I believe Xabi Alonso is the sole candidate for the managerial job at Real Madrid based on his achievements with Bayer Leverkusen in such a short while as coach of the German side. But this doesn't necessarily mean that if he eventually gets the job that he would perform the same way he has done with Leverkusen. In Spain it could be very difficult due to pattern and the tempo of the competition in the Spanish La liga.
Moreover being the coach of Real Madrid comes with lots of responsibilities including consistency, which means if you fail to be consistent for a very long period of time then you might be shown the way out because at Real Madrid they have a very slim tolerance for failure. So if Xabi Alonso finally takes up the job then he should be ready to face all challenges involved.
There is no point in discussing this, because Ancelotti is not going to leave the team, he has gone through difficult times for Real with dignity and now they are leading La Liga and in the Champions League they are only one point away from the top 8, I think they will win the match with Brest without problems. So Ancelotti will definitely do everything to defend the title of champion in La Liga and the Champions League.
You wouldn't know that just yet if Ancelotti is leaving or not at the end of this season. Before this season kicked off there were rumours about Ancelotti and Pep Guardiola being on the radar for the South America national team, Brazil. And a lot of insinuations on that was that it's going to materialised by the end of this season that either Ancelotti or Pep could be the man to take over the job. So maybe we could wait till end of season to know if really there's no point in discussing on that.
As for his team performance this season they haven't had a thorough run like other previous seasons, you'll agree with me that there has been a fall in their form, therefore you shouldn't be in haste to assume that Real Madrid can defend both the champions league and their domestic league title. In the domestic league Barcelona has an upper hand in their head-to-head this season and despite RM currently standing as league leaders, the gap difference with Barcelona and ATM is nothing significant because with just one or two match lost ATM and FCB will close in on them. So why the much confidence?