May 2007

NetCracker OSS Observer

PO Box 1319
Profile Sugar Grove, IL 60554
Tel: +1.630.466.9223

A SERIES OF VENDOR AND SERVICE PROVIDER PROFILES FROM OSS OBSERVER

By Larry Goldman and Roz Roseboro

Executive Summary
NetCracker provides a service fulfillment suite centered on its CONTENTS
NRM capabilities. In recent years, NetCracker moved into the
Executive Summary, p1
leading ranks of inventory/NRM vendors with significant tier-1 and
-2 CSP wins displacing competitive products. NetCracker provides Financials and Basics, p2
a complete service fulfillment suite supporting a broad range of OSS Products and Services,
services, but its strength is in order management and inventory for p2
convergent, IP-based services. Customers and Markets, p5
NetCracker has a unique position among the larger service fulfillment vendors. OSS Observer Analysis, p7
It provides a complete suite of fulfillment software and extensive professional
services to complement its product offering. In this regard, it is much like Comparison with Peers, p9
Amdocs is in providing billing products and professional services. In contrast,
most service fulfillment vendors try to focus on software products and leave the
professional services work to systems integrator partners. Figure 1: NetCracker
revenue, p1
Figure 1: NetCracker revenue (estimated) Figure 2: NetCracker
product suite, p4
Figure 3: Position in
$120 segmentation, p4
$100 Figure 4: NetCracker
revenue business segments,
(USD millions)

$80 p6
$60 Figure 5: NetCracker
revenue geographic
$40 segments, p7
$20 Table 1: Company basics,
p2
$0
2004 (est.) 2005 (est.) 2006 (est.) Table 2: NetCracker
Revenue $40 $68 $115 products, p3
Table 3: Significant
customers, p5
Source: OSS Observer
Table 4: Position in service
markets, p6
Table 5: Position in
geographic markets, p7
Table 6: Comparison with
service fulfillment suppliers,
p9
2007 OSS Observer LLC. All rights reserved worldwide 1
NetCracker Profile 2

Financials and Basics

NetCracker is headquartered in Waltham, MA and has offices in London,
Moscow and Australia. NetCracker has built a strong technology team in
Russia, helping lower R&D and customization costs and giving them a strong
presence in the Russian market.
In August 2004, NetCracker acquired Firma AVD, a European professional services
company specializing in system integration, business process engineering, and IT consulting
for CSPs. Firma AVD, founded in 1997 and privately held, was headquartered in Moscow,
Russia. Terms of the deal were not disclosed.
NetCracker is privately held. It does not reveal its financial results. They have had
remarkable growth in the last few years, fueled by many new deals, especially large deals
with major CSPs. They have some non-telecom IT outsourcing revenue from their Firma
AVD acquisition, but we still estimated that they had at least $105 million in telecom
software and services revenue in 2006. They have been funded by internal cash flow since
their formation in 1993. NetCracker has not been active in the M&A activity seen recently
in the OSS market, and it seems content to bide its time waiting for the right opportunity.

Table 1: Company basics

Name NetCracker
Year founded 1993
Headquarters Waltham, MA
President and CEO Andrew Feinberg
Revenue 2006 (estimate) $115 million
Employees 1100
Product Segment Service Fulfillment
Geographic focus Global
Primary products Network Inventory Management and Service
Fulfillment solutions
Key Partners HP, Unisys, LogicaCMG, Atos, Cisco,
Huawei, IBM, Vitria, BEA, Comverse

Key Customers Covad, France Telecom, Moscow City

Telecom, Sprint, Swisscom Broadcast and
Wholesale, Telstra, TeliaSonera, Time
Warner Telecom, TELUS

Source: OSS Observer

OSS Products & Services

NetCracker provides a complete solution for service fulfillment and activation, from order
management and design and assign through to network inventory and discovery.
NetCrackers products are built on BEA J2EE software that gives them strong scalability and
distribution characteristics. Unlike many other OSS systems, the NetCracker products are
an open platform that CSPs can extend with J2EE programming tools. CSPs that prefer to
integrate their new service fulfillment platform tightly with existing systems are able to use
the widely available J2EE tools with NetCracker.
Supporting the product suite, NetCracker has a large professional services organization. All
service fulfillment systems require extensive professional services work to plan

2007 OSS Observer LLC. All rights reserved worldwide

NetCracker Profile 3

deployments and operations changes, restructure existing data, link with existing systems,
test their deployments, upgrade to new versions and a myriad of other such steps.
NetCracker offers both the product and professional services from a single vendor.
NetCracker has been able to leverage its professional services efforts to implement new
product features to offer to other customers. The degree of productization and
customization is open to debate in nearly all service fulfillment deployments, but especially
so for NetCracker because of the size and scope of customer-specific work that they
undertake.
Table 2 provides descriptions of NetCrackers products. Figure 2 illustrates the product
suite as depicted by NetCracker. Figure 3 shows where their products fall in OSS
Observers Service Fulfillment segment.

Table 2: NetCracker Products

Products Description
Network Inventory Repository of physical and logical network infrastructure
Auto Design & Assign Service design and assign automation capabilities for all types of
services regardless of the underlying network technologies.

Network Discovery Gathers network data directly from equipment via TL1, SNMP,
and Reconciliation or by integration with network management systems and element
management systems such as HP OpenView, Nortel Preside and
Cisco Works.

Outside Plant A centralized, dynamic repository of all outside plant assets,

Management including devices, tracks, ducts, pipes/bores etc.
Order Management Simplifies the order management process with a Web-based
interface that collects and organizes information required to
initiate, process and complete an order.
Asset Management Extends the capabilities of the NetCracker Network Inventory
Management system with tools to track network assets
throughout their lifecycle in a centralized repository
Telecom Cost Automates the reconciliation of invoices for off-net transport and
Management access circuits allowing service providers to identify erroneous
charges
OSS Engine A J2EE-based platform for all NetCracker solutions as well as
other OSS and enterprise applications, The platform is workflow-
driven and 100% Web-based.
Professional services Installation, customization, integration and conversion services
Service Inventory Includes a Service Catalog that identifies the different
combinations of component services that can be used to create
the end user service, It also contains the configurations of all
installed services, thereby enabling changes to the existing service
or the provision of additional converged services.
Service Provisioning Enables service providers to automate and optimize service
and Activation delivery starting from initial service order, to customer service
design and resource assignment to service turn-on and upstream
systems notification.
Customer Impact Allows companies to sift through trouble tickets and alarms
Analysis produced when a network problem occurs in order to identify
the root cause and then to determine the services and customers
affected.
Design and Planning Provides graphical design and versioning and builds order
management capabilities to support network infrastructure
expansion.

2007 OSS Observer LLC. All rights reserved worldwide

NetCracker Profile 4

Source: NetCracker, OSS Observer

Figure 2: NetCracker product suite

Sou
rce: NetCracker

Figure 3: NetCracker position in OSS Observers product segmentation

Service Delivery Billing Customer Care Service Fulfillment Service Assurance

Platforms
Customer Order Service
Rating & Pricing
Charging Interaction Management Management

Partner &
CRM NRM / Inventory Fault & Event
Interconnect
Content
Management
Subscriber
Fraud & RA Activation Performance
Management

Telecom Apps Workforce

Server Mediation Eng Tools Probe Systems
Automation

Network Management Systems

Device
Management Residential Business Data
Mobile PSTN
Broadband Services

Middleware

Source: OSS Observer

2007 OSS Observer LLC. All rights reserved worldwide

NetCracker Profile 5

Customers and markets

NetCracker has won several large service fulfillment customers in the past
few years, including TELUS, France Telecom, Swisscom and Sprint Nextel.
These deals revolve around NetCrackers inventory capability but usually
include other fulfillment applications. It also has a base of CSP business with
tier-3 CSPs in North America and Europe that use its products as a
complete fulfillment solution. NetCracker is increasingly winning more
business in larger CSPs around the world.
One way NetCracker uniquely supports customers is by assigning many of their staff to
work at or near the customer site. In some instances, this involves dozens of staff working
closely with a customer. NetCrackers staff provides custom solutions as well as developing
new product features driven by specific customer input. This strategy allows NetCracker to
get the most possible revenue from each customer they win.

Table 3: Significant OSS/BSS customers

Customers Deployment
Time Warner Telecom Using NetCrackers Network Inventory Management, Auto Design
& Assign, Outside Plant, Network Discovery & Reconciliation and
Asset Management solutions in support of business services
Swisscom Using NetCracker to track all of the assets in its network-including
equipment information, circuit and bandwidth availability details,
network information and related customer information. Also using
NetCracker to plan radio, TV and wireless services for its base of
business customers
Telstra Using NetCrackers NetCracker's Network Inventory, Auto Design
& Assign and Order Management applications in support of business
IP services
TELUS Using NetCracker as part of its network inventory and fulfillment
systems across its wireline network, NetCrackers solution replaces
the carrier's legacy systems and is integrated with its network
management and billing applications
France Telecom/Orange Using NetCracker in support of FTTx/GPON services and home
(multiple locations) inventory on its fixed networks, Also using to manage its mobile
NGN infrastructure
Omnitel Using service and resource inventory, outside plant, and discovery
and reconciliation modules in support of residential broadband
services
Covad Using NetCracker's Network Inventory, Auto Design and Assign,
and Discovery and Reconciliation in support of residential
broadband services
Golden Telecom (Russia) Using NetCracker to help streamline the back office operations and
service provisioning processes in support of residential broadband
and business services
Sprint/Nextel Using NetCracker in a multi-phase project to automate the
provisioning of IP product lines The initial implementation was
focused on the inventory and provisioning of Sprint's wireline IP
products for business customers.
UPC (multiple locations) Using NetCracker for provisioning and fulfillment for cable services
Source: NetCracker, OSS Observer

NetCracker lists its partners as including NEMs Cisco and Fujitsu, systems integrators
HP, Logica, Unisys, CGI and IBM. OSS partners include BEA Systems, Comverse and
Kabira. The company has recently expanded its strategic partner initiatives following the
consolidation occurring among service fulfillment vendors. The company often implements

2007 OSS Observer LLC. All rights reserved worldwide

NetCracker Profile 6

its own solution in cases where it comprises the entire fulfillment system for a tier-2/3 CSP.
Still, it does integrate its products with software such as service assurance solutions that
surround service fulfillment.

Table 4: Position in service markets

Market Deployments and relative strength
Mobile Deployments with tier-1 CSPs France
Telecom/Orange and Sprint/Nextel
Residential Broadband Deployments with major CSPs including Covad,
UPC, France Telecom and TELUS
Business Services Deployments with tier-1 CSPs including TELUS,
Telstra, France Telecom as well as UPC
PSTN Deployments with Sprint, France Telecom, Time
Warner Telecom and One Communications

Source: NetCracker, OSS Observer

Figure 4: NetCracker revenue business segments

PSTN, 20% Mobile, 27%

Business services, Residential

28% broadband, 25%

Source: OSS Observer

NetCracker has CSP customers around the world, with 45% of 2006 revenue coming from
North America, 40% from Europe and 15% from ROW (figure 5). They have been able to
broaden their reach over the last few years so they now have a nearly global presence.
NetCracker is positioned to take advantage of new business opportunities around the
world.

Table 5: Position in geographic markets

Market Deployments and relative strength
North America Deployments with tier-1 CSP Sprint/Nextel and TELUS,
as well as Covad and Time Warner Telecom
EMEA Significant business with France Telecom and its related
companies, as well as with UPC, Swisscom, Golden
Telecom and Omnitel
Rest of world Telstra is the most significant deployment in ROW.

Source: NetCracker, OSS Observer

2007 OSS Observer LLC. All rights reserved worldwide

NetCracker Profile 7

Figure 5 : NetCracker revenue geographic segments

North America
ROW 15%
45%

EMEA 40%

Source: OSS Observer

OSS Observer analysis

Strengths
NetCracker has a rare combination of good technology, product features and services
capabilities. There are very few companies that can do a good job developing and
supporting products and at the same time offer a significant amount of professional services.
Managing the two in a profitable way has been too difficult for most to handle. The most
important benefit of this strength is that NetCracker is able to get the maximum amount of
potential revenue from each deal they win.
About four years ago, NetCracker revamped their technology to be J2EE based and to
focus as much on managing services as on managing network infrastructure. This was a bit
ahead of market demand but positions them well as many CSPs are now dealing with the
OSS transformations needed to support new, converged services.
After doing almost all their business with tier-3 CSPs until 2003, NetCracker has built a
remarkable base of tier-1 and -2 CSP business. These very large deals, where they are
getting both significant product and integration revenue, are the key to their strong growth.
Such deals tend to continue to provide revenue for several years after the initial win.

Weaknesses
While NetCracker does work with systems integrators, NetCracker is not the SIs favorite
partner because NetCracker often takes revenue that SIs could get when working with
other fulfillment partners. The major SIs including NEMs, continue to exert enormous
influence in many CSPs and therefore limit NetCrackers opportunities in some markets.
Given the acquisitions of other fulfillment companies over the past year, SIs are getting
more interested in working with NetCracker. NetCracker has strengthened its partnership
program to take advantage of this situation and address the weakness.
NetCracker is perceived as company that has enormous flexibility in letting customers
improve and enhance the NetCracker product and providing NetCracker resources to
make those enhancements. For some customers, that makes NetCracker the best company
to work with. However, some CSPs tell us that they prefer to work with vendors that have
clearly defined features that are not so easily changed.
NetCrackers strong growth over several years with major customers indicates they are
doing a lot of things right. However, they have stumbled in some situations. For instance,
they had won the Telstra business IP services fulfillment business. NetCracker seemed to
be in a very strong position for Telstras IT transformation initiative. However, Telstra
wound up choosing Cramer instead.

2007 OSS Observer LLC. All rights reserved worldwide

NetCracker Profile 8

Threats
NetCracker has grown very quickly over the past three years. We believe it is unwise to
continue such breakneck growth because so many companies have stumbled when
managing breakneck growth, especially when getting past $100m revenue. We believe
NetCracker can maintain and perhaps enhance their position among the service fulfillment
leaders if they grow 20-30% annually.
We do not know NetCrackers cost structure or the cost of their providing integration and
customization services to their customers. However, other companies have gotten into
deep trouble with similar strategies when major customers demanded support that the
vendor could not afford to provide. We think it is very challenging for NetCracker to
manage many such very large deals with their very flexible support approach.
NetCracker has added many new product capabilities that complement their core inventory
products. The proliferation of new products, such as outside plant, asset management and
network design seem to have gotten them into many new areas very rapidly.
NetCrackers relatively small size and business scope is a threat is some situations. In the
past two years, NetCracker caught up in size with Cramer and MetaSolv, only to see both
of them be acquired by much larger companies. Amdocs and Oracle believe their greater
overall market presence will help them win fulfillment business that Cramer and MetaSolv
could not win on their own. If the market does develop in that way, it threatens to squeeze
out smaller independent vendors like NetCracker.

Opportunities
NetCracker is very well positioned in two strong growth areas order management and
inventory/NRM. These two areas are among the highest growing in all of telecom software.
There are some new OSS transformation projects driven by the need to support new
services. NetCrackers stronger position in the market, up to date technology and flexible
product and service approach will make them a contender for many of these. Many of the
new transformation opportunities will come from larger tier-2 CSPs such as TELUS rather
than tier-1s like France Telecom.
We think there are opportunities for NetCracker in more focused deals that are not all
encompassing OSS transformations but significant new systems to support VoIP or IP-VPN
or mobile data services.

2007 OSS Observer LLC. All rights reserved worldwide

NetCracker Profile 9

Comparison with peers

Table 6: Comparison of NRM/Inventory suppliers

Residential

Inventory/
Broadband
Order Mgt

Eng. Tools
Activation
Business
Services
Overall

Mobile
EMEA

PSTN
ROW

NRM
NA
Vendor

AiMetrix
Aktavara
Amdocs
AsiaInfo
Atreus
Axiom Systems
C-Cor
Ceon
Clarity
CMS
Comarch
Comptel
ConceptWave
CSG - Telution
CSSI
Digital Fairway
Dorado
Elematics
ETI Software
Evolving Systems
GE Smallworld
HP
IEL
Intec
JacobsRimell
Kabira
LogicaCMG
N2 Broadband
NetCracker
NetHarmonix
Oracle
S2Net
ServiceSpan
Sigma Systems
Step9
Sterling Commerce
Synchronoss
Syndesis
Telcordia
TTI Telecom
Vero Systems
Visionael
Source: OSS Observer & company briefings

= has a presence in the market = has a notable presence in the market = market leader

2007 OSS Observer LLC. All rights reserved worldwide

NetCracker Profile 10

Published by OSS Observer LLC

PO Box 1319
Sugar Grove
Illinois
60554-1319
Tel: +1 630 466 9223
Fax: +1 630 566 3863
Email : [email protected]
Web site: www.ossobserver.com

2007 OSS Observer LLC

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2007 OSS Observer LLC. All rights reserved worldwide