avoidance. This is mainly due to the high ARPU generated by business customers in this
particular business segment. Unsurprisingly, the next largest 5620 SAM benefits were associated with
resource and time reduction. These are typically the main benefits of OSS business cases. The benefits
associated with productivity and performance were much smaller. Provisioning was the main area
where benefits were realized for the 5620 SAM in the business services segment.
Figure 3.13 summarizes the cashflow in the ROI model related to the 5620 SAM over the three-year
business case.
Year 0 Year 1 Year 2 Year 3 Present value
Total costs (1 011 369) (425 667) (425 667) (425 667) (2 033 748)
Total benefits - 618 984 1 759 998 2 683 167 3 865 550
Yearly totals (1 011 369) 193 318 1 334 332 2 257 501
Cumulative running totals (1 011 369) (818 051) 516 281 2 773 781
Figure 3.13: Summary of cashflow in the ROI model, in USD [Source: Analysys Mason, 2010]
Ref: 17233-32
3.5 Risk assessment
While we have made conservative assumptions in developing the baseline ROI analysis (see
Sections 3.2, 3.3 and 3.4 above), our experience shows that these projects are typically not exactly the
same and that there are a number of risks associated to them. Such risks are classified into either
positive or negative risks. We have therefore developed an optimistic (positive) and pessimistic
(negative) risk-assessment model in addition to the realistic model detailed above.
Pessimistic ROI analysis
We have increased the discount rate to 22%, which represents a 10% increase with respect to the
baseline discount rate of 12% used in the realistic model. The factors influencing such a high increase
in the discount rate are as follows:
instability of the global economy, causing the increase of the WACC
project overruns delays, over-budget, loss of customer uptake (late to market)
integration complexity, requiring more internal and external resources
lack of on-site skills by the vendor and/or CSP
equipment and hardware issues delivery, testing, integration, etc.
legacy constraints
longer lead time to transition from the legacy systems and operational processes, leading to a
delay in realizing benefits.
Optimistic ROI analysis
We have decreased the discount rate to 7%, which corresponds to a 5% decrease with respect to the
baseline discount rate of 12% used in the realistic model. The factors influencing such a low decrease
in the discount rate are as follows:
most of the benefits associated with the 5620 SAM have been included in the realistic model
rapid acceleration for the CSP to train and transition to the Service Portal, 5620 SAM, 5650 CPAM
and 5670 RAM; most of these products capabilities (about 8090%) are used as originally designed
an ideal greenfield implementation with no legacy constraint systems or operational
the optimal number and type of nodes were deployed for optimal operation and costing
higher customer ARPU due to customer satisfaction from the quality of management and
reporting (5670 RAM)
discounting of all associated costs from the benchmarks used in the realistic model.
Ref: 17233-32
3.6 Summary of the ROI model
Figure 3.15 shows the consolidated results of the ROI analysis for the composite CSP over the
business case period (three years).
ROI parameters Realistic ROI model
(WACC = 12%)
Optimistic ROI model
(WACC = 7%)
Pessimistic ROI model
(WACC = 22%)
Mature market
Total costs (present value) (2 033 748) (2 128 453) (1 880 683)
Total benefits (present value) 3 865 550 4 306 005 3 167 480
NPV 1 831 802 2 177 552 1 286 797
IRR 28% 28% 28%
Payback period 1.63 years 1.63 years 1.63 years
ROI 90% 102% 68%
Figure 3.14: Consolidated modeling results for the business case, in USD [Source: Analysys Mason, 2010]
Figure 3.15 and Figure 3.16, respectively, illustrate the results of the baseline/realistic ROI analysis
for the composite CSP.

ROI analysis
(pessimistic)
1.286.797
ROI analysis
(realistic)
1.831.802
ROI analysis
(optimistic)
2.177.552
0
500.000
1.000.000
1.500.000
2.000.000
2.500.000
N
e
t

p
r
e
s
e
n
t

v
a
l
u
e

(
U
S
D
)

Figure 3.15:
Consolidated ROI
analysis [Source:

Ref: 17233-32

1.500.000
1.000.000
500.000
0
500.000
1.000.000
1.500.000
2.000.000
2.500.000
3.000.000
Year0 Year1 Year2 Year3
C
a
s
h
f
l
o
w

(
U
S
D
)
Total costs
Total benefits
Cumulative running totals

Figure 3.16: Cashflow of
the realistic ROI analysis
[Source: Analysys
Mason, 2010]
Ref: 17233-32
4 Recommendations and conclusions
Analysys Masons analysis of the ROI values on the 5620 SAM yielded the following
recommendations and conclusions:
The benefit of the 5620 SAM was evident in the business services segment and the 5620 SAM has
had success from pull-through sales from the AlcatelLucent 7xxx Service Router (SR)
platform, as the CSPs interviewed chose this hardware platform for their IP-NGN network
transformation.
In mature markets where Tier 1 service assurance systems such as InfoVista, IBM Tivoli Netcool
and EMC Ionix IT Operations Intelligence (formerly Smarts) already exist in the CSP
environment, the 5620 SAM OSS integration (SAM-O) adapters provided a winning proposition.
Of the CSPs interviewed, it was noted that NMS weighting in RFP evaluations has increased to
>20%. This is a notable change from where ~90% was typically weighted on the equipment and
technology that is ~10% on NMS.
The high ARPU generated by business customers in the business services segment led to a large
portion of the 5620 SAM benefits being attributed to customer net revenue.
Resource and time reduction were the next largest benefits for the 5620 SAM in this ROI analysis.
Provisioning was the main area where benefits were realized by the 5620 SAM in the business
services segment.
In spite of using conservative metrics, the ROI analysis yielded very positive results for the 5620 SAM
for the composite CSP deploying only business services in mature markets with an expected 90% ROI
over three years, and under 20 months of payback period. In the worst case scenario, we calculate that
the ROI for the 5620 SAM is estimated to remain at a healthy 68% over the three-year period of the
business case.

Return on investment of the AlcatelLucent 5620 SAM | A1
Ref: 17233-32
Appendix A: Glossary
ALU AlcatelLucent
ARPU Average revenue per user
BGP Border gateway protocol
BSS Business support systems
Capex Capital expenditure
CLI Command line interface
CPAM Control plane assurance manager
CSP Communications service provider
CSR Customer service representative
DSC Dynamic service controller
EMS Element management system
GPON Gigabit-capable passive optical network
GUI Graphical user interface
IP Internet Protocol
IRR Internal rate of return
LAN Local area network
LTE Long term evolution
MPLS Multi-protocol label switching
MTTR Mean time to resolve
NEM Network equipment manufacturer
NGA Next generation access
NGN Next generation network
NMS Network management system
NPV Net present value
Opex Operations expenditure
OSS Operations support systems
PCRF Policy control and rating function
PV Present value
RAM Reporting and analysis manager
RFP Request for proposal
ROI Return on investment
SAM Service aware manager
SR Service router
SSC Subscriber services control
VLL Virtual leased line
VPLS Virtual private LAN services
VPN Virtual private network
VPWS Virtual private wire service
WACC Weighted average cost of capital
WAN Wide area network
WNG Wireless network guardian
Return on investment of the AlcatelLucent 5620 SAM | B1
Ref: 17233-32
Appendix B: AlcatelLucents 5620 SAM NMS portfolio:
an overview of NMS
1

AlcatelLucent was the second-largest vendor of NMS in 2009, with revenues of USD770 million in a
total NMS market of USD4.3. The company is also one of the largest network equipment
manufacturers (NEM), both fixed and mobile, reflecting the combined heritage of its two parent
companies Alcatel and Lucent Technologies which merged in 2006.
AlcatelLucent typically delivers its NMS as part of network roll-out projects that deploy Alcatel
Lucent network equipment and platforms, providing optimized network management capabilities. In
order to support a CSPs transformation to an all-IP architecture, AlcatelLucent provides its high
leverage network conceptual architecture: a consolidated, converged architecture supporting all
services and network technologies at reduced cost and greater efficiency. The 5620 Service Aware
Manager (SAM) NMS is the core of this high leverage network conceptual architecture. As a result,
the 5620 SAM was designed to be a multi-domain (mobile, business services and residential
broadband) NMS, which can manage network technologies from the core to the access network such
as optical transport and access, IP-MPLS, carrier Ethernet and mobile packet core. This product and
approach will support multi-play CSPs when consolidating their NMS into a common IP-NMS.
CSPs are constantly battling operational inefficiencies to increase margins. The objective of the
5620 SAM is to reduce key network management operations metrics such as provisioning (and de-
provisioning) time, configuration time, network auditing time, resolution time, and operational
resource requirements.
The 5620 SAM product family addresses network management in the high-growth mobile and
business services NMS segments, as well as the lower-growth residential services segment. The
product is not used for the declining PSTN market. Additionally, the 5620 SAM will provide
enhanced support for optical technologies. This indicates that AlcatelLucents strategic direction is to
develop a common (multi-domain) IP-NMS for multi-play CSPs to consolidate their complex NMS
environments.
AlcatelLucents 5780 Dynamic Service Controller (DSC) complements the 5620 SAM and provides
3G and Long Term Evolution (LTE) policy control and rating function (PCRF), enabling mobile CSPs
to optimize mobile network bandwidth and offer personalized tiered services to subscribers in 3G and
LTE environments. Furthermore, the 5780 DSC provides a foundation for converged wireline/wireless
policy management for the enablement of any screen application.

1
For further detail, see AlcatelLucent 5620 SAM NMS portfolio: network management systems.
Ref: 17233-32
AlcatelLucent is a major global enterprise with over 77 000 employees in more than 130 countries.
The companys NMS products are developed and provided through its largest segment, the Networks
(prior to 2010 called the Carrier) segment, which employed over 28 000 staff at the end of 2009. The
company is especially strong in North America and in Europe, the Middle East and Africa (EMEA),
building on its dual heritage. AlcatelLucents share of the market in the AsiaPacific region is
growing with investments in optical transport and access and IP-MPLS networks by the Tier 1 CSPs.
Figure B.1 shows Analysys Masons estimate of AlcatelLucents NMS revenue from 2007 to 2009.

0
100
200
300
400
500
600
700
800
900
2007 2008 2009
R
e
v
e
n
u
e

(
U
S
D

m
i
l
l
i
o
n
)

Figure B.1: Alcatel
Lucents NMS revenue,
20072009 [Source:

AlcatelLucents year-on-year NMS revenue declined by around 13% to an estimated
USD770.4 million in 2009, after a nominal 2% growth in the previous year. This decrease reflected
the general impact of the economic recession, coupled with a longer-term decline in investments in
xDSL and legacy PSTN equipment and related NMS. In addition, AlcatelLucent also announced
fewer mobile NMS contracts in 2009 compared with other NEMs. However, its business services and
residential broadband segments were sustained with contracts particularly from mobile backhaul, and
optical next-generation access (NGA) (FTTx, Gigabit-capable passive optical network (GPON)) and
IPTV, respectively.
NMS sales generated 67% of AlcatelLucents telecoms software total revenue in 2009, as shown in
Figure B.2, whereas the service-delivery segment generated 26%. Most of AlcatelLucents revenue
from service-delivery platforms came from telecoms application servers supporting delivery and its
service layer exposure capabilities for application enablement. Customer care accounted for 5% of
AlcatelLucents telecoms software total revenue, which comes from AlcatelLucents acquisition of
Genesys. Billing accounted for 2%.
Ref: 17233-32

NMS
67%
Service delivery
26%
Customer care
5%
Billing
2%

Figure B.2: Alcatel
Lucents telecoms
software revenue by sub-
segment, 2009 [Source:

Return on investment of the AlcatelLucent 5620 SAM | C1
Ref: 17233-32
Appendix C: Analysys Masons experience in ROI development
Analysys Mason has conducted numerous business planning, costbenefit analysis and risk-assessment
projects related to investments and market opportunities for CSPs, vendors and enterprises on
products/solutions and strategies. We are also highly specialized in the telecom sector in both our research
and consulting divisions, which we do leverage in such studies to provide breadth and depth of experience
and knowledge in our final deliverables, always ensuring high standards of quality.
Analysys Mason team
The Analysys Mason team who contributed to this project has extensive experience in undertaking
business modeling and analysis for vendors, CSPs, banks and private investors:
Patrick Kelly (Research Director) was the Project Director, with overall responsibility for ensuring
that project objectives were met, quality procedures were followed and AlcatelLucents
requirements were satisfied. Patrick is an entrepreneur and experienced industry analyst with a
proven track record in evaluating emerging technologies and the business value in developing
markets. He has advised public- and private-sector clients throughout his 20 years in the industry. He
will serve as the expert on the service assurance market. Patrick has an M.B.A. from Plymouth State
University in the UK, and a B.S. in Mathematics from the University of Vermont in the USA.
Glen Ragoonanan (Senior Analyst) was the Project Manager, responsible for the day-to-day
management of the project. Glen is the lead analyst for Analysys Masons Infrastructure Solutions
research program. He joined Analysys Mason in 2008 and has worked as a consultant on projects on
next-generation IT and telecom networks, systems and technologies for incumbents, new entrants,
private companies, regulators and public-sector clients. Before joining Analysys Mason, Glen worked
for Fujitsu, designing, delivering and managing integrated solutions. Glen is a Chartered Engineer and
project management professional with an M.S. from Coventry University in the UK.
Mark Mortensen (Principle Analyst) acted as subject matter expert, with experience in business
planning and product strategy development. Mark is a leading expert on service fulfillment. He
provided a major input to the overall analysis for this project, as well as injecting specific
expertise and senior-level experience. Mark has a Ph.D. in Physics from Yale University in New
Haven, and a B.S. in Physics from the University of Massachusetts Lowell in Lowell,
Massachusetts.

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