PRESENTATIONS IN NETWORK MANAGEMENT
Economic Evaluations
Saad Haj Bakry, PhD, CEng, FIEE
Saad Haj Bakry, PhD, CEng, FIEE
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Economic Evaluations
Objectives / Contents
Background in Economics
Cost / Expenditures
Benefits / Revenues
Saad Haj Bakry, PhD, CEng, FIEE
2
Economic Evaluations
Background in Economics
Basic Principles
Cost & Benefits
Change of Value
Evaluation Methods
Saad Haj Bakry, PhD, CEng, FIEE
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Economic Evaluations
Basic Principles
Symbol
Factor
Criteria
C
Cost /
“Cost Reduction”
Expenditures
(maintaining requirements / management)
B
E
t
Benefits /
“Maximizing Benefits”
Revenues
(efficient use / charging policy)
Cost-Effectiveness:
E=B/C
time
Saad Haj Bakry, PhD, CEng, FIEE
Investigation time scale.
 Break-Even time: E = 1.
 Optimum Life: Maximum E

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Economic Evaluations
Types of Cost / Benefits
Issue
Type
Explanation
Estimation
Problem
Tangible
Can be quantified directly and assigned a
monetary value: e.g. cost of equipment.
InTangible
Difficult to quantify and given monetary
value: e.g. staff frustration
Recurring
Continue to occur through the life of the
project: e.g. maintenance cost
NonRecurring
Usually occur at the beginning of the
project life and do not occur again:
e.g. initial investment.
Operation
/ Time
Saad Haj Bakry, PhD, CEng, FIEE
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Economic Evaluations
Change of Value (with Time)
Factor
Explanation
Reference t = 0
Reference time (year) for the
Time / Year
evaluation of real worth values
Proportional  Effect of “inflation”
Change of  Effect of “borrowing”
Value
 Combined Effects: “discount rate”
V(t  1)  V(t)
Change:
(positive or
v(t) 
V(t)
negative)
v(t)
Real Worth
v(t) = v
Saad Haj Bakry, PhD, CEng, FIEE
RV(t) = V(t) / (1+v)t
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Economic Evaluations
Evaluations: Cash Flow
100
50
Cost
Benefits
0
-50
-100
-150
-200
-250
-300
Year
(0)
Year
(2)
Year
(4)
Saad Haj Bakry, PhD, CEng, FIEE
Year
(6)
Year
(8)
Year
(10)
Year
(12)
Year
(14)
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Economic Evaluations
Evaluations: Investment State
150
100
50
0
-50
-100
-150
-200
-250
-300
Year
(0)
Year
(2)
Saad Haj Bakry, PhD, CEng, FIEE
Year
(4)
Year
(6)
Year
(8)
Year
(10)
Year
(12)
Year
(14)
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Economic Evaluations
Evaluations: Efficiency
1.4
1.2
Efficiency
1
0.8
0.6
0.4
0.2
0
Year
(1)
Year
(3)
Saad Haj Bakry, PhD, CEng, FIEE
Year
(5)
Year
(7)
Year
(9)
Year
(11)
Year
(13)
Year
(15)
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Economic Evaluations
Cost / Expenditures
Network Structure
Place
Staff
Network Operation
Cost Management / Policy
Saad Haj Bakry, PhD, CEng, FIEE
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Economic Evaluations
Network Structure
Consulting: Planning (Legal, Technical,..) / Design
Access / Services
Sub network:
Communications
Sub network:
Access Points
Servers
Communications
Switches
Channels
Installation / Testing
Saad Haj Bakry, PhD, CEng, FIEE
Capacity / BW = Cost
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Economic Evaluations
Place / Staff
Land
Building
Offices / Furniture
Training
Salaries
Lighting
Air-Conditioning
Other Staff
Benefits
Water Cooling
Saad Haj Bakry, PhD, CEng, FIEE
12
Economic Evaluations
Network Operation
Monitoring & Control
Preventive Maintenance
Help-Desk: Fault Repair
Cost of Other Management Functions…
Saad Haj Bakry, PhD, CEng, FIEE
13
Economic Evaluations
Cost Management / Policy
Contracts / SLAs: Service Level Agreements
Distribution of Cost / Criteria
Cost Reduction / Resource Sharing
Saad Haj Bakry, PhD, CEng, FIEE
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Economic Evaluations
Service Level Agreements: SLAs
Users: Associated with Different Internal Department
Internal SLAs
Internal IT Department: Computer Services / Intranet
External SLAs
Resources Suppliers
Saad Haj Bakry, PhD, CEng, FIEE
Services Providers
15
Economic Evaluations
Cost Distribution: Organization Intranet
Centralized
• Cost is paid by
“top management”
• Top level
“overheads”
Distributed
• Cost is distributed
among the departments
of the organization
• “Distribution Criteria
is needed.
Saad Haj Bakry, PhD, CEng, FIEE
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Economic Evaluations
Cost Distribution: Criteria
Criteria
Description
Shares
Cost is distributed according to
specified weights of shares
Size
Cost is distributed according to size:
“employees” / “space”..
Cost is distributed according to
“profit” or “loss”
Profit
Use
Saad Haj Bakry, PhD, CEng, FIEE
Cost is distributed according to
traffic “generation” / “flow”
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Economic Evaluations
Cost Reduction
Equipment:
Buy / Lease / Rent
Operation /
Maintenance /
Staff:
Considering SLAs
Balancing
Demands and
Resources
Saad Haj Bakry, PhD, CEng, FIEE
(Specialized Companies)
Sharing Resources
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Economic Evaluations
Sharing Resources
Advantages:
Cost Sharing
Less Cost per Department
Capacity Utilization
Cost Effectiveness
Examples:
• Long Distance Channels
• Management Software
• Information Services
• Staff
Problems: Increased Management Complexity /
Control & Security / Performance Level
Saad Haj Bakry, PhD, CEng, FIEE
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Economic Evaluations
Benefits / Revenues
Dimensions
of Benefits
Saad Haj Bakry, PhD, CEng, FIEE
Management
Of Revenues
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Economic Evaluations
Dimensions of Benefits
PROPER UTILIZATION
Time
Saving Time
Increasing
Productivity
Geography
Saving Movement
Saving Space
Form: Enhancing Quality / Supporting
Management Efficiency / Better Security
Saad Haj Bakry, PhD, CEng, FIEE
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Economic Evaluations
Management of Revenues
Tariff Policy

Services
Competitiveness

Busy Period Issues

Management


Cost v. Revenues
Public Services of
Non-Urban Areas
Future Development:
Cost of Expansion / Upgrading / Replacement
Saad Haj Bakry, PhD, CEng, FIEE
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Economic Evaluations
Conclusions
Efficient
Management
Evaluations: Use of Economic Principles
Interaction
Cost /
Expenditures
Time / Progress
Saad Haj Bakry, PhD, CEng, FIEE
Benefits /
Revenues
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Economic Evaluations
References

General Network Planning, ITU-T

Telecommunications Management: Operation &
Management of Networks, National Computing
Centre (NCC) Training, UK.

R. Jamal-Aldeen, S.H. Bakry, A. Nouh, “Analysis
of the cost-effectiveness of information
networks with applications”, International
Journal of Network Management, Vol. 100, No. 2,
pp.91-101, March / April 2000.
Saad Haj Bakry, PhD, CEng, FIEE
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