An Evaluation of Strategic Networking Equipments Using. AHP(Analytic Hierarchy Process)

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1 An Evaluation of Strategic Networking Equipments Using AHP(Analytic Hierarchy Process) DaeKyeong Nam, Juseong Kim Abstract We analyze the evaluation of strategic networking equipments for the purpose of framing a policy to promote Korean telecommunication equipment industry. We identify factors and alternatives which drive next generation equipment industry. The factors are divided into two sections; bright prospect which is comprised of marketability, international competitive power, ripple effect, and strategic needs, national assistance which is development period, development fund, development possibility, and competitive intensity. The result of evaluation of alternatives indicates that both FTTH equipments according to bright prospect and voice and data integrated softswitch from national assistance are the most important equipment. Keywords : Next generation networking equipment, AHP 1. Introduction A worldwide telecommunications service industry for the past several years has grown tremendously by the combination of telecommunications deregulation, an exponential increase in IP services, and mobile services. In consequence of unexpected demand for network infrastructure, telecommunications equipment manufacturers also enjoyed sales and revenue growth. However, the more recent and fairly abrupt slowdown, particularly in capital spending on networking equipment, has resulted in massive corporate restructuring and workforce realignment in the telecommunications industry[4]. With the globalization of the telecommunications equipment market, both domestic and international levels of competition have increased. Moreover, drastic changes in technology have made firms face a much higher level of technological complexities and uncertainties than ever before. Korean telecommunication equipment manufactures generally lack in financial and technical resources as well as management skills, comparing to major telecom equipment suppliers. Especially, in domestic as well as international networking equipment market, major suppliers, such as Cisco, take possession of big market share. Accordingly, Korean manufacturers are under unfavorable circumstance. The growth of next telecommunications industry will be accelerated by many telecom services converged with others, new

2 network architecture and requirements evolved, and the demand for next generation network infrastructure surged. However, under the present conditions, If BcN(Broadband convergence Network), the next generation network infrastructure in Korea, is emerged, it should not contribute to grow in the future. Consequently, it is important to frame a policy to promote Korean telecommunication equipment industry. We have three objectives: first, to identify factors and equipments which drive domestic networking equipment industry; second, to evaluate factors and alternatives; lastly, to examine the strategic implications. First, in Section 2, we identify the research model and apply AHP. Second, the weight of factors and alternatives are analyzed in Section 3. Finally, we finish the paper with conclusions as described in Section Research Model Figure1. Research model AHP (Analytic Hierarchy Process) AHP is a decision-making process in which a problem is first broken down to a hierarchy of interrelated decision elements and then uses the pairwise comparisons of the user to give the order in which factors affect a decision, consistency of the respondent, and (depending on the particular problem) a prioritized list of the decisions to be made[2]. There are several advantages including ease of use and overspecification of judgment, built-in consistency tests, use of appropriate measurement scales, and applicability in the elicitation of utility functions[5]. Some of its applications include technology Choice[20] and vendor selection of a telecommunications system[6]. The steps to be followed while implementing the AHP process are illustrated as follows[3]. Step 1 : Set up a decision hierarchy by breaking down the problem into a hierarchy of interrelated decision elements. The overall goal is placed at the top, with the main attributes on an level below.

3 Step 2 : Collect input data by pair-wise comparisons of decision elements. Every attribute on each level is compared with adjacent attributes in respect of their importance to the parent. Step 3 : Use the eigenvalue method to estimate the relative weights of decision elements. The options available to the decision maker are now scored with respect to the lowest level attributes. Step 4 : Aggregate the relative weights of decision elements to arrive at a set of ratings for the decision alternatives. The scores reflecting the weight given to each attribute are adjusted and the summed to yield a final score for each option Hierarchy Structure The alternatives as well as the valuation bases of next generation strategic networking equipments for this study was generated through the literature and expert survey. The survey was conducted with 26 experts in the area of telecommunications equipment industry. An expert, for this study, is one who has had a long association in the field, is aware of current network equipment market and whose background is broad enough to assess various events related to technology[7]. Through this process, we identify factors, alternatives, and their operational definitions. We classify factors into two sections, bright prospect and national assistance, which is necessary to promote next generation networking equipment industry. We summarize operational definitions, which are shown as follows, by literature review and expert s opinion. Table [1]. Hierarchy and operational definition in Bright prospect Criteria Subcriteria Operational definition Current global market size Current Market size Domestic production and export market size Marketability Global GAGR(Compound Annual Growth rate) Growth potential Product life cycle Competitive price Competitive price compared with major supplier International Technological level Approaching to the highest level of technology competitive Domestic core The rate of dependence on imports power components Competitive price and quality of domestic core components Service and New service launching Infrastructure Contribution to BcN Network performance Ripple effect Recruitment and Experts training Employment effect Venture business promoting Priority level of developing BcN services and acquiring Strategic Early settlement international standards needs Fragility Financial and technological damage such as patent fee

4 In the bright prospect section, it is divided into four factors, marketability, international competitive power, ripple effect and strategic needs. Each factor has its subcriteria. Table [2]. Hierarchy and operational definition in national assistance Criteria Development period Development fund Development possibility Competitive intensity Operational definition Whether development is special skill Whether it needs large scale of development fund Whether it has a chance of success Whether there are major competitors In a national assistance section, it is comprised of development period, development fund, development possibility and competitive intensity. Table [3]. The alternatives of next generation strategic networking equipment Layer Service and control layer Transport network layer Subscriber network layer Alternatives of next generation networking equipment Voice and data integrated Softswitch Signaling Gateway Call Agent/SIP Server Media Server QoS guaranteed IPv6 Switch Voice and data integrated IP Switch MSPP Trunk Gateway Carrier Class Ethernet Switch FTTH(Fibre-to-the-Home) equipment (PON, AON) QoS guaranteed DSLAM Access Gateway Residential Gateway Networking equipments are divided into three sections, service and control layer, transport network layer and subscriber network layer[11][12]. The category of next generation networking equipment is restricted on the basis of marketing opportunities, technological importance. The alternatives are shown in table [3] Data collection and samples For collecting data, we first explained the AHP methodology and discuss purchase factors. Then we conducted AHP questionnaires to 26 experts who participated in expert survey identifying the valuation

5 bases of next generation strategic networking equipment and alternatives. The survey data were collected for 4 days from March 16, The judgment of the importance of one factor over another should be made subjectively and converted to a numerical value using a scale of 1-9[8]. Consistency rate which indicates the logical response of questionnaire was satisfied less than 0.1[9][10]. And then, we used rating scale for the evaluation of alternatives. We used Expert Choice 2000, which is an application program of AHP model, to analyze weight of factors and alternatives The weight of factors The weight and priority of factors are shown in table [4]. Table [4]. The weight and priority of factors in Bright prospect Criteria Global weight Subcriteria Sub rank Local weight Total rank Total weight Marketability 0.39 Current market size Growth potential International competitive power 0.27 Competitive price Technological level Domestic core components Ripple effect Service and Infrastructure Employment effect Strategic needs Early settlement Fragility In bright prospect section, we found marketability is the most important factor for promoting next generation networking equipment. The weight of marketability(0.39), is twice as large as ripple effect(0.176) and strategic needs(0.164). Among subcriterias the result indicates that growth potential(31.4) is the most significant factor. It is identified technology level and service and infrastructure is also important. The weight of three factors is about 55% of all. Table [5]. The weight and priority of factors in national assistance Criteria Total rank Total weight Development period

6 Development fund Development possibility Competitive intensity In national assistance, the result indicates that development possibility(0.385) is the most important and the second is development fund. The results of evaluation of alternatives by the weight of factors are shown as follows. Table [6]. The result of evaluation of alternatives in Bright prospect Layer Alternatives Total rank Total weight Voice and data integrated IP Switch Service and control layer Transport network layer Subscriber network layer Signaling Gateway Call Agent/SIP Server Media Server QoS guaranteed IPv6 Switch Voice and data integrated Softswitch MSPP Trunk Gateway Carrier Class Ethernet Switch FTTH equipment (PON, AON) QoS guaranteed DSLAM Access Gateway Residential Gateway A. Bright prospect In bright prospect, the outcome indicates that FTTH equipment(0.088) is the most hopeful alternative, and not enough of a difference between FTTH equipment and access gateway(0.086). Table [7]. The result of evaluation of alternatives in national assistance Layer Alternatives Total rank Total weight Voice and data integrated IP Switch Service and control Signaling Gateway layer Call Agent/SIP Server Media Server Transport network QoS guaranteed IPv6 Switch

7 layer Subscriber network layer Voice and data integrated Softswitch MSPP Trunk Gateway Carrier Class Ethernet Switch FTTH equipment (PON, AON) QoS guaranteed DSLAM Access Gateway Residential Gateway In national assistance section, the consequence indicates that voice and data integrated IP switch(0.097) is mostly needed national assistance. Carrier class Ethernet switch(0.0869) and QoS guaranteed IPv6 switch(0.0861) is decided the next ranking. 3. The analysis of alternatives 3.1 The analysis of alternatives in bright prospect There are many alternatives which are highly ranked on the alternative list in subscriber network layer. Subscriber network layer is comprised of FTTH equipment(1 st ), QoS guaranteed DSLAM(4 th ), Access Gateway(2 nd ) and Residential Gateway. In bright prospect, FTTH equipment is selected the most important alternative. In the evaluation of FTTH, the weight of growth potential, technological level, and service and infrastructure, are relatively high against other alternatives. It means that FTTH equipment will be the next development in telecommunications infrastructure in Korea, because video-based communication will be the killer applications on these networks and access will be a key issue. Korea has been most progressive-already installing extensive fiber connections to homes and are in the process of a nationwide rollout of fiber optic cables. Moreover, many telecoms aggressively attempt to shift an emphasis from traditional services to the triple play scenario. All telecommunications equipment market indications are that such technologies as PON(Passive Optical Networks) and AON (Active Optical Networks), which enable triple play services, are on the raise. These help telecom companies to economically deploy new fiber infrastructure. FTTH equipment to break the last bottleneck in supporting broadband will exist in the feature, satisfying various users requirements. The result indicates that access gateway is also important. Access gateway will be key to the delivery of BcN carrier services and multiservice, low cost devices which extend the network edge out to the customer premise. It means that the next generation Access gateway provides multi-service support for voice, fax, and data calls over packet to meet the increasing demands of network convergence.

8 FTTH AG IPv6 Switch (QoS) DSLAM CA/SIP MSPP Softswitch (voice&data) Figure2. The result of bright prospect alternatives 3.2 The analysis of alternatives in national assistance In case of evaluation of alternatives for national assistance, it shows that service and control layer is the most important layer. However, there is little difference between service and control layer and transport network layer. Voice and data integrated Softswitch is identified as the most significant equipment which is needed national assistance. The weight of development possibility and development fund is relatively high against other equipments. The telecom industry is shifting its focus toward next generation subscriber services, such as VoIP. Consequently, it is expected that the softswitch market will be grow steadily. If national support for next generation networking equipment such as technology and funds will be much more than it is, the softswitch market should have great possibilities. In addition, the outcome shows that both Ethernet switch and QoS quaranteed IPv6 switch are needed national support. Although they are insufficiently competitive, it is possible to increase their competitiveness as long as national assistance is fully available Softswitch (voice&data) Ethernet Switch IPv6 Switch (QoS) FTTH IP Switch (voice&data) Media Server Figure3. The result of national assistance alternatives

9 4. Conclusions We investigated the factors and equipments which drives the growth of Korean networking equipment industry and analyzed the next generation networking equipment alternatives. We classify factors into two sections, bright prospect and national assistance, and identify the valuation bases of next generation strategic networking equipment and alternatives which are necessary to promote next generation networking equipment industry. In the evaluation of alternatives, it is investigated that FTTH equipment according to the bright prospect section is most important and voice and data integrated softswitch from the national assistance section is. With the globalization of the telecommunication equipment market, the competition level has increased and drastic changes in technology have made firms face a much higher level of technological complexities and uncertainties than ever before. From this point of view, it is important for service providers, manufacturers, and government employee to identify significant factors and alternative equipments which drive market growth. Our implications are first finding detail factors and alternatives and analyzing the weight of them. Second, we suggest objective indexes them for their marketing strategies, R&D, and polices. Finally, we investigate translating factors, which exhibit qualitative feature, into quantitative value on the basis of objective foundation. Although our study provides meaningful implications, there are a few limitations. First, any factors of hierarchy for AHP can not maintain independence with other factors because of not using factor analysis, when we made hierarchy for AHP. Second, samples for analyzing important factors and the evaluation of alternatives are so biased to IT field experts that it would be occurred a lack of objectivity. Accordingly, further study is needed to investigate developed models to maintain independence and to minimize sampling bias by expanding samples, such as marketing experts and government employee. References [1] Akkineni, V.S. and Nanjundasastry, S., The Analytic Hierarchy Process for Choice of Technologies, Technological Forecasting and Social Change, Vol. 38, pp , [2] Christos Douligeris and Ian J. Pereira, A Telecommunications Quality Study Using the Analytic Hierarchy Process, IEEE Journal on Selected Areas in Communications, Vol. 12, No. 2, [3] F.Zahedi, The analytic Hierarchy process-a survey of the method and its applications, Interfaces, Vol. 16, pp , [4] Joe, Z. Cheng., Joseph, Z. Tsyu. and Hsiao-Cheng, D. Yu., Boom and gloom in the global telecommunications industry, Technology in Society, Vol. 25, pp , [5] Lai, V.S., Trueblood, R.P. and Wong, B.K., Software selection: a case study of the application of the analytical hierarchical process to the selection of a multimedia authoring system, Information & Management, Vol. 25, No. 2, 1992.

10 [6] Maggie, C.Y.Tam, and V.M. Rao Tummala, An application of the AHP in vendor selection of a telecommunications system, Omega, Vol. 29, pp , [7] Reeger, W.G., Directives in Delphi Developments: Dissertations and Their Quality, Technological Forecasting and Social Change, Vol. 23, pp.89-93, [8] Saaty, T. L., The Analytic Hierarchy Process, McGraw-Hill, New York, [9] Saaty, T. L., "Priority Setting in Complex Problems," IEEE Transactions on Engineering Management, Vol.30, No.3, pp , 1983 [10] Tax, S. S., S. B. Brown and M. Chandrashekaran, "Customer Evaluatoins of Service Complaint Experiences:Implications for Relationship Marketing," Journal of Marketing, Vol. 62, pp , [11] A Study on the BcN Foundation Establsishment, NCA, [12] The Present Condition and Forecast of BcN equipment industry, ETRI, 2006.

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