Yes,
it seems like the US economy is rebounding, the recession is
over and yes, the networking industry seems to be as well, in
certain markets. Over the past few months I have consulted to
over ten chief network architects of Fortune 1000 firms and I
hear the same request. Can I help them develop an IP
convergence strategy and plan? The answer is of course, but
what is most interesting and systemic is the reason the
question is being asked in the first place. Most if not all
enterprises have taken as much as they can out of their IT and
total cost of network ownership. That is, the cost for
capital, operational (meaning staff and maintenance) and
facilities (meaning wide area transport and toll charges) have
all been lowered to the point where there isn't much more fat
in the system. Many companies have reduced IT spend by as much
as 25% over the past three years. I'm convinced that just like
mortgage refinancing, this too has run its
course.
The fundamental change in corporate
network procurements is that return on investment or ROI is
being extended from 12 months or less, to now 24 and in some
cases 36 months. This is so very important to our industry
because it means that CEOs/CFOs/CIOs and other key financial
decision makers are willing to make network investments that
pay off further out in time. Most CEOs, CIOs and CNAs (chief
network architects) are coming to the realization that the
only way now to reduce spending, and increase flexibility and
profitability is by re-thinking how their enterprise network
supports their business operations since simple cost cutting
has bottomed out. Key in this thinking is the fact that during
the economic down turn most corporations sought efficiency and
cost reduction. This three-year efficiency exercise
established new business processes, which are now being
supported with new applications. But network spending to
support new applications lagged since budget was held back to
a tight 12 month ROI. In short, corporations could not spend
to gain more efficiency. With ROI being extended, CNAs are now
getting the go ahead to seek out "structural" changes that
will reap huge rewards even if it takes a few years to
realize.
Not only is this good news for CNAs but
for the equipment suppliers and service providers as well. A
longer ROI metric will allow a longer protracted recovery in
the networking industry. But companies don't just re-architect
their network because they can; there has to be a compelling
reason because it's very hard work. In the companies I've been
working with, we have been able to reduce total cost of
ownership by as much as 30% and in one case that means $30
million/year while increasing flexibility and productivity.
How you ask? Convergence through IP Telephony is the answer.
So if the new mantra is re-design your enterprise network,
then where do you start? First let's review a few
transformational trends that have been working throughout the
economy.
Instant Messaging (IM)
boom. In some companies I have seen IM traffic
approaching that of voice and e-mail and over the next several
years IM will be the dominant traffic type on corporate
networks. IM needs to be embraced, controlled, managed and
integrated into other communication mediums.
IP Networks
Supporting Real Time Voice: IP networks have
increasingly incorporated quality of service features to
prioritize VoIP transport while the cost of bandwidth has
fallen. These trends are true in both wide and local area
networking.
Phones are Going Smart
and Soft: Increases in computing, storage and display
performance and capacity are causing phone, PDA and PC
functionality to converge. For example, email, text, audio and
video messaging are now included in mobile phones as are PDA
features such as calendaring and limited Internet access. I
call this next generation of communicating devices,
"smartphones" and they will support Wi-Fi and GSM/CDMA
interfaces, providing corporate users access to enterprise IP
telephony services while in the office and a mobile provider
service when they're not. Voice communications capabilities
are now included in standard desktop software packages such as
Microsoft's Outlook. Many softphone providers such as Avaya,
Siemens, Cisco, Mitel, 3Com, et al, will have a phone icon
that enable VoIP calls from Microsoft's Outlook using existing
contact lists.
Say Goodbye to Fixed
Phones: Fixed phones on corporate desktops have been
part of a knowledge worker's productivity tools since the
industrial revolution. As the economy enters into the
convergence era, smart and soft phones will be the norm while
fixed phones tethered to a desktop will be the exception.
Driven by the ever-increasing need for businesses to be mobile
and flexible, collaboration between knowledge workers will
occur through soft and smart phones that offer optimal access,
be it IM, VoIP, email, text messaging and/or video. I call
this new set of collaboration capabilities "IP
communications".
VoIP
Service Provider Offerings Proliferate: Over the past
six months, nearly
every large interexchange service
provider has announced a VoIP service with their IP VPN
offering. In the next six months every large interexchange
service provider will do the same. Add all the start-up
service providers in the VoIP space such as Vonage, packet8,
et al, and you get competition plus innovation, which results
in choice. The major drivers for the service providers to
convert to IP telephony are efficiency, bypassing as many of
the $30B access and universal service fees as
possible.
VoIP
Economics Leaning Toward Private Implementations: The
incremental cost of adding voice service to the existing
telephone network is approximately 1 cent. The incremental
cost of adding VoIP to an existing frame relay, IP VPN/MPLS
corporate network is close to 1/8th of a cent and at times
even less. What this says is that for the first time in the
history of telecommunications, corporations can provision
voice service cheaper than service providers. Even with the
massive scale of all service providers, corporations equipped
with smart and soft phones and a converged capable IP
infrastructure can deliver enterprise voice service at lower
cost. Therefore, private IP Telephony implementations will be
more popular and the service providers will potentially become
even more hollowed out as they are relegated to transport
providers during the convergence era.
Broadband Proliferation:
Competition between cable and telecos for broadband
customers has resulted in a high rate of adoption to both
residential and small office connections. Factor in government
incentives to encourage teleworking plus employee preferences
and corporate cost cutting opportunities and you get a remote
workforce on a scale that corporations have never seen
before.
WLANs
Deployment: Sure, corporate adoption of WLANs is
slower than most equipment suppliers had hoped, but the
industry will knock down the three key barriers of entry: 1)
network security, 2) management and 3) automated RF
management. WLANs will be a large part of enterprise networks,
perhaps driven more by smartphones than laptops.
Chief
network architects are still very interested in reducing
network spend, but the smart designers are now able to
architect a converged network thanks to longer ROI return
metrics being put in place. Converged networks are not just
about combining voice and data networks into one to obtain
reduction in operational, facilities and capital cost.
Converged networks have to support wide scale mobility through
centralized control and management, perhaps through managed
mobility services. To leave out mobility as part of a
converged network architecture is missing a major opportunity
to reduce cost and complexity and increase productivity. If
examined, most network planners will realize that the
consumption of cell phone minutes has doubled nearly every two
years over the past five. Also, while cell phone bills have
gone up, their unit cost/minute has fallen far more
precipitously than toll. This increased use and decreased unit
cost boosted cell phone consumption to the point where it
could represent between 20 and 30% of overall annual voice
spend.
In short the set of communication tools we
use to collaborate are many and our options will only grow in
number. The glue that ties all these devices together is IP.
What makes them useful is IP Telephony. What will make
corporations achieve another level of productivity during the
convergence era is collaboration through a set of IP
communications that use the right medium, be it IM, email,
voice, video, text, etc., to bring colleagues together to
solve a problem or seize an opportunity. The industry is
entering a new, post recession stage where convergence is the
driver, IP Telephony is the platform and collaboration is the
killer application. To put all this together for your
corporation will take work, but it's worth it.
I
welcome your comments. Please send them to me at
info@lippis.com.
The
following educational programs will help you manage your way
in the new era of convergence. You'll receive the insight and
practical guidance you need to successfully design your
enterprise network.
"Presence-Based
Communications: What It Is and Why It Will Transform Unified
Communication". Available
on demand now.
The Enterprise
Networks 2004 Conference
April 26-28, 2004, Boston,
MA
Join me at the Welcome Reception on Sunday April 25 6:30
to 9:30 PM
For more information and to register, please
visit
www.en2004.comRegister by April 2
and receive:
- $200 savings
- Free wireless card
- Free copy of the new "IP Telephony Total Cost of Network
Ownership Report", which I authored along with Dr. Mark
Gaynor of Boston University
Nick
