Service Assurance Market Review Jun09

Global Telecom Software Market Analysis
Service Assurance
Market Review
June 2009
By Patrick Kelly
Table of Contents
Contents
Executive summary ...............................................................................8 Figure 1: 2008-2013 Global service assurance .....................................9 Market share........................................................................................10 Figure 2: Service assurance overall market share ..............................10 Figure 3: Service Assurance product market share.............................13 Figure 4: Service assurance product-oriented professional services market share........................................................................................13 Market forecast ....................................................................................15 Application segments forecast overview .............................................15 Figure 5: 2008-2013 Global service assurance forecast by application segment ...............................................................................................15 Forecast by communications service ..................................................16 Figure 6: 2008-2013 Global service assurance forecast by telecommunication service ..................................................................17 Regional forecast.................................................................................17 Figure 7: 2008-2013 Global service assurance forecast by region .... 17 Probe systems market share ...............................................................19 Figure 8: Probe systems market share ...............................................19 Probe systems forecast .......................................................................20
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Service assurance market review

2009 Analysys Mason Ltd
2009 Analysys Mason Ltd. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any other means electronic, mechanical, photocopying, or recording or by any otherwise without the prior permission of Analysys Mason Ltd. Analysys Mason Ltd. maintains that all reasonable care and skill has been used in the compilation of this document. However, Analysys Mason Ltd. 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 document by the customer, his or her employees, contractors, agents or any third party. OSS Observer LLC is an Analysys Mason Ltd. company.
Table of Contents
Figure 9: 2008-2013 Probe systems forecast .....................................20 Probe systems forecast by communications service ...........................20 Figure 10: 2008-2013 Probe systems forecast by telecommunication service .................................................................................................21 Probe systems forecast by region .......................................................22 Figure 11: 2008-2013 Probe systems forecast by region .................... 22 Fault and event management market share ........................................23 Figure 12: Fault and event management market share....................... 23 Fault and event management forecast ................................................24 Figure 13: 2008-2013 Global fault and event management forecast .. 24 Fault and event management forecast by communications service .... 24 Figure 14: 2008-2013 Fault management forecast by communication service ................................................................................................25 Fault forecast by region .......................................................................25 Figure 15: 2008-2013 Fault management forecast by region ............ 26 Service management market share.....................................................27 Figure 16: Service management suppliers market share .................... 27 Service management forecast .............................................................27 Figure 17: 2008-2013 Global service management forecast............... 27 Service management forecast by communications segment .............. 28 Figure 18: 2008-2013 Service management forecast by telecommunication service ..................................................................28 Service assurance market review
Service management forecast by region .............................................29

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Figure 19: 2008-2013 Service management forecast by region ........ 29 Performance monitoring market share ................................................31 Figure 20: Performance management market share ...........................31 Performance monitoring forecast ........................................................31 Figure 21: 2008-2013 Global performance monitoring forecast ......... 31 Performance monitoring forecast by service segment ........................ 32 Figure 22: 2008-2013 Performance monitoring forecast by communication service ........................................................................32 Performance management forecast by region ....................................33 Figure 23: 2008-2013 Performance monitoring forecast by region ..... 33 Workforce automation .........................................................................34 Figure 24: Workforce automation market share ..................................34 Workforce automation forecast............................................................35 Figure 25: 2008-2013 Workforce automation forecast ....................... 35 Work force forecast by communications service .................................35 Figure 26: 2008-2013 Workforce automation forecast by communication service ................................................................................................36 Workforce Automation forecast by region............................................36 Figure 27: 2008-2013 Workforce automation forecast by region ....... 37 Market drivers ......................................................................................38 Drivers .................................................................................................39 Growth of wireless network traffic Service assurance market review
Competition in developed countries

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Quality of service Exceed user expectations First time resolution Emerging markets with high subscriber growth Convergence Consumer VoIP Merging of IT and telecommunication services Adoption of SIGTRAN New access technologies FTTx and xDSL Inhibitors ..............................................................................................43 Resistance to change organization Consolidation High profile project delays and failures Closed markets Not invented here Business environment ........................................................................45 Figure 28: Quarterly GDP volume growth ...........................................45 Table 1: 2004-2009 Acquisitions in the service assurance market ...... 49 Market definition ..................................................................................50 Figure 29: Analysys Mason supplier market segments ....................... 50 Figure 30: Service assurance components and relationships to other telecommunication software systems ..................................................51 Service assurance market review
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Probe systems ....................................................................................53 Figure 31: Probe based monitoring system collection and application reporting ..............................................................................................53 Fault and event management ..............................................................54 Service management...........................................................................54 Performance monitoring ......................................................................54 Workforce automation ........................................................................55 Service assurance suppliers................................................................56 Accanto Agilent AIRCOM International Amdocs Anritsu Arantech Astellia BMC CA CellVision EMC Empirix EXFO (Brix) Harris Stratex Service assurance market review
HP
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IBM IneoQuest InfoVista Ixia JDSU Keynote (SIGOS) Motive Mycom International NetScout Nexus Telecom AG Polystar OSIX Spirent SRIT (OSI) Tekelec Tektronix Telcordia Tollgrade TTI Telecom Service assurance suppliers................................................................67 Table 2: Comparison of service assurance suppliers .......................... 67 Recommendations...............................................................................68

Executive Summary
Executive summary
Service assurance spending is forecast to grow from $2.28 billion in 2008 to $2.94 billion in 2013 at 5.3% CAGR (figure 1). We are forecasting a 2.3% decline in 2009 as the larger North American and European communications service providers (CSPs) cut their Capex and reduce assurance spending. Signs of capital expenditure declines year over year appeared in 4Q 2008. The global economic recession will cause operators to defer spending on risky projects that pose both technology challenges and uncertainty on the return on investment. Spending in the mobile service segment will increase each year as CSPs prepare to support mobile data growth and content based services. This is being driven by the availability of smart phones, the completion of 3G RAN upgrades and a rapid growth of subscribers signing long term contracts for data services. We forecast that the service management segment will increase from $221 million in 2008 to $418 million in 2013 at 14% CAGR. Overall, we forecast slower growth in North America (NA) (4% CAGR) as demand weakens from both consumers and businesses in 2009 and 2010 for fixed line services. The uncertainty surrounding the timing of a economic recovery reinforces CSPs behavior toward cash preservation. Europe, Middle East and Africa (EMEA) is forecasted to grow at 5% CAGR, driven mainly by growth in the Middle East and Africa. Spending in the Asia Pacific (APAC) market will be driven by subscriber growth in China and India and the leapfroging of technology investments by CSPs to catch up to developed countries. Central and Latin American (CALA) is mostly emerging so investments will outperform NA and EMEA over the forecast period at 6% CAGR. A major catalyst for service assurance spending to support next generation services is the need to measure customer quality of experience. The market forces increasing awareness of customer experience that is in part being driven by the commoditization of telecoms services primarily voice - and the threat posed by new participants in the telecoms economy that offer premium services over a broadband network. CSPs are investing billions of dollars in capital to provide convergent mobile and fixed broadband services to consumers and businesses but this has not led to improvements in customer loyalty, which is reflected in price concessions and churn in mature segments of their business. Despite the incumbent status held by most tier-1 and tier-2 CSPs that serve millions of broadband and mobile subscribers, CSPs have acknowledged that their ability to assess customer satisfaction is limited. Legacy systems that were deployed to support specific network technologies make it difficult to gain a unified view of the customer. At the same time the convergence of services brings with it technology and operational challenges.
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Executive Summary
The pace of supplier consolidation has slowed in the segment. The service assurance market remains fragmented but it is unlikely that it will consolidate to the same extent as the billing or customer care segments. Hewlett Packard (HP) and IBM could acquire smaller innovative vendors in the space but it is unlikely because it does very little to move the revenue needle. It does not make sense for IT suppliers to make a bid for probe system suppliers because little leverage exists outside the telecoms sector. The bigger probe system suppliers such as Agilent and Tektronix remain focused on their core segments. Agilents move to diversify earlier this decade proved to be a failure and subsequently it divested of OSI last year. Tektronix acquired Arantech in April 2009, which we believe is a strong complement to its portfolio but it will require a more sophisticated sales approach that must target groups outside of its traditional customer base in the operations center. In 2008, Arbor Networks acquired Ellacoya Network, EXFO acquired Brix Networks and Keynote acquired Zandan. None of these deals will have an impact on the leader board of suppliers. IBM is the largest commercial supplier of service assurance solutions at 12% market penetration. Agilent, HP, Tektronix and Telcordia follow at 8%, 8%, 8%, and 5% respectively. The fastest growing sub-segment is in the service management market, which is forecast to grow from $221 million in 2008 to $418 million in 2013 at 14% CAGR. The overwhelming majority of spending on service management software will occur in the mobile segment to support broadband data services. Mobile assurance investments will increase from $986 million in 2008 to $1.52 billion in 2013 at 9% CAGR. This robust growth rate is underpinned by the shift towards broadband radio access and new data and media broadband services. Figure 1: 2008-2013 Global service assurance
$3,500 $3,000 $2,500
$ Millions
$2,000 $1,500 $1,000 $500 $Assurance (CAGR 5%)
CY2008 $2,275
CY2009 $2,222
CY2010 $2,295
CY2011 $2,462
CY2012 $2,687
CY2013 $2,939
Source: Analysys Mason

Market Share
Market share
The overall market for service assurance was $2.3 billion (figure 2) in 2008. The top six suppliers account for 45% of the market. IBM was the market leader with 12.3% market share. IBM has a leading position in the fault, performance, and service management segments, with Tektronix, Agilent, HP, Telcordia, and CA rounding out the other top spots at 8.4%, 7.9%, 7.7%, 4.6%, and 3.9% respectively. Figure 2: Service assurance overall market share
2008 SA Revenue = $2,275 million
Arantech BMC EMC Infovista JDSU Motive Oracle Spirent Tekelec TTI Telecom
Other 55.3%
IBM 12.3%
Tektronix 8.4% Agilent 7.9%
CA 3.9%
HP 7.7% Telcordia 4.6%
IBM is the overall leader with a broad portfolio of products, a global professional services organization, and strong partnerships with all of the major infrastructure suppliers. The Netcool asset is used to help CSPs consolidate software systems within its own portfolio of products but also to integrate third-party products. IBM has also been successful in building strong partnerships with the network equipment suppliers (Alcatel-Lucent, Cisco, Nortel) to seed Netcool into the technology upgrade cycles for projects that are led by domain expertise from NEMs. Alcatel-Lucent is IBMs largest partner and a leader in the rollout of IPTV infrastructure and integration services. The current global economic impact is affecting all businesses but IBM is well positioned to take market share from weaker competitors as it leverages its position of strength in the managed service business. IBM is also clever in developing opportunities that benefit the Tivoli Netcool business. The Bharti revenue sharing model effectively removed most competitors from the deal. IBM has been able to successfully transition the telecommunications software businesses it acquired into the Tivoli business unit and still maintain its focus on the telecommunications
10

Market Share
market without much disruption to the large existing Micromuse and Vallent customer base. Tektronix has moved up in market share and is now the leading supplier in the probe systems market. It continues to gain market share against other suppliers in the probe systems market. Geoprobe is strong in the mobile market has been introducing new products to address the convergence of voice and video in the fixed line market. Tektronix has deployments for UMTS monitoring at AT&T Wireless, Vodafone and other tier-1 CSPs. The core of the probe system architecture is the GeoProbe platform. This consists of a range of carrier class hardware probes that can passively monitor communication links across a wide range of technologies to capture signaling messages of many different types. On April 7, 2009, Tektronix Communications announced it had acquired private software supplier Arantech. Arantech had revenues of approximately $35 Million in 2008. Growth year over year was 25%. We are positive about this acquisition as it leverages the assets within the Tektronix portfolio and provides a path for high growth in a segment that is becoming more important to CSPs in creating more loyalty from their large base of subscribers. Agilents Network Systems division (NSD) business had a modest decline year over year and its core business has been in a decline for the past three years. This was mostly due to declines in the AcceSS7 business where Agilent is the incumbent supplier to almost all tier-1 CSPs globally for the monitoring of their SS7 networks. Agilent is developing a common platform and plans to transition its customer base forward when its customers migrate their networks to support converged services. Its broad base of customers includes nearly every tier-1 and tier-2 CSP in the global market. Some growth to support next generation technologies and services has offset declines in the access7 product line. This includes new customer deployments across the full range of wireless technologies (GPRS, UMTS, etc.) as well as continuing growth in IMS, VoIP, and in IP core in general. The EMEA and APAC regions supported growth in the NgN business. HP is a leading supplier in the telecommunications software market. Its product components span IT and telecommunications infrastructure supporting fixed, mobile, and media service providers. HP has a diversified portfolio of products that span service assurance, service fulfillment, billing, mediation, and the service delivery platforms (SDP) segments. HP reorganized its telecommunications business earlier this year. It hired several executives from outside the company and created a business that is accountable for profit and loss. The new HP Communications and Media Solutions (CMS) business unit has been divided into four groups Next Generation Operations Support Systems (NGOSS) Customer Intelligence and Billing (CI&B), Service Delivery
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Market Share
Infrastructure and Applications (SDIA) and Digital Media. NGOSS provides assurance, fulfillment, and integration services. The most recent public announced win was DTAC. DTAC is deploying HP TeMIP, HP Network Node and HP Operations Manager, which together provide automated fault-detection and management by providing a single view of all elements in the operators telephony, IP and IT networks. Another system, HP Performance Insight, monitors performance on the network and dynamically adjusts capacity and resources. Once a problem is detected, HP Service manager reduces time-to-repair by automating the pieces of the problem resolution process, including trouble ticketing and help desk response. Publicly announced wins in 2008 include Mobilnet Bulgaria, Movilnet, SFR, TeleDanmark and Vodafone Germany. Telcordia is among the leaders in service assurance. Telcordia has extensive technical strengths and a long history of applying those strengths in the telecom software business. It has been issued more than 1800 patents and its engineers invented many of the telecom capabilities used in todays networks. Telcordia has a large established footprint in the NA wireline workforce automation (WA) segment with its Force product and in the fault management segment with NMA. Force manages the dispatch of 20,000 field technicians of a large European CSP and is designed to handle single installations from 2,000 to 20,000 technicians. It is the leading scheduling and dispatch management systems in the telecommunication industry. The growth area where Telcordia is applying additional resources is in the service management segment with Service Director, Device Director, and its Home Network Assurance portfolio of products. These new products are helping Telcordia win incremental business internationally. Telcordia has had a number of wins in the CALA market with deployments at Telmex, Oi, and Telefonica. In the service management area, Telcordia has had recent wins at Mobistar, OTE and TPSA. CA is one of the worlds largest providers of IT management software. CA Communications, Media and Entertainment (CME) is responsible for CAs growth into the CME vertical, including telecom, using a large cross-section of products. The Network and Systems Management products enable CSPs to manage performance and service availability of LANs, WANs (ATM/FR/IP), routers, DSL, voice and cable technologies. The Application Performance Management solutions assure and monitor applications, SDPs and OSS/BSS systems. Customer experience management (CEM) solutions are used to monitor transaction success rates, response times, and to manage SLAs for end users and third parties. CA has deployments at AT&T, BT, Comcast, DT, Sprint Nextel, Telstra, Verizon, and Vodafone. CA has a broad portfolio of products including management of mainframe, storage, application servers, security, identity access, network equipment, and desktop equipment. In the service assurance market eHealth and SPECTRUM have been
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Market Share
deployed in fixed line CSPs offering managed services. BT, DT, Embarq and France Telecom are notable customers that have been using these products to manage Frame Relay, ATM, and VPN services offered to corporate accounts under a CPE managed service. The global service assurance product spend was $1,518 million of total spending. Figure 3 shows the relative product revenue shares of the leading suppliers. We include both licensed software and maintenance revenue. Figure 3: Service Assurance product market share
2008 SA Product = $1,518 million
Other 56%
IBM 13%
Tektronix 9% Agilent 8%
CA 3%
HP Telcordia 7% 4%
We do not expect much change in the product/service mix over the forecast period. We believe the larger suppliers are in a more favorable position to take on more services related work that entails their own set of products and third party partner products. This will be driven by CSPs desire to shift some of the risk related to next generation OSS systems to their key suppliers in order to accelerate deployments and leverage expertise not available inside. The total professional services revenue from software vendors in 2008 was $757 million of total spending. The relative shares of leading suppliers are shown in figure 4.

Market Share
Figure 4: Service assurance product-oriented professional services market share

2008 SA Professional Services = $757 million
Other 55%
IBM 11%
HP 9% Tektronix 7%
CA 5%
Agilent Telcordia 7% 6%

Market Forecast
Market forecast
Analysys Mason forecasts service assurance spending to grow from $2.28 billion in 2008 to $2.94 billion in 2013 at 5.3%. The main factors driving service assurance spending are competition in mature markets to assure a positive customer experience, support of complex access networks, IP enablement, and a focus on improving the efficiency of the field workforce.
Application segments forecast overview

The fastest growing service assurance segment is service management at 14% CAGR driven by the focus on service quality management. Figure 5 below provides the global service assurance forecast broken out by the five major application segments. The probe systems market is the largest sub-segment and will increase from $864 million in 2008 to $1.05 billion in 2013 at 4% CAGR. The fault and event management market is a mature segment and we forecast growth at 2% CAGR to support demands for multi-domain cross correlation and problem isolation. Performance will grow at 5% CAGR. Workforce automation will grow at 6% CAGR over the forecast period. Figure 5: 2008-2013 Global service assurance forecast by application segment
$1,200
$1,000
$ millions
$800
$600
$400
$200
$Pro be (CAGR 4%) Fault (CAGR 2%) Service Mg mt (CAGR 14%) Perfo rman ce (CAGR 5%) Wo rkforce (CAGR 6%)
CY2008 $864 $525 $221 $347 $318
CY2009 $819 $514 $243 $339 $306
CY2010 $850 $527 $263 $340 $315
CY2011 $916 $544 $294 $369 $339
CY2012 $990 $566 $346 $408 $378
CY2013 $1,058 $590 $418 $451 $422

Market Forecast
Forecast by communications service
Investments in mobile service assurance will increase from $986 million in 2008 to $1.52 billion in 2013 at 9% CAGR (figure 6). Upgrades in the mobile and fixed access and aggregation networks will drive spending for the management of new technologies and services. Underpinning our forecast is growth in emerging markets where the lack of a fixed broadband infrastructure will spur growth for more cost effective alternatives that are deployed faster. In developed markets, the uptake 3G PC cards and non-messaging related services are strong indicators for pent up demand. We forecast that the service assurance business data segment will increase from $422 million in 2008 to $512 million in 2013. Business data services comprises dedicated data circuits sold to large and medium businesses, data center hosting, Enterprise telephony, and managed services. IP and Ethernet technology will be deployed more extensively to support more efficient backhaul and replace legacy technologies such as ATM and TDM. Service assurance investment in the broadband market will be driven by voice and video services. We forecast that the service assurance broadband segment will increase from $454 million in 2008 to $695 million in 2013. This is driven by new services such as video and the mainstream adoption of VoIP. Residential IPTV and VoIP fit into most if not all of the CSPs triple play strategy. The obvious business benefit of the triple play strategy is to improve customer retention and gain market share. It is fair to assume that broadband access is table stakes in most developed countries. We forecast that the service assurance PSTN segment will decline from $412 million in 2008 to $214 million in 2013. CSPs continue to leverage sunk cost in the PSTN network and must be presented with a strong business case prior to retiring existing services. The probe systems and fault management market will be negatively impacted by efforts to retire the PSTN network.

Market Forecast
Figure 6: 2008-2013 Global service assurance forecast by telecommunication service

$1,600
$1,400
$1,200
$ Millions
$1,000
$800
$600
$400
$200
$Mo bile (CAGR 9%) PSTN (CAGR -12%) Busin ess (CAGR 4%) Res BB (CAGR 9%)
CY2008 $986 $412 $422 $454
CY2009 $999 $361 $408 $454
CY2010 $1,075 $320 $419 $482
CY2011 $1,196 $280 $446 $540
CY2012 $1,333 $246 $479 $629
CY2013 $1,518 $214 $512 $695
Regional forecast
NA will grow from $939 million in 2008 to $1.13 billion in 2013. CALA will grow from $114 million in 2008 to $152 million in 2013. EMEA will grow from $915 million in 2008 to $1.18 billion in 2013. APAC will grow the fastest from $307 million in 2008 to $475 million in 2013 (figure 7). Figure 7: 2008-2013 Global service assurance forecast by region
$1,400
$1,200
$1,000
$ Millions
$800
$600
$400
$200
$NA (CAGR 4%) CALA (CAGR 6%) EMEA (CAGR 5%) APAC (CAGR 9%)
CY2008 $939 $114 $915 $307
CY2009 $885 $116 $897 $324
CY2010 $899 $122 $926 $348
CY2011 $955 $131 $992 $384
CY2012 $1,042 $141 $1,079 $424
CY2013 $1,134 $152 $1,178 $475

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Market Forecast
In North America, growth will be driven by the addition of new services off a mature subscriber base. The rollout of mobile broadband is a positive indicator for service assurance spending. Verizon Wireless has plans for a nationwide 4G/LTE network that will spur investments in passive and active probing. The U.S. has led the global economy into a recession. The U.S. accounts for 22% of global GDP and the outlook for recovery is projected for late 2009. This will delay capital spending decisions for most of 2009. Workforce reductions will put downward pressure on telecommunications business data services and enterprise mobile services during this period. When the economic recovery begins, the major CSPs must continue to rationalize their systems in preparing to support converged services. Growth in the region is forecasted in 2010 following a 3% decline in 2009. The EMEA region is a mixture of mature telecoms markets in Western Europe with rapidly growing markets in Eastern Europe, Russia, Middle East and Africa. The mobile market will see continuing rollout of higher speed radio access technologies in Western Europe and rapid subscriber growth in the developing markets of Africa, Middle East and Eastern Europe. Residential broadband and business data services are significant growth areas for CSPs in EMEA. Assurance investments will support the convergence of these services and bring together the multidomain environments present in most network operations center (NOC) facilities today. The APAC region is a mixture of mature, emerging and developing markets. Pacific Rim countries, such as Australia, Hong Kong, Japan, New Zealand, Singapore, South Korea and Taiwan are essentially mature markets similar to Western Europe and North America. Saturated markets and regulatory changes have led to intense competition in the mobile and residential broadband markets. In these markets, service assurance spending will be driven by the rollout of higher speed radio access technology, DSL growth and the growth in business data services. The emerging markets are dominated by China and India, both with populations of over a billion people. The mobile broadband rollout in China is the largest ever in the world and is being done in record time. Investments are attractive in India, Indonesia and Vietnam. CALA is among the more mature of the emerging markets. Investments from Brazil and Mexico have the largest impact on the region. There is a wide disparity in income but growth will not come from high income subscribers. Brazil is the largest country in the region, with a population of 186 million and a significant number of low income people. Mobile penetration was only 46% at the end of 2006, so there is still room to grow. With 30% post-paid subscribers, the opportunity for new subscribers rests with those with lower incomes. In Mexico, new entrants are focusing exclusively on higher income subscribers, leaving
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Market Forecast
incumbent Telmex the only real choice for lower income subscribers. Argentina and Chile, with relatively higher GDP/capita than most countries in the region, are already near mobile saturation. In many of the former colonies in the Caribbean, service assurance spending deals will be small in size and scope.
Probe systems market share

Analysys Mason estimates that the top six suppliers account for 65% of the probe systems commercial market in 2008 (figure 8). Tektronix leads with 21% market share followed by Agilent, JDSU, Spirent, Tekelec, and NetScout with 20%, 8%, 7%, 5%, and 4% respectively. Figure 8: Probe systems market share
2008 Probe System Market Share $864 million
Astellia Anritsu Tollgrade Polystar OSIX Nexus Telecom Empirix EXFO IneoQuest Radcom Accanto Ascom Symmetricom
Other 35%
Tektronix 21%
Agilent 20% Netscout Tekelec 4% 5% Spirent 7%
JDSU 8%

Market Forecast
Probe systems forecast
Analysys Mason forecasts that the probe systems market will grow from $864 million in 2008 to $1.06 billion in 2013 at a CAGR of 4% (figure 9). Figure 9: 2008-2013 Probe systems forecast
$1,000
$800
$ Millions
$600
$400
$200
$Probe (CAGR 4%)
CY2008 $864
CY2009 $819
CY2010 $850
CY2011 $916
CY2012 $990
CY2013 $1,058
Probe systems forecast by communications service The mobile segment is forecast to grow from $397 million in 2008 to $593 million in 2013 at 8% CAGR (figure 10). The demand in this segment is largely driven by infrastructure network upgrades, triple digit growth of data services in developed economies, and robust subscriber growth in emerging markets. Probe systems provide a rich source of network level data that is increasingly being made available to other users responsible for quality control, product management, and customer care groups. Service management focuses on leveraging network data that can then be correlated to complex services and customers in the mobile and wireline markets to provide improvements in CEM. This is a developing market that has wide implications on how CSPs prioritize resources to resolve problems, retain high value customers, and react quickly to situations that jeopardize new service offers. Session level analysis will be important for the operations groups but increasingly this information will be utilized across a wider base of users within CSPs. The PSTN segment will decline from $225 million in 2008 to $106 million in 2013 at a CAGR of -14%. We expect the rate of investment to decline much faster in the later years of the forecast. The decline will follow the pace of CSPs willingness to cap and retire the circuit switched infrastructure.
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Market Forecast
The residential broadband segment will grow from $130 million in 2008 to $201 million in 2013 at a 9% CAGR. In the consumer broadband segment the major opportunities for probe systems will come from the rollout of voice and video services. VoIP and IPTV will require an effective service assurance solution to limit the number of truck rolls and a superior customer experience to the competing cable offering. Probe systems are likely to play a significant role in this solution for testing, diagnostics, and quality metrics if lower cost solutions can be implemented. Another potential area of investment that will benefit sustained investments in the probing market is the focus on home networking. Advances in technology will enable more control over appliances in the home and add-on services (i.e. remote surveillance). This will drive the demarcation point beyond the modem and into the home. Standards such as technical report 069 (TR-069 defines an application layer protocol for remote management of end-user devices. This now gives CSPs more management control and helps to resolve issues associated with wasted truck rolls. The business services segment will grow from $112 million in 2008 to $159 million in 2013 at a 7% CAGR. This growth will be driven by investment in probe systems to monitor the IP transport, carrier Ethernet, and enterprise telephony services. Demand for lower costs and more efficient backhaul options favors carrier Ethernet. If a CSP needs to invest in capacity the clear choice will be Ethernet instead of SONET/ SDH. Mobile backhaul and the push towards all IP networks will drive the market for business services. This is where we see the most opportunity for suppliers of remote testing solutions. Figure 10: 2008-2013 Probe systems forecast by telecommunication service
$700 $600 $500
$ Millions
$400 $300 $200 $100 $Mobile (CAGR 8%) PSTN Res BB (CAGR -14%) (CAGR 9%) Business (CAGR 7%)
CY2008 $397 $225 $112 $130
CY2009 $385 $197 $107 $131
CY2010 $417 $179 $119 $136
CY2011 $467 $156 $137 $156
CY2012 $515 $139 $148 $188
CY2013 $593 $106 $159 $201

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Market Forecast
Probe systems forecast by region The NA region will remain the largest through the forecast period, but with the lowest growth rate at a CAGR of 2%. This lower growth rate is driven by consolidation and a shift in pricing power towards CSPs. NA is also the largest region for PSTN passive monitoring, which will decline over the forecast period as CSPs migrate their networks to softswitches and IP transport. Overall, the higher level of consolidation in the market will put CSPs in a strong negotiating position. NA is still an attractive market due to increased 3G mobile deployments, which are driving demand for higher value mobile data services. Residential broadband is an area of growth with the telcos and cable operators competing and investing heavily for the triple play opportunity. IP/MPLS and Ethernet technologies continue to drive spending in the business services segment. Figure 11: 2008-2013 Probe systems forecast by region
$450 $400 $350 $300
$ Millions
$250 $200 $150 $100 $50 $NA (CAGR 2%) CY2008 $380 $42 $345 $96 CY2009 $342 $42 $332 $103 CY2010 $349 $44 $345 $112 CY2011 $370 $47 $373 $126 CY2012 $399 $50 $402 $139 CY2013 $427 $52 $426 $152
CALA (CAGR 4%) EMEA (CAGR 4%) APAC (CAGR 10%)
CALA will grow at 4% annually over the forecast period. Brazil and Mexico influence the largest share of spending, which is dictated by technology upgrades. The CALA region is more mature than most other emerging markets. It has extensive wireline infrastructureindeed PSTN makes up more than a third of revenues in the region. However, residential broadband penetration rates are much lower than would be expected given the availability of wireline networks. Both 2G and 3G networks are being deployed and upgraded. Some of the richer countries are close to mobile saturation, so CSPs are investing to provide higher value services. A handful of very large CSPs control most of the market, giving them considerable pricing power. Service assurance market review
Market Forecast
The EMEA region will grow at a CAGR of 4% spurred by mobile and broadband services. Western Europe investments will be driven by UMTS network upgrades, faster adoption of IPTV, and active investments made by several large incumbents focusing on IP and business transformation. In Eastern Europe, Middle East and Africa, subscriber growth will provide increased demand for network and service monitoring. The APAC region will grow at a CAGR 10% reflecting strong subscriber growth in countries like China and India. However, the overall market size for commercial suppliers will remain small compared to NA and EMEA. This is driven by a preference for custom solutions developed internally or by local system integrators.
Fault and event management market share

Analysys Mason estimates that the top six suppliers accounted for 83% of the commercial fault and event market in 2008 (figure 12). IBM leads with a 32% market share penetration. HP, EMC, Telcordia, CA and TTI Telecom followed with 21%, 15%, 7%, 4%, and 4% respectively. Figure 12: Fault and event management market share
2008 Fault and Event Mgmt Revenue = $525 million

IBM 32%
SRIT (OSI) Harris Stratex Kapsch CarrierCom

CA 4%
Other 17%
TTI Telecom 4% Telcordia 7%
EMC 15%
HP 21%

Market Forecast
Fault and event management forecast Analysys Mason forecasts the fault and event management market will grow from $525 million in 2008 to $590 million in 2013, a CAGR of 2% (figure 13). We are forecasting a decline of 2% from 2008 to 2009 as operators cut their capital expenses in reaction to sharp declines in both business and consumer demand. Figure 13: 2008-2013 Global fault and event management forecast
$600
$500
$400
$ Millions
$300
$200
$100
$Fault and event (CAGR 2%)
CY2008 $525
CY2009 $514
CY2010 $527
CY2011 $544
CY2012 $566
CY2013 $590
Fault and event management forecast by communications service Managing multiple network domains in the access, aggregation and transmission networks will drive investments in fault and event management systems. The challenges of more complex network technologies and IP services will drive more consolidated operational centers that utilize a centralized framework to integrate a diverse set of data feeds. The ability to quickly isolate service impacting events is a requirement to support business priorities and processes. Advances in fault management systems to isolate faults in MPLS networks and support for new metro and access technologies makes sourcing from outside suppliers the logical choice for most CSPs. Broadband growth is driven by the need to manage optical networks and new investments in the copper network for technologies such as ADSL2 and VDSL. Associating faults in the access, transport, IP, and content networks for VoIP and IPTV will fuel growth in this segment. The outlook for managing legacy services will decline at a modest rate over the forecast period as CSPs gradually shift voice and circuit switched data services towards IP. Legacy fault systems will remain in place for at least another decade.
24

Market Forecast
Figure 14: 2008-2013 Fault management forecast by communication service

$300 $250 $200
$ Millions
$150 $100 $50 $Mobile (CAGR 8%) PSTN (CAGR -10%) Business (CAGR -1%) Res BB (CAGR 2%)
CY2008 $189 $79 $126 $131
CY2009 $195 $72 $118 $129
CY2010 $211 $63 $121 $132
CY2011 $239 $54 $114 $136
CY2012 $260 $45 $119 $141
CY2013 $277 $47 $118 $148
Fault forecast by region North American wireline CSPs will limit spending on fault and event management in 2009 mostly a result of economic conditions and ongoing efforts to focus on system consolidation, which began two years ago. The RBOCs are spending less on maintenance of legacy networks. Fault management spending will be diverted to new initiatives that include enterprise IP services and broadband data (DSL and fiber to the premise). Growth in the fault segment will be driven by the need to support new transport and access networks necessary to support VoIP, IPTV, broadband data, metro Ethernet, and MPLS VPN services. Diminishing demand for private line services and declines in PSTN signal monitoring and cooper line testing will offset any growth in IP broadband and VPN service growth. In the EMEA region, growth in fault system will be driven by the management of convergent services, from incumbents investing more in wholesale and business services. In the residential broadband segment, most developed countries in Western Europe are leading all other regions in the deployment of VoIP and video services. The market is much more fragmented than NA, which leads to more deployments. In the mobile market advanced software from infrastructure suppliers provides options to CSPs. In many cases multi-vendor systems supplied from the ISV are architected to consolidate data from the NMS/EMS systems supplied by Alcatel-Lucent, Ericsson, Nokia Siemens Networks (NSN), and other tier-2 equipment suppliers.
25

Market Forecast
The CALA region represents a small share of overall investments. In the past year, we have noted that in addition to Brazil and Mexico, other countries have been active in deploying a more comprehensive assurance system to support new service deployments. In both cases, investments tracked the deployment of NGN migrations which required management of technology from a major equipment supplier. Automation in high growth, low ARPU countries will drive requirements for improving scale in the operation centers. In APAC developing countries, most of the fault and event management system deployments are influenced by infrastructure suppliers. India is open to outsourcing, which favors the larger suppliers that provide consulting, integration, and hosted solutions. Opportunities in China are still elusive because of the strong influence of local system integrators and less of an appreciation for the value of commercial software solutions. In developed countries, the trend is similar to NA which favors consolidation activities as CSPs prepare for converged services. Figure 15: 2008-2013 Fault management forecast by region
$250
$200
$ Millions
$150
$100
$50
CY2008 $197 $30 $204 $94
CY2009 $188 $31 $198 $98
CY2010 $188 $32 $202 $105
CY2011 $191 $34 $206 $113
CY2012 $197 $36 $212 $121
CY2013 $203 $38 $220 $129

Market Forecast
Service management market share
We estimate that HP held 16% of the service management market (figure 16). IBM, Arantech, CA, Telcordia, and InfoVista followed with 14%, 11%, 7%, 4%, and 2% respectively. This is the highest growth segment within the service assurance market. The increased desire to measure quality indicators for both service and the end customer is driving the market. Budgets are expanding beyond the operations group and into service quality groups and customer care, which is a boom for the sector. Figure 16: Service management suppliers market share
2008 SM Revenue = $221 million
SRIT(OSI) Tektronix EMC TTI Telecom InfoVista Digital Fuel Managed Objects Oblicore
HP 16% Other 46% IBM 14%
Inf oVista Telcordia 2% 4%
CA 7%
Arantech 11%
Service management forecast Analysys Mason forecasts that the service management market will grow from $221 million in 2008 to $418 million in 2013 at a CAGR of 14% (figure 17). Figure 17: 2008-2013 Global service management forecast
$450 $400 $350 $300
$ Millions
$250 $200 $150 $100 $50 $-
CY2008 $221
CY2009 $243
CY2010 $263
CY2011 $294
CY2012 $346
CY2013 $418
SM (CAGR 14%)

Market Forecast
At the service management layer data is modeled. This includes new sources of data that include the end-user device and session layer data that links the service (multimedia messaging service (MMS), email, VoIP, etc.) to the network elements delivering the service. The data is then correlated to the user using subscriber identity information captured from the end user device (international mobile subscriber identity (IMSI), international mobile equipment identity (IMEI)). This enables the CSP to qualify the experience of the subscriber based on how well the network and services are performing. More importantly, it allows the CSP to gain visibility into recognizing when some services are not working because of incorrect configuration errors, congestion, server failures and then to directly assess the impact on its most valuable customers.
Service management forecast by communications segment The rapid growth in mobile broadband data services supports our view that this will continue to drive spending for service management. Smart phones and higher data rates in the radio access network now provide developers with a robust platform to develop advanced applications that utilize location based search services and most of the capabilities offered in a fixed broadband service email, internet browsing, and video streaming. Figure 18: 2008-2013 Service management forecast by telecommunication service
$350 $300 $250
$ Millions
$200 $150 $100 $50 $Mobile (CAGR 11%) PSTN (CAGR Nil) Business (CAGR 9%) Res BB (CAGR 43%)
CY2008 $177 $$33 $11
CY2009 $192 $$36 $15
CY2010 $202 $$37 $24
CY2011 $221 $$41 $32
CY2012 $252 $$45 $48
CY2013 $301 $$50 $67

Mobile CSPs recognize the importance of providing high quality services to enterprise subscribers. Spending on service management in the mobile segment will grow from $177 million in 2008 to $301 million in 2013 at 11% CAGR. It is led by mobile CSPs seeking improved
28
Market Forecast
application analytical software that provides operations, service quality and customer care groups with a better understanding of customer experience for data services operating over a mobile data network. Providing service level reports that validate and warranty service commitments provided to corporate customers will contribute to growth in the business services segment. Strong demand for VPN and hosted services require tighter management controls on key performance indicators for MPLS networks. The investments made today are targeted at global MPLS networks owned by the CSP. Spending in the residential broadband market lags the mobile and business service segments. Our model assumes that spending will accelerate as IPTV reaches mass market adoption. More activity is occurring now in the VoIP segment than a year ago. However it is our view that this segment will lag the mobile and business data services segment over the forecast period. Service management forecast by region Service management in the EMEA region is forecast to grow from $114 million in 2008 to $209 million in 2013. CSPs have benefited by expanded deployments in 2008 and a willingness to work with system integrators and suppliers to develop solutions targeted at profitable services. Figure 19: 2008-2013 Service management forecast by region
$250
$200
$ Millions
$150
$100
$50
CY2008 $66 $9 $114 $32
CY2009 $72 $10 $125 $36
CY2010 $78 $12 $135 $38
CY2011 $86 $13 $151 $44
CY2012 $103 $16 $174 $53
CY2013 $123 $19 $209 $66

Growth in the European market is driven by the competitive marketplace in most developed countries. The most notable European mobile CSPs active in this segment include Elisa, Orange (UK, France, Switzerland),
29
Market Forecast
O2, Swisscom, TeliaSonera, TIM, T-Mobile (Germany, Austria), TMN and Vodafone (UK, Germany, Spain, Ireland). In NA, the top four mobile operators have made isolated investments, which should expand across the company in the next two years. Smart phones, new wireless data card services, and corporate applications will drive spending in the sector. Most operators in CALA and APAC have a tendency to engage in more customized internal solutions and therefore the commercial market opportunity will be limited. The exceptions to ad-hoc development include KT, SingTel, Telstra, and other CSPs that have demonstrated their preference to buy versus build.

Market Forecast
Performance monitoring market share
We estimate that IBM held 23% of the performance monitoring market (figure 20). CA, InfoVista, AIRCOM International, HP and Telcordia, followed with 15%, 12%, 9%, 9%, and 6% respectively. Figure 20: Performance management market share
2008 PM Revenue = $347 million
IBM 23% CA 15%
Other 26%
TTI Telecom Mycom Harris Stratex
Telcordia 6%
Aircom International 9%
InfoVista 12% HP 9%
Performance monitoring forecast

Analysys Mason forecasts the performance monitoring market will grow from $347 million in 2008 to $451 million in 2013, a CAGR of 5% (figure 21). Broadband, mobile-access, and backhaul data services will generate strong demand. Figure 21: 2008-2013 Global performance monitoring forecast
$450 $400 $350 $300
$ millions
$250 $200 $150 $100 $50 $PM (CAGR 5%) CY2008 $347 CY2009 $339 CY2010 $340 CY2011 $369 CY2012 $408 CY2013 $451

Market Forecast
Performance monitoring forecast by service segment Investments in the mobile segment are driven by infrastructure investments in the mobile packet core networks. The core network was built using TDM/ATM-based technology. A shift towards carrier Ethernet lowers cost and provides more flexibility. This will put demand on replacing existing systems to support the performance monitoring (PM) requirements of IP networks. Figure 22: 2008-2013 Performance monitoring forecast by communication service
$250
$200
$ millions
$150
$100
$50
$Mobile (CAGR 7%) PSTN (CAGR -10%) Business (CAGR 5%) Res BB (CAGR 11%)
CY2008 $156 $45 $94 $52
CY2009 $156 $37 $91 $54
CY2010 $163 $31 $88 $58
CY2011 $181 $26 $96 $66
CY2012 $200 $24 $106 $77
CY2013 $221 $27 $117 $86
In wireless access networks, PM systems are utilized to assist in coverage and capacity requirements. These key performance indicators help operators determine where network performance is unacceptable. Capacity planning tools provide engineers with the ability to assess cellsite capacity by linking inputs from historical data collection, which can then be used to reconfigure cells. Business data services will require CSPs to warranty site to site SLAs. In order to establish control verification, PM software must be capable of collecting data from many different network domains to warranty the service. IP quality of service (QoS) that measures latency, packet loss, and jitter is also necessary for measuring voice and video delivery across each domain in the network. CSPs will invest in performance monitoring systems to avoid customer defections resulting from poor audio and video service quality. The introduction of video into an IP network requires different techniques for measuring quality as compared to data or voice. To achieve service quality measurements for each stream, it is necessary to deploy monitoring and/or test equipment at critical
32

Market Forecast
distribution points in the network. This is needed to measure inter-packet arrival jitter, inter-packet arrival deviation from the transport data rate, packet loss, and any encoding errors. Performance management forecast by region EMEA accounts for the largest region of investment mostly due to mobile operators increased investment in IP transport and packet data network monitoring. The outlook remains strong for IP related investments and multi-domain network monitoring. The business drivers are targeted at eliminating network failures that result in lost revenue and customer dissatisfaction. It is easy to justify investments in systems that help to avoid customer churn. NA growth will remain modest as CSPs continue to consolidate operations. Our view is that we expect fewer opportunities to emerge over the next several years in the business data services and mobile markets. Instead CSPs will try to leverage probe systems or existing legacy systems. The one area where immediate opportunities exist is in the broadband sector. APAC will grow at 9% CAGR. New investments in 3G and broadband will extend growth beyond the usual systems acquired from network equipment suppliers. Figure 23: 2008-2013 Performance monitoring forecast by region
$250
$200
$ Millions
$150
$100
$50
CY2008 $122 $17 $157 $52
CY2009 $119 $17 $150 $53
CY2010 $115 $17 $150 $57
CY2011 $125 $19 $162 $62
CY2012 $138 $21 $179 $70
CY2013 $150 $24 $196 $80

Market Forecast
Workforce automation
The top six suppliers held 79% of the WA market. We estimate that BMC held 23% of the market (figure 24). Motive, Oracle, Telcordia, SupportSoft, and Amdocs followed with 19%, 12%, 12%, 7%, and 6% respectively. Figure 24: Workforce automation market share
2008 WF Revenue = $318 million
BMC 25%
Ventyx (MDSI) ARRIS (C-Cor) ClickSoftware ViryaNet
Other 19%
Motive 16%
Amdocs SupportSoft 6% 8%
Oracle 13%
Telcordia 13%
BMC is the leading software supplier of trouble ticketing and help desk software. The Remedy set of products provides incident and problem tracking, manages SLA violations, and links separate help desks into a centralized system. BMC is deployed at AT&T, Brasil Telecom, Cox, TeliaSonera, Time Warner, Vodafone, and other CSPs around the world. Motive now part of Alcatel-Lucent carved out its position in the broadband market and has been able to achieve high penetration rates in the DSL market in North America and Europe. It has expanded into the mobile terminal market. Motive has been able to penetrate leading CSPs in each of the major regions. Customers include AT&T, Bell Canada, BT, Deutsche Telekom, SingTel, Softbank BB, Swisscom, Telecom Italia, Telefonica Brazil and Verizon. Telcordia has a strong position in the North American market with its Force control and dispatch software system. It is deployed for AT&T, Telmex, Verizon and some other European CSPs. Force will assign and schedules work using a smart load algorithm. It automatically and dynamically re-evaluates work assignments based on changing load demands and notifies technicians of work changes.
34

Market Forecast
Oracle has a set of capabilities from its acquisition of Siebel and Portal. It provides a range of capabilities for trouble tracking and workforce assignment. SupportSoft has achieved success in the broadband segment. It provides a set of solutions that includes remote device management, incident management, and online chat software. Amdocs provides trouble tracking and workforce assignment in conjunction with its other customer care support.
Workforce automation forecast

Analysys Mason forecasts the WA market will grow from $318 million in 2008 to $422 million in 2013, a CAGR of 6% (figure 25). Figure 25: 2008-2013 Workforce automation forecast
$450 $400 $350 $300
$ Millions
$250 $200 $150 $100 $50 $-
CY2008 $318
CY2009 $306
CY2010 $315
CY2011 $339
CY2012 $378
CY2013 $422
Workforce Automation (CAGR 6%)
Work force forecast by communications service Residential broadband was an active segment a few years ago but growth has lagged in subscriber and revenue increases in the past several years. Some of this is due to the fact that activation and remote testing capabilities have improved for the large CSPs so the need has diminished. With new services such as VoIP gaining traction and IPTV on the horizon we expect net-adds to ramp up quickly. PSTN spending for WA has been declining for many years. It will continue to decline 6% CAGR, operating purely in maintenance mode.

35
Market Forecast
Mobile will be the fastest growing segment over the forecast period. The addition of new types of multi-media services and more sophisticated mobile terminals will drive growth. Many of the successful broadband suppliers such as Motive and SupportSoft that developed remote device management and incident management systems are poised to benefit from mobile data service management. Business data services will be driven by opportunities that emerge in the burgeoning ICT and wholesale IP services market. Figure 26: 2008-2013 Workforce automation forecast by communication service
$250
$200
$ Millions
$150
$100
$50
$Mobile (CAGR 14%) PSTN (CAGR -12%) Business (CAGR 3%) Res BB (CAGR 8%)
CY2008 $67 $64 $57 $130
CY2009 $70 $55 $55 $126
CY2010 $82 $47 $54 $132
CY2011 $88 $44 $58 $149
CY2012 $106 $38 $60 $174
CY2013 $127 $34 $67 $194
Workforce Automation forecast by region NA is the largest region of investment. We forecast that NA will grow from $173 million in 2008 to $230 million in 2013 at 6% CAGR. In NA there is a clear requirement to increase productivity and effectively route technicians by skill set. Also the WA market has evolved to support home networking management task driven by standards and embedding management capabilities on the CPE, PC, and set-top equipment. This has occurred primarily in the broadband segment. In EMEA, the level of investment is not as high as NA, which contradicts trends in other segments of the service assurance market. It remains unclear as to why Europe and rest of world (ROW) lags NA. Our view is that CSPs have not yet adopted a rigorous workforce process analysis. Therefore workforce efficiency has not been optimized. If this thinking
36

Market Forecast
changes, we would expect much faster growth in EMEA and ROW in later years of the forecast and adjust accordingly to reflect this trend. At this point we do not see any evidence in the near term that would cause us to change the forecast model. Figure 27: 2008-2013 Workforce automation forecast by region
$250
$200
$ Millions
$150
$100
$50
CY2008 $173 $16 $96 $33
CY2009 $165 $16 $92 $34
CY2010 $169 $16 $94 $35
CY2011 $183 $17 $100 $38
CY2012 $205 $18 $113 $42
CY2013 $230 $19 $126 $47

Market Drivers
Market drivers
Isolating failures and detecting poor performance in new network technologies and providing a high quality of service (QoS) to consumers underpins investments in service assurance software. Factors that will support growth in the service assurance market and inhibitors that have the potential to stall investments include:
Drivers
Growth of wireless network traffic Competition Quality of service Exceed user expectations First time resolution Emerging markets with high subscriber growth Convergence Consumer VoIP Merging of IT and telecommunication services Adoption of SIGTRAN New access technologies
Inhibitors
Resistance to change organization Consolidation High profile project failures Closed markets Not invented here

Market Drivers
Drivers
Growth of wireless network traffic Total wireless network traffic generated by cellular users from voice and data services will increase substantially in developed regions. The total traffic volume in 2015 will be nearly ten times that in 2008, due to improved cellular devices (such as USB modems and smart phones), widespread deployment of advanced 3G technologies and femtocells; affordable pricing, increased indoor usage of cellular devices; and the increasing size of items of Web content. While developed regions will account for just 25% of the cellular user population by 2015, they will generate 65% of total global wireless network traffic. Monthly wireless network traffic per cellular user in developed regions will be eight times greater in 2015 than in 2008, rising from 56MB to 455MB. Increasing cellular penetration in developing regions will also drive up wireless network traffic, but there will be a much greater proportion of basic mobile phones, used primarily for voice communication, than in developed regions. Consequently, total wireless network traffic from cellular users in developing regions will be six times greater in 2015 than in 2008. The volume of data traffic generated by cellular users now exceeds the volume of voice traffic in developed Asia and Western Europe. In NA, where levels of voice usage are very high, data traffic will overtake voice in 2010. By 2015, 94% of wireless network traffic from cellular users in developed regions will arise from data services. Competition in developed countries NA, Western Europe, the Middle East, and parts of Asia enjoy high levels of economic development. In many cases, at least three CSPs serve the region and provide advanced mobile and broadband services. Now non-traditional competitors are entering the market and will disrupt long established business models. Media companies are entering the market to offer more flexibility in the distribution of content. Information portal providers such as Google and Yahoo are aggressively exploiting the shift of advertising dollars from traditional media outlets to the web. In the process the desire to investigate alternatives to the control exerted by incumbents in accessing the internet could spur a new round of investments. Service assurance market review
Market Drivers
Cheaper voice service plans are forcing incumbents to cannibalize the voice cash cow and creating a rush to offer IPTV, VoIP, fixed mobile convergence and other services to counter first mover advantage. The additional complexity and inter-dependence of multiple services over the same broadband connection is creating more demand for next generation service assurance solutions. Quality of service Consumers willingness to move from one operator to another is often measured on the availability of service, fast problem resolution, and the consumers perception of the QoS. Competitors entering the market to offer new types of services contribute to spending to support new technologies and services and overall business objectives to attract and retain existing customers. For established services that have reached high subscriber saturation rates or high coverage areas (homes passed), CSP investment in assurance systems must not only evaluate the transport and access network but it must tune their operations to assess application performance and service quality. Intense competition in highly saturated markets will result in more investment in service quality management software that measures the end user experience. Exceed user expectations Customers are becoming more demanding and expect broadband services to deliver the same reliability as their land line phone and cable TV service. Telecommunications services are no longer delivered within the vacuum of silo technologies. Development of free services over the internet has changed customer lifestyles, buying behavior and usage of all types of retail services. Online companies, particularly Amazon and Google, have introduced new customer-centric business models that have radically changed user perceptions and expectations of what constitutes good quality service. New services that have yet to reach mass market adoption such as IPTV must exceed the customer expectations to achieve success in the marketplace. First time resolution CSPs have to be able to identify the root causes of why customers contact the call center. Customer service representatives (CSRs) need to be able to solve a customer issue on the first call (typically referred to as first call resolution or fix first time). To do this effectively, CSRs need to have up-to-date relevant customer data at their finger tips. This type of capability is predicated on a CSPs ability to manage end-to-end processes effectively, have visibility of actual user experience, and good
40

Market Drivers
communications between support functions. The importance of providing quality customer service is of heightened concern, given the prevailing economic conditions for 2009. It places new demands on the need for customer retention and satisfaction and speed is of the essence. CSPs are looking for better insight into the network, automated methods to find and fix networks and customer problems fast and the ability to track intelligent transactions across different access channels. Scalability and reliability are also critical, especially in the current financial market where it is essential that carriers do it right the first time. Emerging markets with high subscriber growth In emerging markets, particularly in the Middle East, Africa, Latin America and emerging Asia, CSPs are still experiencing strong mobile subscriber growth rates. The global recession will slow growth in 2009 and 2010, but growth rates are still high and will accelerate as the recession comes to an end. Monitoring voice and data quality is an effective process to lower rates of churn. Convergence The changing business environment coupled with a new focus on getting it right for customers is driving various investments in transformational technology. Next-generation network architecture will transport all voice, video and data over a single consolidated network layer. The common denominator is the IP protocol in the core and aggregation networks. Service assurance systems must be able to manage next generation services over the IP network and support the legacy services found in the access networks in both fixed and mobile networks. Consumer VoIP Consumer VoIP is fueling top line revenue growth and contributing to profit margins in developed countries. Consumers are migrating off primary POTS lines driven by the promotion of bundled services and cheaper calling plans, yet expect identical quality and availability offered with POTS from digital voice. Bandwidth management and QoS will increase in importance as other services make their way into the market. Over-provisioning the network might have worked in the early phases of deployment but this approach is not sustainable. Management systems must be able to isolate and identify faults in near real-time. A comprehensive approach is needed to support the diversity of telecoms software application servers, softswitches, media gateways, and IP networks that will deliver voice and video services Service assurance market review
Market Drivers
Merging of IT and telecommunication services Demand for MPLS VPN, metro-Ethernet services, managed services, and hosted IP telephony solutions will increase as CIOs in the enterprise market evaluate flexible solutions that bring lower operational cost. The common denominator is the IP protocol in the enterprise, government, and telecommunications infrastructures. CSPs have deployed IP networks that go across countries and in some cases continents. These IP networks are evolving to support a MPLS control plane to provide corporate VPNs and QoS characteristics to support different types of applications such as video, voice, and data. In the IT world, the MPLS network provides more flexibility to support connectivity requirements to data centers, remote centers and branch offices. This coupling of IT and telecommunications services will open new markets for OSS suppliers in service level reporting. Adoption of SIGTRAN The rapid adoption of Signaling Transport (SIGTRAN) to meet capacity demands and lower operational cost is driving demand for probe solutions to meet the same requirements found in the SS7 and IP networks. SIGTRAN is a new set of standards defined by the International Engineering Task Force (IETF). SIGTRAN enables the transport of PSTN signaling over IP networks and the offloading of SMS traffic from the PSTN. CSPs are not in a position to abandon the PSTN network and must proceed with phased migrations towards IMS and IPbased access networks. SIGTRAN supports the phased approach of a hybrid network because it leverages existing assets. The operations groups will want to deploy probes to identify route configuration errors, network outages, and over-utilized links. New access technologies FTTx and xDSL A strong indicator to future assurance spending is new network technology deployments such as fiber to the premise. Overlay technologies to bring higher bandwidth access and session layer control requires new sources of data to isolate faults and measure available capacity. In the mobile segment, the focus is on moving to third generation networks. At this point in the investment cycle, probe and fault systems are gaining a disproportionate share of the spending. In the future when more services are utilizing the network, we would expect a marked increase in service management spending. Broadband testing in the pre-deployment phase is necessary to introduce new types of broadband services such as IPTV. Fiber to the node or premise and xDSL access technologies require testing of the distribution and access networks. Troubleshooting IP video problems requires the
42

Market Drivers
ability to detect video pixilation and picture freezes. Problems due to lost packets and jitter require testing of the physical, logical, and IP layers. Advanced services such as IPTV over new access technologies will drive remote testing and centralized monitoring of the distribution and access networks.
Inhibitors
Resistance to change organization The unwillingness to restructure existing departments to support next generation services efficiently is a significant impediment to probe system investments. In some countries labor laws limit the actions executives can take to redistribute labor resources, which would involve workforce reductions in some business units. However, more often, managers are not willing to make tough decisions to reshape the organization. In the service management segment, the status quo has stalled the rate of growth. Cooperation among stakeholders in different parts of the business is necessary to support new processes. Without cooperation, it does not make any sense to move ahead with a service management project. Consolidation Consolidation has an immediate effect on suppliers. Following any planned merger, future investments that affect the operations of the combined entity are delayed for as long as 18 months. The new management team will realign the business and operations to expand their market-share, optimize business operations, and respond to competitive threats. Most of the software impact of consolidation will result in fewer strategic suppliers serving a broader base of regional operational centers. NOC consolidation usually results from CSP mergers. It may also occur if CSPs are making a dramatic shift in how services are delivered. Vodafone is doing this to coordinate activities across diverse regions. The fallout to OSS suppliers is that some strategic suppliers gain a stronger position in the newly formed CSP and other suppliers roles diminish over time. High profile project delays and failures Every year in the telecommunication segment, a high profile project captures the attention of the market. Sprint Nextels mobile WiMAX broadband service was the most recent. Others include AT&T U-Verse, and BT 21CN. All have similar goals in creating new types of services that promise unique advantages over their competitors strategy and exploits the latest advances in technology. The risk of failure is high because variables can doom the project - from immature technology
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Market Drivers
to lackluster demand - needed to justify further investments. Irrational exuberance at the onset with a fanfare of announcements flowing from the CSP and the suppliers can wane quickly with delays and glitches in the technology. The downstream affect of delays or the decision to cancel the project not only limits the near term opportunity but has greater consequences to capital investments long term. Closed markets China, Japan and other countries in Asia are less likely to source from established service assurance suppliers and instead procure solutions from local suppliers or build their own. Some of the larger tier-1s such as NTT remain confident that their IT organizations can build better systems than can be purchased in the commercial market. Not invented here Some of the larger tier-1 CSPs remain confident that their IT organizations can build better systems than can be purchased in the commercial market. NTT and Verizon represent this style of thinking and certainly have large, capable internal resources to tackle a corporate wide initiative. The top 30 CSPs in the world have an enormous impact on how fast a market will develop. AT&T Wireless, BT, Telstra, Vodafone, and others are open to seeking options in the commercial market but approximately one third of the top 30 have maintained a more narrow view on how to evolve their next generation management systems.

Business Environment
Business environment
The economic recession in developed countries is contributing to declines in telecom service revenues and fueling price declines in an effort to retain customers. Gross domestic product (GDP) in the OECD area fell by 2.1% in the first quarter of 2009, the largest fall since OECD records began in 1960, according to preliminary estimates, and followed a fall of 2.0% of GDP in the previous quarter. In the United States GDP fell by 1.6% in the first quarter of 2009, the same rate as in the previous quarter. Japans GDP declined by 4.0%, following a 3.8% decrease in the previous quarter. GDP in the euro area was down 2.5%, following a 1.6% fall in the previous quarter. Compared with the same quarter a year earlier, all the regional economies recorded a fall in GDP (figure 28), and a marked deterioration on the previous quarters year-on-year figures. Figure 28: Quarterly GDP volume growth
Quarterly GDP Volume Growth

% change on the same qtr of previous year
4.0 2.0 0.0 -2.0 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 -4.0 -6.0 -8.0 -10.0 European Union United States and Canada Japan Other (Australia, Korea, New Zealand)

During the past five years, Analysys Masons telecoms software forecasts have been based on the assumption that next generation network expansion and broadband services would support continued growth in business and operational support systems. Economic-factors impacted by an asset bubble that began in the real estate market, which was enabled by risky lending in the financial sector has spilled over into all sectors of the economy. The erosion of consumer and business confidence has lowered demand for telecommunications services, leading to deferred investments in network, IT, and software projects. Unlike the previous downturn in the telecoms market in 2001 2002, which was fuelled by the internet boom of the late 1990s and a regulatory reform in the telecoms market that funded CLECs with cheap capital, telecoms is better positioned than most sectors of the economy.
45
However, declines in exports, rising unemployment, and increases in consumer saving will have adverse effects on the telecoms industry as a whole. CSPs will reduce investments in line with any revenue declines. We are using a forecast model that assumes: Reduced or delayed short-term investment in next-generation access, together with more rational long-term planning. This will have the greatest impact on service assurance, service fulfillment, and the EMS/ NMS segments in the form of consolidated systems and fewer one off purchases to support new network technologies. Accelerated loss of leased fixed lines and circuit switched voice lines, initially in the business segment, but also in the residential segment as the effects of unemployment are felt. This will decrease software spending in the business services and PSTN segments over the next 18 months. More discounted fixed-line/broadband contracts. Average household spend on broadband access and services will not increase, despite takeup of VoIP and IPTV. VoIP typically increases the price of the broadband package by 1030% on a DSL connection, and slightly higher on cable. IPTV adds $30 month in Europe and $40 month in North America to a bundled offer. Adoption of all three services has not been widely adopted by consumers. A dual-play option is more likely. This should spur spending in the WA segment to improve utilization rates for field support staff. Certain kinds of aggressive investment decisions will be postponed or cancelled, most notably the next major generations of fixed and wireless access. This will reduce software investments for the management of higher growth IP network and services. It may be easier for operators to justify investment if it will yield savings in the long term, but long-term IP and IT transformations have historically tended to yield fewer savings than originally expected and senior executives may justifiably be wary. By the end of 2008, mobile accounted for 2030% of broadband subscribers in the more-advanced Western European markets, such as Austria and Ireland. The rise in data traffic carried over wireless networks in developed markets has taken many network operators by surprise. At the same time, revenue per megabyte is continuing to fall, driven down by increasing competition and the introduction of flat-rate pricing. This creates a compelling case for more spectral efficient technologies such as LTE combined with indoor technologies such as femtocells. Deployments of LTE networks will occur at the end of 2009. This in turn will create demand for telecoms software systems once operators move beyond pilot deployments so it is not unreasonable to expect RFIs in 2009. The squeeze on credit places greater cash burdens on Opex than on Capex, and therefore operators will be seeking ways of lowering operating costs, particularly in network operations. This should result in more managed network outsourcing deals with IT and infrastructure
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suppliers. As a result suppliers will need to develop strong partnerships with IT and equipment vendors that will offer managed services. The outlook for lower spending in the service assurance market for 2009 will improve in the second half of 2010 as most developed economies return to growth and confidence improves. CSPs will shift from controlling cost to funding investments that support growth initiatives. While the economic downturn will certainly slow the rate of major network overhauls, it should accelerate some long-term trends in the industry. The long-term trend of fixedmobile substitution is likely to accelerate because the mobile operators underlying cost structure allows them to adapt more rapidly to changes in consumer spending. The operators that emerge strongest from the recession will be those that have a more clearly differentiated position in the network economy. These operators will have identified where their particular strengths are in the telecoms value system and will be exploiting that area to the fullest. Fixed and mobile network convergence monitoring has been strong in terms of business won over the past year and new product announcements. This includes monitoring of signaling and media on converged transport networks. Suppliers added support for Gb/IP, IuFlex interfaces and A-interface over SIGTRAN for real-time, end-to-end visibility of services running on mobile networks. In the mobile backhaul, Carrier Ethernet is becoming more prevalent and CSPs are making investments to monitor IP services over gigabyte Ethernet links. Demand for service management software is attracting the interest of more stakeholders in the business in addition to the traditional network operations group. Customer care, quality, and product management organizations are applying pressure to the operational groups to get better reporting of service quality and overall customer experience of complex services. Demand is increasing to deploy software that can measure and precisely identify the customer experience and how each service is performing from the access terminal to the content application server and all connection points in-between. CSPs want to introduce more services in shorter time periods. If the users first impression of the service is poor, the new service will fail and negatively impact the CSPs brand identity. Services offered on 3G networks will put further demand on service assurance investments because of new protocols, multi-domain service enablers, and increasingly the entry of third party content providers that are introduced into the telecommunications value chain. The service assurance market has been consolidating for both established suppliers as well as niche segments within the sector over the past four years. Table 1 provides a list of acquisitions from
47

2004 through the first quarter of 2009. We have estimated revenue where public data is not available. Estimating revenue then allows us to generate a price to revenue ratio. JDUS, Spirent, Tektronix, and Tollgrade have all made one or more acquisitions in the probe market over the past three years. IBM acquired Micromuse and Vallent to propel itself into the top market share position. Smaller suppliers in high growth segments have opted to sell their business as market dynamics shift more influence to larger established suppliers that bring not only product but professional services to handle more complex deployments.

Table 1: 2004-2009 Acquisitions in the service assurance market

Transaction value ($ M) $490 $17 $56 $4 $37 $1,350 $260 $93 $350 $33 $760 $97 N/A $70 $75 $865 N/A $70 $740 $240 $27 N/A $16 N/A $12 $1,600 $205 $730 $2,850 $100 $20 $3 N/A N/A $28 $3 N/A N/A Price Revenue Multiple 3.0 1.1 2.5 3.5 1.3 1.6 4.3 2.2 2.6 4.1 1.7 8.1 N/A 1.6 1.7 5.4 N/A 7.0 3.7 N/A 2.7 N/A 3.2 N/A 1.2 15.7 2.2 2.7 2.6 10.0 3.3 1.4 N/A N/A 1.9 2.0 N/A N/A
Date 29-Jun-2004 20-Jul-2004 20-Aug-2004 14-Sep-2004 22-Oct-2004 18-Nov-2004 21-Dec-2004 10-Jan-2005 7-Apr-2005 8-Apr-2005 29-May-2005 26-Jul-2005 11-Aug-2005 22-Sep-2005 2-Dec-2005 21-Dec-2005 4-Jan-2006 23-Jan-2006 5-Oct-2006 1-Nov-2006 6-Nov-2006 28-Nov-2006 3-Jan-2007 2-Apr-2007 31-May-2007 17-Sep-2007 20-Sep-2007 23-Sep-2007 15-Oct-2007 30-Oct-2007 22-Nov-2007 10-Dec-2007 13-Feb-2008 11-Mar-2008 2-Apr-2008 21-Apr-2008 15-Oct-2008 8-Apr-2009 Tektronix
Buyer SupportSoft Tekelec Opnet Watchmark-Comnitel Warburg Pincus EMC Concord CA Micromuse JDSU Cisco Anritsu Vista Equity Partners Fluke IBM JDSU Spirent IBM Vista Equity Partners Tektronix IBM Symmetricom Ventyx Tollgrade HP Netscout ARRIS Group Danaher EMC InfoVista TTI Telecom Arbor Networks Ascom EXFO Keynote Novell Tektronix Core Networks Steleus Altaworks ADC's Metrica SAIC Telcordia SMARTS Aprisma Concord Quallaby Acterna Sheer NetTest MDSI Visual Micromuse Casabyte SwissQual MRO Software Indus Minacom Vallent QoSmetrics
Seller Inet Technologies
Revenue
$106.0 $15.0 $22.0 $1.0 $28.0 $850.0 $60.0 $43.0 $135.0 $8.0 $440.0 $12.0 $94.0 $45.0 $44.0 $160.8 $10.0 $10.0 $200.0 N/A $10.0 $55.0 $5.0 N/A $10.0 $102.0 $95.0 $271.0 $1,110.0 $10.0 $6.0 $2.0 N/A N/A $15.0 $1.5 N/A $35.0
MDSI combined with Indus Broadband Test Div of Teradyne OPSWARE Network General C-COR Tektronix Voyence Accellent Telesens LLC Ellacoya Networks Argogroup Brix Networks Zandan Managed Objects Arantech
Source: Analysys Mason (Revenue is either publicly reported or estimated by Analysys Mason)
Market Definition
Market definition
Figure 29 below illustrates the 25 functional categories of OSS telecom grouped under their major segments: service assurance, service fulfillment, billing, customer care, service delivery platforms and network management systems. Service assurance consists of five sub-segments: service management, fault and event management, performance monitoring, workforce automation, and probe systems. Figure 29: Analysys Mason supplier market segments
Service Delivery Platforms Charging
Billing Rating & Pricing Partner & Interconnect Business Optimization Mediation
Customer Care Customer Interaction CRM
Service Fulfillment Order Mgt Inventory Activation
Service Assurance Service Mgt Fault & Event Performance Workforce Automation Probe Systems
Content Mgt Telecom Apps Server Device Mgt
Subscriber Mgt Eng Tools
Network Management Systems Mobile Residential Broadband Middleware Source: OSS Observer Business Data Services PSTN
Service assurance components will monitor the signaling and media network and collect events and performance data from data center, transport, aggregation, and access networks to provide network operators with overall network performance, fault detection, and troubleshooting capabilities. Figure 30 provides a graphical representation of how service assurance systems are changing to focus on the customer and service, not just the network. The data model or relevant information that provides an abstraction layer of how a service is performing is labeled as Service Management in the blue rectangle. This software is provided as a commercial off-the-shelf product or is developed by the CSP internally. Software adaptors are required to collect data from the service assurance and service fulfillment systems to analyze and assess how the network, application servers, and clients are operating to deliver a specific service to a set of customers. This data can be made available
50

Market Definition
in the form of reports to network operations, engineering, IT, network quality, and customer care groups inside the CSP. Figure 30: Service assurance components and relationships to other telecommunication software systems
Fault and performance systems will interface directly with the network elements or the EMS systems provided by the equipment manufacturers. Probe systems will operate in a non-intrusive mode to collect all signaling and media data that is switched or routed in the network at critical points in the infrastructure. Active probes will inject sample traffic into the network and then analyze the results against performance indicators to determine network quality. The service management layer provides an abstraction layer for data coming from the network and correlating data from adjacent service fulfillment, customer care, and billing systems. The importance of service assurance components to customer care organizations will increase over the forecast period. QoS for applications that will be delivered over a converged network will require more visibility into new types of access technologies and customer premise domains. Probe hardware and software agents will move further to the edge of the network where most problems originate. Establishing voice, video stream, or data flow in the IP network involves session initiation at the control plane. Assuring MPLS, IMS, and other control layer technology connection set-up will be equally as important as isolating faults and predicting congestion after the session has been

51
Market Definition
established. In order to establish session control verification, service assurance software must be capable of collecting data from many different network domains to warranty the service. Today, performance-monitoring systems are utilized to provide actionable data to operational staff. In wireless access networks, PM systems are utilized to assist in optimization analysis. Data collected on drop rates, blocked calls and other data related to congested cell sites are key performance indicators that help operators determine where network performance is unacceptable. Capacity planning tools provide engineers with the ability to assess cell-site capacity by linking inputs from historical PM data collection, which can then be used to reconfigure cells. The end goal for most network operations and customer care organizations is to achieve a consolidated view of the customer experience. Most network architects and engineers struggle with a solution due to constraints imposed by off-net network traffic. At the root of the issue is the inability to access data inside the customer premise. In many cases, the access device is not visible to the operations groups so alternative solutions have been implemented, such as drive testing in the mobile market, roaming test sets, selective deployment of non-intrusive hardware probes, and installation of agents on end user devices. Each system has its strengths and weakness, both technical and economic. Initiatives centered on a consolidated view of the customer experience fall into the service management segment. This segment of the service assurance market has the most potential for suppliers as the array of services and network technologies proliferate.

Market Definition
Probe systems Probe systems are a combination of hardware and software. Hardware devices will be put into the network to either passively monitor signalling and data sessions or remotely test specific types of technology. Figure 31 identifies the monitoring points in the network and the types of applications that will utilize circuit switched and packet data transactions in the signaling and media layers. Figure 31: Probe based monitoring system collection and application reporting
Remote Remote Testing Testing Customer Customer Care Care
Quality of Revenue Revenue Quality of Service Assurance Assurance Service
Data Collection & Data Collection & Analysis Data Collection & Analysis Analysis
HSS HSS
P-CSCF PDF I-CSCF S-CSCF
Diameter
SLF
BGCF
MGCF
SIG G/W
Signalling
P
MRFC
SS7 SS7
SIP
SIP
H.248
IP Network
P
PSTN
Access and Transport Network

Analysys Mason has identified the following subsystems in the probe systems market: Remote test systems use dedicated hardware to make intrusive tests remotely in testing new access networks and responding to reported problems. Passive probe systems use dedicated hardware to passively monitor network trunk links. Principally used to monitor signaling protocols and media sessions.

Market Definition
Active probe systems use hardware or software agents to simulate voice, video and data of end users or applications. Data collection systems coordinate measurements across multiple probes and provide aggregation and correlation of measurements. Reporting and presentation user interface: session trace using ladder diagrams, full protocol decode, detailed network analysis and visualisation, service impact, and customer SLA data provided via a web interface or Windows / Unix client desktop.
Fault and event management Fault and event management systems interface with the network elements and element management systems supplied by equipment manufacturers. Millions of events are processed per day. Downstream events not pertinent to problem isolation will be filtered in order to isolate and attempt to pinpoint the cause of a problem. Traditionally, programers write rules in the software to ignore the majority of superfluous events that would otherwise flood the console and distract operators from focusing on the network outage. A new breed of fault and event management systems applies more automated network correlation logic, based on their knowledge of the topology and logical layer connectivity. The value of a fault management system is measured by its ability to reduce the time to resolve a problem in the network. Service management Service management is best defined as the software systems that link customers with their own individual services. Service management systems enable CSPs to generate granular reports by customer and service to validate service level commitments. Integration cost is high for service management projects because data must be collected from different network domains and legacy systems to construct a model on how well or poorly a service is performing. As a result service management systems depend on adapters and gateway interfaces to collect large sources of network, system, and customer data to complete a representation of each service and its expected performance by customer segment. Performance monitoring PM systems collect a continuous set of circuit-switched and packet data from the network elements and element management systems supplied by equipment manufacturers. SNMP polling, TL1, and other protocols are used to communicate with network elements or domain specific applications to collect real-time or historical data. Large amounts
54

Market Definition
of data are aggregated and used by other OSS and BSS systems to help plan network capacity requirements and assure that the network is exceeding minimum service performance parameters. Most commercial systems provide reports for operations staff. The value of a PM system is measured on its ability to report on usage trends, alert operators of service degradation, and provide raw data that can be used to measure service level management. Workforce automation WA software is used to track incidents resulting from service disruption and effectively dispatch field resources. Centralized WA software is used for complex problems that require the dispatching of a technician. WA manages the process of opening job tickets, matching skill sets, and coordinating the dispatch of technicians for planning and problem resolution. WA software will constantly monitor incoming tasks and match it with availability of technicians based on location, skills, and availability of spare parts and inventory resources. A close coupling exists with service assurance and CRM systems. Advances in self care software have resulted in software systems that enable users to actively diagnose problems and coordinate the escalation of problems to NOC operations.

Suppliers
Service assurance suppliers

We provide both our analysis of suppliers in the service assurance market and a rating table that corresponds to each suppliers position in the market (table 2). Leadership qualities include market penetration by region, telecom segment, and application area. Relative market strength is categorized as either market leader; significant player or present. Vendors we have designated as leaders in a particular market segment or sub-segment are those that attract the most revenue in the segment and that we predict will continue to do so. Those we judge to be significant have recognition in the indicated segment due to significant sales. Those we have indicated as merely present offer products in the indicated segment, but we have no indication of significant sales.
Accanto
Accanto is not a new start-up to the sector but rather the merger of the Telecom Protocol Products Group of Sunrise Telecom and the Scandinavian professional service group, LTE Innovations. Its Traffic Analysis and Monitoring System (TAMS) and Mobile X-Ray fit into our segment of the probe system market. The focus of its solution - branded as Customer Service Assurance (iCSA) - is targeted at real-time mobile data management. Revenue last year was less than $10M. The company is putting an emphasis on working with larger channel partners to gain access to new markets. It announced Telefonica O2 Germany in 2008 and recently announced a win at Digicel.
Agilent
Agilents Network Systems division (NSD) business has been in a long term decline for the past three years. This was mostly due to declines in the AcceSS7 business where Agilent is the incumbent supplier to almost all tier-1 CSPs globally for the monitoring of their SS7 networks. Agilent is developing a common platform and plans to transition its customer base forward when its customers migrate their networks to support converged services. Its broad base of customers includes nearly every tier-1 and tier-2 CSP in the global market. Some growth to support next generation technologies and services has offset declines in the access7 product line. This includes new customer deployments across the full range of wireless technologies (GPRS, UMTS, etc) as well as continuing growth in IMS, VoIP, and in IP core in general. The EMEA and APAC regions supported growth in the NgN business.

Suppliers
AIRCOM International
AIRCOM International is a diversified supplier of radio planning, network optimization, and performance monitoring solutions. AIRCOM has a respectable position in Europe and Asia. As AIRCOM expands its business from radio planning, performance and service quality becomes a logical progression to achieve its growth objectives. IT has a high ratio of services to product deployments relative to most of the other suppliers discussed in this section. Optima provides network performance monitoring and quality metrics that can be used to support service management projects.
Amdocs
Amdocs has a leading position in the WA segment. Its position is a result of the acquisition of the Clarify assets from Nortel in 2001. Amdocs trouble-ticketing software, a component of Amdocs CRM, is used to help speed up the companys response to customer reports about service problems and reduce the amount of time customers spend on the phone with the CSRs. Recent wins include Telkom South Africa. Amdocs has a diverse customer base with large deployments in the North America and European markets. Most notable deployments include BT and Telstra.
Anritsu
Anritsu is the number three supplier in the passive probe system market behind Agilent and Tektronix. Annual revenue is estimated at $30M in 2008. Anritsus Service Assurance division has achieved a solid position in the mobile market for GSM and GPRS probe system network and service monitoring with large scale deployments in both NA and EMEA. Customers include AT&T wireless, VimpelCom and Vodafone Germany. The company has at least eight UMTS system deployments. Anritsu has strong relationships in Japan and other countries within the Asia Pacific region.
Arantech
Arantech specializes in assessing mobile consumers overall experience of voice and data services. Its product touchpoint provides a complete system for data collection, aggregation, and reports by cell site, location, customer group, and handset type. Arantech is now part of Tektronix Communications. It will continue to operate as a stand-alone line of business within the Tektronix Communications Network Intelligence Solutions portfolio. Arantech has deployments at more than 30 mobile operators worldwide, serving some 140 million subscribers. Customers include T-Mobile and Vodafone.
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Suppliers
Astellia
Astellia is a passive probe supplier based in France. Its OCEAN probes are used for QoS measurement, real time surveillance, troubleshooting, and non-intrusive monitoring for protocol analysis. It grew its business 20% YoY. It signed contracts with 17 new operators in 2008. The international market accounted for 66% of company sales last year. It is leveraging its longtime relationship with Orange to grow its international business.
BMC
BMC is the leading software supplier of trouble ticketing and help desk software. The Remedy set of products provides incident and problem tracking, manages SLA violations, and links separate help desks into a centralized system. BMC is deployed at AT&T, Brasil Telecom, Cox, TeliaSonera, Time Warner, Vodafone and other CSPs around the globe.
CA
CA is increasing its focus in the telecommunication market after several years of maintaining a low profile. Several acquisitions in the past few years have strengthened CAs value proposition in selling solutions to the operations and IT groups within CSPs. We would include Concord and Wily as acquired assets that make CA a more credible supplier in the telecommunications market. CA e-Health contributes to its market leadership in this sector. The Introscope product has been growing quickly and is positioned well for CSPs expanding activities in the application performance monitoring area.
CellVision
CellVision has a strong value proposition for any CSPs concerned with mobile data coverage and capacity. Its mBOSS solutions visualize existing and future network coverage and outages on web-based map interfaces designed with the end-user in mind. Department handovers are made simple with accurate geo-coding of coverage complaints. Customers include tier-1 European mobile CSPs.
EMC
EMC SMARTS has enjoyed a technology lead against most competitors that has allowed EMC to continue to maintain its market share position in the telecommunications market despite its low profile within a larger software division and association with a leading storage supplier. The SMARTS Codebook algorithms match events to problem signatures and
58

Suppliers
has been designed to meet the demands of scalability. EMC SMARTS is deployed in many tier-1 CSPs in NA and Europe. It is a strategic software supplier to AT&T for U-verse service and BT.
Empirix
Empirix is privately held. We estimate Empirix service assurance business unit revenue in 2008 was $22 Million. Its Hammer XMS products are used by CSPs to monitor network performance of VoIP and IMS networks. Empirix product platform was developed a decade earlier originating from Hammer Technologies in 1991 and then acquired by Teradyne in 1995. Its technology provides automated testing for call center voice applications. It has the ability to simulate thousands of calls to test VoIP performance and isolate system, network, and application failures before the problems impact call contact centers. Empirix has both a passive and active probe system.
EXFO (Brix)
EXFO acquired Brix Networks on April 2, 2008. Brix revenue is classified in the segment we define as active test monitoring. Demand for its products has come from the business data services and the residential broadband market. The network deployments to support VoIP, IPTV, and MPLS have created strong demand for its solution in the LEC, IXC, mobile, and MSO segments of the market in NA, Europe, and AsiaPacific. Customers include Bell Canada and Sprint Nextel. Brix has also been able to sell its solution to mobile operators for backhaul wireline monitoring.
Harris Stratex
Harris Stratex offers a broad range of wireless products, solutions and services to mobile and fixed telephone service providers, private network operators, government agencies, transportation and utility companies, public safety agencies and broadcast system operators. Its NetBoss product line supports the fault, performance, service management, activation, and billing mediation of SDH, SONET, ATM, Frame Relay, Wireless (GPRS,GSM, UMTS), DSL and emerging IP broadband access technologies. Harris Stratex has a strong position in the Middle East and South American markets. Batelco, Claro, Telmex and Zain (formerly MTC) have become important customers of NetBoss. Direct relationships account for 85% of the business with the remainder coming from the former parent company Harris Corporation. Service assurance market review
Suppliers
HP
HP is a leading supplier in the telecommunication software market. Its product components span IT and telecommunication infrastructure supporting fixed, mobile, and media service providers. HP has a diversified portfolio of products that span service assurance, service fulfillment, billing, mediation, and the SDP segments. HP has been more successful in EMEA, CALA, and APAC than in NA. HP has developed highly specialized service teams skilled in bringing solutions to market for service quality management, convergent charging, and service activation. The strength of the TeMIP platform is its multi-domain capabilities in PSTN, IP, mobile radio access, and transport networks. HP has extended support for standards via web services northbound interface, MTOSI, and OSS/J adapter enhancements, and virtualization to maximize hardware resource utilization. Publicly announced wins in 2008 include Mobilnet Bulgaria, Movilnet, SFR, TeleDanmark and Vodafone Germany.
IBM
The IBM Netcool asset is used to help CSPs consolidate software systems within its own portfolio of products but also to integrate third party products. IBM has also been successful in building out strong partnerships with the network equipment suppliers (Alcatel-Lucent, Cisco, Nortel) to seed Netcool into the technology upgrade cycles for projects that are led by domain expertise from NEMS. IBM is well positioned to take market share from weaker competitors as it leverages its position of strength in the managed service business. IBM is also clever in developing opportunities that benefits the Tivoli Netcool business. The Bharti revenue sharing model effectively removed most competitors from the deal. IBM has been able to successfully transition the telecommunication software businesses it acquired into the Tivoli business unit and still maintain its focus on the telecommunication market without much disruption to the large existing Micromuse and Vallent customer base. IBM is present in the operation centers of most major fixed and mobile operators globally.
IneoQuest
IneoQuest is a supplier of quality and service assurance solutions for IP Video. It provides hardware, software and services to telephony, cable, broadcast and network equipment customers. These products are used to design, build, deploy and manage IP video networks. Customers include Orange, Rural Telecom and SureWest. Service assurance market review
Suppliers
InfoVista
InfoVista is a supplier of IP performance monitoring solutions. It is one of the few remaining independent suppliers that continue to maintain its focus on the performance monitoring market. InfoVista has a diverse customer base that comprises incumbent fixed carriers, cable operators, and mobile CSPs. It is a global supplier with a solid base of customers in Europe and NA. South America, Asia-Pacific, and the Middle East are growing faster from a smaller base of revenue. Major customers include AT&T, Bell Canada, BellSouth, Brasil Telecom, Cable & Wireless, Colt Europe, Deutsche Telekom, Telefonica, Telewest, T-Mobile, Telstra, and Vodafone. InfoVista has been successful in providing commercial performance monitoring solutions to CSPs focused on managing business services. IXCs in North America and Europe offering managed IP services have selected the InfoVista foundation for managing IP-VPN services. InfoVista completed the acquisition of privately held Accellent on November 22, 2007. Accellent focuses on the application networkmonitoring segment. VistaInsight for Networks is targeted at Carrier Ethernet and IP networks. In addition to supporting CSP business data services the solution also appeals to mobile operators who are implementing low cost Carrier Ethernet backhaul networks. InfoVista also supports a wide selection of IP MPLS switched ethernet and routing equipment from ADVA, Alcatel-Lucent, Huawei, Juniper, Nortel, and others.
Ixia
Ixia is a probe supplier for IP-based infrastructure and services. Ixia generates 16% of its revenue from CSPs. The focus of its solutions is in the triple-play broadband segment and carrier Ethernet services. IxRave provides service verification to meet end-user quality of experience needs and to do on-demand troubleshooting of customer service requests. IxRave, which includes both hardware at the core and distributed software agents at the edge, extends across the network and into the customer premises and can reside on numerous devices. The customer base is primarily in NA and Western Europe.
JDSU
JDSU has a strong position in NA and Europe with its NetComplete, NetOptimize, and QT series xDSL probes. JDSU is well positioned to support CSPs offering triple play services in a broadband network. It specializes in xDSL and FTTx remote testing. It has a diverse set of probes in different form factors to collect data from the core network, access, and fiber/copper networks to support engineering, operations, and provisioning departments. JDSU has developed a suite of software
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Suppliers
applications targeted to meet the needs of t groups responsible for planning, optimizing, deploying, and isolating problems in a broadband network. It has a minor position in the active probe mobile market as a result of its acquisition of Casabyte two years ago. Most of this business comes from NA incumbent CSPs. Kapsch CarrierCom Kapsch CarrierCom AG, is part of the Kapsch Group, specializes in voice and data communications solutions for fixed and mobile network providers. Kapsch CarrierCom provides consulting, integration, and installation services. Its product DataXtender is a business intelligence tool, which compiles and processes data from different systems at the network operator in near real-time. Customers include Telecom Austria, T-Mobile and other CSPs in central Europe.
Keynote (SIGOS)
Keynote Systems has three divisions: Internet test and measurement, customer experience test and measurement and mobile test and measurement. The Mobile category consists of its on-demand mobile monitoring and testing services as well as the SIGOS SITE systems sales. Mobile Device Perspective measures the availability and performance of wireless data services from actual mobile phone handsets. Services currently measured include core wireless data network technologies such as (GPRS/EDGE/UMTS/HSDPA, CDMA 1xRTT/1xEV-DO, and iDEN), Web browsing, text messaging, picture messaging, streaming video, instant messaging and walkie-talkie features. Customers include AT&T, SAVVIs, Sprint Nextel and Vodafone.
Motive
In October 2008, Alcatel-Lucent acquired Motive, Inc., a WA supplier for broadband and mobile services. The Motive team (280 employees) now forms a product group within the Fixed Access Division of Alcatel-Lucent. More than seventy-five of the worlds leading communications providers use Motive software, including AT&T, Bell Canada, BT, Deutsche Telekom, SingTel, Softbank BB, Swisscom, Telecom Italia, Telefonica Brazil, and Verizon. Motive is the leading supplier of WA solutions to CSPs offering services over an xDSL broadband access line. Motive generated revenue of approximately $60M in 2008.
Mycom International
Mycoms NIMS-PrOptima is a suite of products that enable CSPs to view multi-technology, multi-vendor network across multiple domains spanning GSM, GPRS, UMTS, CDMA, IP, ATM networks. Performance
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Suppliers
Management, Network Optimization, Service Quality Management and SLA Management capabilities are delivered on the same management platform. It also offers engineering and implementation services such as network design, optimization and radio access planning through its Professional Services organization. Customers include Orange, O2, Saudi Telecom, SFR, SK Telecom, Saudi Telecom and Vodafone.
NetScout
NetScout is a supplier of solutions that we classify in the passive probe systems market. Its nGenius product portfolio is found in data centers and enterprise networks to capture, analyze, and manage performance of IP connections. In the mobile segment where NetScout has had strong growth the solution focuses on monitoring and troubleshooting 3G data services that include streaming video, SMS, MMS, and ring tone downloads. Gigabit Ethernet nGenius Probes can be deployed on the Gn, Gi, and Gp interfaces within the operators UMTS infrastructure. Data from the probes is collected and sent to nGenius Performance Manager for viewing, analysis, and reporting.
Nexus Telecom AG
Nexus Telecom is a supplier of probe and switch-based performance and service management systems, as well as provider of high performance simulation test-tools. Nexus Telecom has established a respectable position in the European mobile market despite competition from much larger competitors. It has also been successful in winning business in more remote markets that include Brazil, Chile, Hong Kong and Korea. Nexus Telecom has sold successfully to tier-1 CSPs in Europe, NA, and ASPAC. Revenue from mobile operators contributes 75% of total revenue. Cingular, Orance, TIM, T-Mobile and Vodafone are the most notable customers.
Polystar OSIX
Polystar OSIX is a passive probe system supplier with headquarters in Stockholm, Sweden. It is part of Polystar Instruments AB, which has business units in the test, instruments, and electronics markets. Polystar and OSIX merged in Q4 2005. Polystar AB has 120 employees world-wide with the majority of its 75 customers in the EMEA and APAC regions. The probe solution supports signaling network monitoring, statistics, quality assurance, real-time xDR-generation, and operational support systems for fixed, mobile, VoIP, and NGN networks. Mobile is a strong segment accounting for almost half of probe revenue. Customers include MTT in Russia and T-Mobile Austria.
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Suppliers
Spirent
Spirents Service Assurance division derives the majority of its revenues from tier-1 wireline providers in NA (AT&T, TELUS, and Verizon). The focus is on DSL line testing and reducing costs in escalating trouble tickets and avoiding truck rolls. Spirent has a large base of customers using its REACT product that include Qwest, TELUS and Verizon. TELUS has deployed REACT and test probe devices in the central office and in its fiber to the node premises. TELUS is also deploying IPMax probes along with SmartSight. Expansion into new markets will be driven by its 1GB and 10GB Ethernet probes for managing mobile back haul and business services. The Ethernet probes (QoS Scopes) have enabled Spirent to expand its customer base outside North America.
SRIT (OSI)
Sobha Renaissance Information Technology acquired from Agilent Technologies Objective Systems Integrators division in August 2007. The OSI acquisition added approximately 150 new customers to SRITs base, many of them tier-1 service providers from around the world. OSI provides solutions in the service management, fault management, and performance monitoring market. Its products include NetExpert and the recently launched NEON which is targeted at the burgeoning market for customer experience management solutions.
Tekelec
Tekelecs Integrated Applications Solution (IAS) provides comprehensive real-time visibility of traffic traversing hybrid TDM and IP networks. IAS encompasses data acquisition, mediation and applications and gives the operator a set of tools to measure and manage traffic and events on the network in real-time and historically. IAS is a distributed and scalable system with data collection integrated with Tekelecs network elements or from non-intrusive probes connected to the operators network. A single probe can support IP protocols, wireless access protocols and PSTN protocols. xDRs are continuously generated network-wide, in real -time and without sampling, for all session and call attempts and transactions by intercepting and correlating protocol messages. The stream of xDRs is further correlated, aggregated and filtered to generate key performance indicators (KPIs) and key quality indicators (KQIs), traffic statistics, counters and threshold-triggered traffic and service alarms. NA accounts for the majority of its business followed by EMEA.

Suppliers
Tektronix
Tektronix is the leading supplier in the passive probe systems market. It continues to gain market share against other suppliers in the probe systems market. Geoprobe is strong in the mobile market has been introducing new products to address the convergence of voice and video in the fixed line market. Tektronix has deployments for UMTS monitoring at AT&T Wireless, Vodafone and other tier-1 CSPs. Tektronix was selected by BT in 2006 to manage the transition of its circuit switched voice to an all IP network under its 21CN initiative. Tektronix acquired Minacom on November 27, 2006 to extend its probe monitoring to include active testing. Most recently Tektronix acquired privately held Arantech (see comments on Arantech).
Telcordia
Telcordia develops, markets, and sells service creation, fulfillment, and assurance software to wireline, mobile wireless, and cable customers globally. Telcordia has a broad portfolio of products that support services over a circuit switched and packet network. Telcordia is among the leaders in service assurance. Telcordia has a large established footprint in the NA wireline WA segment with its Force product and in the fault management segment with NMA. The growth area where Telcordia is applying additional resources is in the service management segment with Service Director and Device Director. These new products are helping Telcordia win business from mobile CSPs around the world. Customers include T-Mobile USA, Telefonica and Verizon.
Tollgrade
Tollgrade provides remote testing solutions for circuit switching and broadband services. Its overall business has been flat for the past three years. It is in a unique position in the cable market because relatively few probe suppliers have pursued opportunities in this area due to weak demand. Strong growth in HSD and now digital telephony is increasing demand in the cable sector. The introduction of voice over the packet network is generating more demand and more sophisticated management solutions to assess service quality. Tollgrade is viewed as the incumbent supplier in the MSO market.
TTI Telecom
Team Telecom International (TTI) is a supplier of service assurance software and services to wireline and wireless CSPs. TTI Telecoms Netrac products cover a wide range of OSS functionality, focusing on performance management, fault management and service
65

Suppliers
management. TTI won new business at several tier-1 CSPs in EMEA and North America and maintain its relationships with NA CSPs despite business pressure to consolidate systems. TTI has turned most of its attention towards the service assurance domain. The majority of its development in the past year has been in the performance monitoring and service management segments. TTI has maintained its focus in the telecommunications market and continues to release new products including Netrac FaM 10 Cruiser and Netrac Studio. Netrac FaM 10 for fault and event management expands its events processing capabilities and adds a new telecom-oriented graphical interface.

Suppliers
Service assurance suppliers

Table 2: Comparison of service assurance suppliers
Broadband

EMEA
CALA
Company Accanto Agilent Aircom International Amdocs Anritsu Arantech ARRIS (C-Cor) Ascom Astellia BMC CA ClickSoftware Danaher (Fluke) Digital Fuel EMC Empirix Evidian EXFO (Brix) Harris Stratex HP IBM IneoQuest InfoVista Ixia JDSU Kapsch CarrierCom Keynote (SIGOS) Managed Objects Motive Mycom International Netscout Nexus Telecom AG Nokia Siemens Networks Oblicore Oracle Polystar OSIX Radcom Spirent SRIT (OSI) SupportSoft Symmetricom (QoSmetrics) Tekelec Tektronix Telcordia Tollgrade TTI Telecom Ventyx (MDSI) ViryaNet
ROW
NA

Source: Analysys Mason & company briefings = has a presence in the market = has a notable presence in the market = market leader
67
Business

Overall
Mobile
PSTN
Recommendations
Recommendations
Despite a difficult economic environment, service assurance investments are needed to support both new technology deployments and the services delivered to mobile and fixed subscribers. Service quality and customer care organizations have become more influential in the types of systems deployed to support their requirements. Operations are still tasked with implementation and maintaining the core components of the assurance architecture but increasingly pressure to make reports available outside the network operation center is paramount to respond to customer and quality issues. Assurance solutions must meet the technical challenges of managing new devices, decoding new protocols, and correlating complex event streams. Next generation assurance software must also associate relationships between the service and the customer. CSPs should avoid the short term drivers of managing the next set of technologies and instead focus on the long term business processes needed to provide superior customer service. In order for a business to assess the customer experience, each interaction must be managed across each part of the network to adequately assure the QoS delivered. CSPs must implement a plan to phase out silos that tend to promote insular behavior that is not conducive to supporting the customer. CSPs should directly evaluate the business impacts from the fragmented systems they deploy. CSPs are allowing their fragmented approach to adversely impact their revenue and increase their costs. The traditional approach of installing autonomous systems that support a single service will not work. Instead, CSPs must design and implement a service assurance system that is capable of crossing many different domains. The data must be available to many departments that include operations, engineering, product marketing, and customer service. CSPs will need to coordinate resources across many access, transport, and IT network domains. New services will require incremental investments in new access technologies but more importantly an understanding of the impact on users perception of service quality. In our view if CSPs hope to have any success in the marketplace with new service deployments, investments in the management systems must support new business workflows. The independence at lower levels of the organization inhibits problem resolution and yield higher incident cost. Vendors should enhance their products to support service convergence integration. This includes integrating CRM with order handling, fulfillment, and assurance systems. It includes service aware network analysis
68

Recommendations
that links the customer to what the network is capable of delivering. It includes customer self-care through multiple access points to the same information regardless of the method.


Service Assurance Market Review Jun09

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Global Telecom Software Market Analysis

Service assurance market review

Service management forecast by region .............................................29

Competition in developed countries

Service assurance market review

Service assurance market review

$2,000 $1,500 $1,000 $500 $Assurance (CAGR 5%)

Source: Analysys Mason

Service assurance market review

Tektronix 8.4% Agilent 7.9%

HP 7.7% Telcordia 4.6%

Source: Analysys Mason

Service assurance market review

Service assurance market review

Service assurance market review

Source: Analysys Mason

Service assurance market review

Figure 4: Service assurance product-oriented professional services market share

Source: Analysys Mason

Service assurance market review

Application segments forecast overview

CY2008 $864 $525 $221 $347 $318

CY2009 $819 $514 $243 $339 $306

CY2010 $850 $527 $263 $340 $315

CY2011 $916 $544 $294 $369 $339

CY2012 $990 $566 $346 $408 $378

CY2013 $1,058 $590 $418 $451 $422

Source: Analysys Mason

Service assurance market review

Service assurance market review

Figure 6: 2008-2013 Global service assurance forecast by telecommunication service

CY2008 $986 $412 $422 $454

CY2009 $999 $361 $408 $454

CY2010 $1,075 $320 $419 $482

CY2011 $1,196 $280 $446 $540

CY2012 $1,333 $246 $479 $629

CY2013 $1,518 $214 $512 $695

Source: Analysys Mason

CY2008 $939 $114 $915 $307

CY2009 $885 $116 $897 $324

CY2010 $899 $122 $926 $348

CY2011 $955 $131 $992 $384

CY2012 $1,042 $141 $1,079 $424

CY2013 $1,134 $152 $1,178 $475

Service assurance market review

Source: Analysys Mason

Service assurance market review

Probe systems market share

Agilent 20% Netscout Tekelec 4% 5% Spirent 7%

Service assurance market review

$Probe (CAGR 4%)

Source: Analysys Mason

Service assurance market review

CY2008 $397 $225 $112 $130

CY2009 $385 $197 $107 $131

CY2010 $417 $179 $119 $136

CY2011 $467 $156 $137 $156

CY2012 $515 $139 $148 $188

CY2013 $593 $106 $159 $201

Service assurance market review

Source: Analysys Mason

CALA (CAGR 4%) EMEA (CAGR 4%) APAC (CAGR 10%)