Service Assurance & Virtualization Investor Relations€¦ · 08.04.2016 · instrumentation for monitoring and service assurance? • What is the current and potential spend on

©2015 NETSCOUT ° CONFIDENTIAL & PROPRIETARY

Service Assurance & Virtualization

Investor Relations

Anil Rao, Senior Analyst, Analysys Mason Dr. Vikram Saksena, Office of the CTO, NetScout Systems, Inc.

April 8, 2016

April 8, 2016

Agenda

© 2016 NetScout Systems, Inc. 2

• NFV / SDN – Current state of play

o Key drivers of service provider interest

o Market outlook

o Opportunities and obstacles

• NetScout’s Perspective

o NetScout’s approach and capabilities

o Early use cases

o Supporting hybrid networks

o Summary

• Q&A

Anil Rao, Analysys Mason

Dr. Vikram Saksena, NetScout Systems

April 8, 2016

Safe Harbor

Forward Looking Statements:

Forward-looking statements in this communication are made pursuant to the safe harbor provisions of Section 21E of

the Securities Exchange Act of 1934 and other federal securities laws. Investors are cautioned that statements in this

communication, which are not strictly historical statements, including without limitation, the statements related to

product development plans and related customer adoption, constitute forward-looking statements which involve risks

and uncertainties. Actual results could differ materially from the forward-looking statements due to known and unknown

risk, uncertainties, assumptions and other factors. Such factors include slowdowns or downturns in economic conditions

generally and in the market for advanced network and service assurance solutions specifically; dependence upon

broad-based acceptance of the Company’s network performance management solutions; the presence of competitors

with greater financial resources than ours and their strategic response to our products; lower than expected demand for

the Company’s products and services; and the timely execution of key product development initiatives. For a more

detailed description of the risk factors associated with the Company, please refer to the Company’s Annual Report on

Form 10-K for the fiscal year ended March 31, 2015 and the Company’s subsequent Quarterly Reports on Form 10-Q,

which are on file with the Securities and Exchange Commission. NetScout assumes no obligation to update any

forward-looking information contained in this communication or with respect to the announcements described herein.


April 8, 2016

Key Investor Questions to Answer Today


• What is virtualization and why does it matter?

• How might service provider deployment of virtualized network architectures

evolve?

• What parts of the network will likely continue to require traditional

instrumentation for monitoring and service assurance?

• What is the current and potential spend on virtualized probes over the

coming years?

• What is NetScout’s approach to virtualization?

• What are the benefits of NetScout’s technology in supporting virtualization

initiatives and what are the initial use cases?

• Where can NetScout’s virtualization capabilities be applied going forward?

NBED Title in sentence case

© Analysys Mason Limited 2016

NETWORK VIRTUALISATION AND

SERVICE ASSURANCE:

STATE OF THE INDUSTRY

ANIL RAO

8 APRIL 2016


Revenue growth expectations are fueling a focus on five areas

6

Trends behind CSP to DSP transformation Network innovation’s enabling role

Personalised, dynamic communication requirements Active identity, location, content, preferences management; matching services

Anywhere, anytime communications Elastic capacity where and when it’s needed; Cloud-based service delivery

Real-time, automated fulfilment and experience management Automated service and resource orchestration with dynamic service chaining and

integrated policy, security and analytics

Fast and flexible service innovation Automated, API-driven architecture open to third parties

CSP Communicat

ion

Service

Provider

DSP Digital

Service

Provider

Virtual

network

Existing

investments

New

opportunities

Physical

network

© Analysys Mason Limited 2016 7

NFV/SDN is the “Sixth Wave” in telecom networking

Physical to virtual, featuring:

Decoupled control & data plane

Decoupled hardware & software

Copper to fibre Synchronous

to IP/MPLS/Ethernet

Asynchronous

to synchronous

(for example, PDH to SDH) Analogue to digital

1960s 1980s 2000s 2015+ 1990s

Fixed narrowband to

mobile broadband

Source: Analysys Mason

Most CSPs

are here

Very

few

CSPs

are here

Development Early adoption Mass adoption Stable state Persistent legacy

Next wave

2-4 yrs 5-15 yrs

All physical Co-existence of physical and virtual All virtual

New waves tend to have long

development and adoption phases

7


Drivers and inhibitors for NFV/SDN

8

Key market drivers and inhibitors for NFV/SDN

SHORT TERM LONG TERM

HIGH

SCN will provide a long-term flexible, scalable vNGN platform for existing and

new digital economy services. This will require long-term transformation

(process, people and systems).

NFV and SDN COTS software immaturity is driving in-house development and

inhibiting scalable operationalisation of these technologies.

LOW

PRODUCT IMMATURITY

LOW

HIGH

TIMEFRAME IMPACT

DR

IVE

RS

IN

HIB

ITO

RS

NEW DIGITAL SERVICES REVENUE


SERVICE AGILITY

COST OPTIMISATION

EXISTING INFRASTRUCTURE

UNCERTAIN BUSINESS BENEFIT

vNGN-OSS automation and operational flexibility will reduce opex, time to market

and capture revenue faster.

Hardware, data centre and disaster recovery cost savings will be short term, but

support tactical cost-reduction business cases to secure SCN budgets in the

near term.

CSPs need to get a return on their investments in existing network infrastructure,

and everything will not be virtualised.

SCN spend will continuously compete mainly with sales and marketing for

budget and will need business case support for increasing spend (for example,

for large deployments, replacements and upgrades).



Service agility enabled by increased OSS automation is the long-

term driver for vNGN

9

15%

5%

CSPs’ NFV deployment strategy

Service-led strategy Greenfield implementation of a

new service

Lifecycle upgrade

strategy

Upgrading end of life infrastructure with

virtual network functions

Platform migration

strategy

CSP migrates infrastructure and services

onto the new NFV enabled platform


Exponential traffic growth with flattening CAPEX Network virtualisation includes:

• Network function virtualisation (NFV) – Use of cloud

computing technologies to run telecom network functions;

(eg: commercial hardware, hypervisors, virtual machines

etc)

• Software defined networking (SDN) – new architecture

enabling network programmability to dynamically route

network traffic

Network virtualisation is expected to break the Traffic –

CAPEX correlation; but the evolution to virtual networks will

take ‘many years’ (atleast 10 yrs)

With slowing CAPEX, CSPs will need service assurance to

increase network and operational efficiency to support the

growing traffic, enhance customer experience and reduce

customer churn

Service assurance spend will be driven by the need to increase

network efficiency; NFV/SDN will create new SA requirements

10

Exponential

growth of data

traffic

Flattening

CAPEX

• Network

virtualisation

• Demand for

service

assurance


2014 – Service assurance market

• The market forecast presented here is for the period 2014

– 2019;

• For the period 2015 – 2020, we expect the growth rate to

moderate to about 3% to 4%, with the SA market

accounting for about USD 3.68 billion in 2020.

[ ESTIMATE ONLY; NOT PUBLISHED]

• NFV/SDN associated spending will account for about

5% to 8% of the total SA market in 2020.

• Historically, the probes systems segment has accounted

for about 40% of the overall service assurance segment.

2019 – Service assurance market

SA for NFV/SDN is a small portion of the overall SA market

11

3081

8

Physical

Virtual

4161

94

Physical

Virtual

CAGR: 6.6%


vNGN-SA for a hybrid telecoms network Key takeaways

• The NFV evolution will be a gradual process, and the

physical network will not perish overnight

• As more network elements virtualise, new assurance

capabilities must be introduced to monitor the virtual

domain (vProbe); but end-to-end assurance is critical

• Commercial SA contracts for NFV is starting to emerge,

and more announcements are expected in 2016

New SA must provide e2e monitoring of the physical and virtual

network, and assure services delivered over the hybrid network

12


NetScout’s 5 Stages of Growth

13 ©2015 NetScout Systems, Inc.

Innovation, Belief, Staying Power, Customer Focus

1984-1991

$ 0-1 M

NetScout .1

Consulting

Projects

2001-2006

2006-2015

Next 5 yrs.

$1-$100M

NetScout 2.0

Survival

Enterprise

$100-$450M

NetScout 3.0

Leap Frog

Service

Provider

$450-$2B

NetScout 4.0

Pervasive

Mainstream

Service Assurance in the Era of Virtualized, Software-centric Networks

Dr. Vikram Saksena, Office of the CTO NetScout Systems, Inc.

April 8, 2016

April 8, 2016

NetScout Today

• Acquisition of Danaher Communications assets in July 2015 positions NetScout as the market leader in service assurance

• Global footprint in top mobile, fixed, and cable operators in 50+ countries

• Long history of software deployments in Enterprise Datacenters

• Advancing development of an integrated probing solution that brings together the technology differentiators of both NetScout and Tektronix Communications

• Successful track record in helping customers evolve through complex transitions driven by IP convergence, fixed/mobile broadband, cloud, and now .. NFV/SDN

© 2016 NetScout Systems, Inc. April 8, 2016 14

April 8, 2016

Adaptive Service Intelligence (ASI) One Software, Delivered on Multiple Platforms

SUBSCRIBER

NETW

OR

K A

PP

LIC

ATIO

N

• Real-time metadata and Key Performance Indicators (KPIs)

• On demand session trace for subscriber troubleshooting

• Optimized workflows for service triage and root-cause analysis

• Complete hardware independence

• Common data set across all platforms

Appliance COTS HW NFV vCPE

PLATFORMS


April 8, 2016

Four Pillars of a Software-centric Network

Virtualization Abstraction

Assurance Orchestration

• Efficiency • Elasticity • Lower CapEx

• Service Velocity • Innovation • Differentiation

• Agility • Automation • Lower OpEx

• High-class user experience

• Real-time Analytics


April 8, 2016

Enterprise Virtualization Engagements


• Server Virtualization

– Proven NetScout deployments on hypervisor virtual server environments

– Provides visibility into server to server communications and access to packets for detailed troubleshooting

• Network Virtualization

– Primarily in evaluation phase (e.g., labs or prototype deployments)

– Some production installations where NetScout instrumentation is deployed in the PoD or MicroSegment

• Next-Generation IT Environments

– Combined server and network virtualization will drive automation and agility in the continual deployment of services and applications

– The continuous deployment model will require continuous monitoring in real-time to ensure success

April 8, 2016

Service Provider Virtualization Engagements

• Service providers examining a range of use cases

– Mobility (IoT, e.g., Connected Cars)

– IP Voice (Voice over LTE, Cable Voice)

– Carrier-to-Carrier SIP Peering

– Business Services

• SIP trunking, Hosted VoIP

• vCPE, Managed Services

• Hosted Application Services


April 8, 2016

Our Software Strategy Delivers Exceptional

Value to Customers

• Delivering the lowest total cost of ownership (TCO) with an

optimized hardware footprint

• Providing service assurance continuity across physical and

virtual infrastructures to enable disruption-free evolution

• Extending the monitoring to the edges of the network for end-

to-end service assurance via pervasive deployment

• Improving service delivery automation

Greater Service Agility with Lower Capital and Operational Expense


20 April 8, 2016

ASI Technology Delivers Lowest TCO Optimized Hardware Footprint

Smart Data Recording

Smart On-board Processing

Smart Acceleration

5-15 times compression for longer retention, faster retrieval, and lowest storage costs

Process-then-Store model as opposed to Store-then-Process model minimizes the number of back-end servers

Intelligent I/O and packet processing technology minimizes the number of CPUs required

Least amount of hardware resources, power consumption, and rack space (Green Technology)

© 2016 NetScout Systems, Inc.

April 8, 2016

Service Assurance Continuity Seamless Monitoring across Physical and Virtual Networks

IP Backbone

Physical Gateway & Probe

IMS Core

• Consistent end to end visibility for effective service assurance

• Common ASI metadata from all probes to facilitate seamless integration at the application level Virtual

Gateway & Probe

nGeniusONE

Service Assurance

End to End Voice Call over 4G/LTE


22 April 8, 2016

Pervasive Instrumentation Extend Monitoring to the Edges of the Network

Metro Ethernet

Small/Medium Business vCPE

vPER Fabric Switch

Operator Edge

IP Core

vFW

vDNS vPER

nGeniusONE

Service Assurance

• Software probes can be deployed in places where it was not feasible to instrument before

• Expands the addressable market for NetScout

Existing Infinistream

New Soft Probe New Soft Probe


New Soft Probe

23 April 8, 2016

………………….

Critical Feedback for improved Automation Drive Lower CapEx and OpEx

VNF VNF VNF

Service & Network

Controllers

Service Orchestration Real-time

Alerts Powered

by NetScout

Service Request • Real-time performance alerts drive the Orchestration layer

• Network auto-configures without any human intervention

• Network resources can be scaled up or down dynamically to adapt to changing traffic conditions Software

Probes

nGeniusONE

Service Assurance


April 8, 2016

Summary

• Software-centric Networks is the next major evolution in networking

– Operators gain control of service creation and are able to innovate faster in response to customer and market needs

– Networks become more agile and elastic, better managed and orchestrated, lowering the total cost of ownership

• This evolution will take place over many years as operators wrestle with a myriad set of technology, operational, and organizational challenges

• NetScout is well-positioned to help customers make this transition

– ASI technology is optimized for lowest TCO

– Seamless service assurance across physical and virtual network infrastructures

– Instrumentation points can be extended to the network edge where it was not previously feasible thereby enabling end to end service assurance

– Real-time feedback for service delivery automation and just-in-time resource management to drive lower capex and opex





1984-1991 1984-1991

$ 0-1 M

NetScout .1

Consulting

Projects

1991-2001

2001-2006

2006-2015

Next 5 yrs.

$0-$1M

NetScout 0.1

Consulting

Projects

$1-$100M

NetScout 1.0

Invention

Early

Adopters

$1-$100M

NetScout 2.0

Survival

Enterprise

$100-$450M

NetScout 3.0

Leap Frog

Service

Provider

$450-$2B

NetScout 4.0

Pervasive

Mainstream

Q&A SESSION




1984-1991 1984-1991

$ 0-1 M

NetScout .1

Consulting

Projects

1991-2001

2001-2006

2006-2015

Next 5 yrs.

$0-$1M

NetScout 0.1

Consulting

Projects

$1-$100M

NetScout 1.0

Invention

Early

Adopters

$1-$100M

NetScout 2.0

Survival

Enterprise

$100-$450M

NetScout 3.0

Leap Frog

Service

Provider

$450-$2B

NetScout 4.0

Pervasive

Mainstream

THANK YOU




1984-1991 1984-1991

$ 0-1 M

NetScout .1

Consulting

Projects

1991-2001

2001-2006

2006-2015

Next 5 yrs.

$0-$1M

NetScout 0.1

Consulting

Projects

$1-$100M

NetScout 1.0

Invention

Early

Adopters

$1-$100M

NetScout 2.0

Survival

Enterprise

$100-$450M

NetScout 3.0

Leap Frog

Service

Provider

$450-$2B

NetScout 4.0

Pervasive

Mainstream

APPENDIX

April 8, 2016

About Our Speakers

28

Anil Rao (Senior Analyst) is the lead analyst for the Service Assurance research and is part of the Telecom software

research team within Analysys Mason. He has published research on real-time network analytics, NFV service

assurance, assurance in SaaS model, IP probes and the importance of service assurance in improving customer

experience. He also works with clients on custom consulting engagements such as market sizing, marketing support,

sales enablement and strategy workshops, and has delivered public speeches on latest industry topics such as digital

transformation, CEM and operationalisation of NFV/SDN. He holds a BEng in Computer Science from the University of

Mysore and an MBA from Lancaster University Management School, UK.

Dr. Vikram Saksena is NetScout’s CTO, Cable Markets and also serves as the chief solutions architect for NetScout’s

virtualization initiatives. Dr. Saksena has been at the forefront of technology innovations in the wireless, Internet, cloud

and data analytics industries, holding senior leadership positions in a number of small and large companies. He began

his career at AT&T in the early days of packet switching and made fundamental contributions that led to the

commercialization of Frame Relay and Internet Protocol networks. He was named an “AT&T Fellow” in 1997 for his

contributions to the growth of AT&T’s data networking business. Subsequently he was part of the founding team of two

broadband start-up companies, MaxComm Technologies and Narad Networks. Later on he became the CTO of two

public companies, Sonus Networks and Tellabs, where he led the technology strategy and development of new

products in voice over IP, mobile backhaul, mobile packet core, mobile video, and mobile security areas.




Research from Analysys Mason

29

We provide dedicated coverage of developments in the telecoms, media and technology

(TMT) sectors, through a range of research programmes that focus on different services

and regions of the world.

To find out more, please visit www.analysysmason.com/research

PROGRAMMES

Service Assurance

Customer Experience Management

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PROGRAMMES

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Future Comms and Media

IoT and M2M Solutions

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SME Strategies

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Regional markets Telecoms

software

Network technologies

PROGRAMMES

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Research portfolio



Consulting from Analysys Mason

30

For 30 years, our consultants have been bringing the benefits of applied intelligence to

enable clients around the world to make the most of their opportunities.

To find out more, please visit www.analysysmason.com/consulting

Consulting portfolio

Strategy and planning

Transaction support

EXPERTISE

Commercial due diligence

Regulatory due diligence

Technical due diligence

Regulation

EXPERTISE

Policy development and response

Margin squeeze tests

Analysing regulatory accounts

Expert legal support

Media regulation

Postal sector costing, pricing and regulation

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EXPERTISE

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Service Assurance & Virtualization Investor Relations€¦ · 08.04.2016 · instrumentation for monitoring and service assurance? • What is the current and potential spend on