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Network waste to reach $100 billion

Network overspending will cost enterprises more than $100 billion over the next five years, according to recent predictions by Gartner Inc.

Enterprises will waste more than $100 billion on the wrong networking technologies and services over the next five years, according to a recent prediction by Gartner Inc.

According to Mark Fabbi, vice president and distinguished analyst for enterprise communications at Gartner, corporations are putting their money into the wrong technologies, leaving other technologies and services to suffer. He said enterprises are still throwing money at traditional networking approaches such as increasing private bandwidth, but a lot of these investments are being wasted.

"Enterprises are continuing to follow existing best practices and outdated rules of thumb," Fabbi said. "They have to start thinking differently. Today, we really have to understand what applications and business processes run on the network instead of just building out a generic network."

By ignoring applications and business processes, companies are missing out on opportunities to build a network that would give them a competitive edge, Fabbi said.

Recent network evolutions have changed the way enterprises should architect their networks. Fabbi said that approaching network design in a new way can dramatically change the current cost model, but a lot of companies are missing these opportunities by following methodologies of the past, such as the common misconception that bigger and faster equal better.

Gartner found that by following outdated network design principles, 70% of companies will be at a competitive business disadvantage because they miss out on initiatives that drive new business processes, while at the same time they lack the budget room for those initiatives because they overspend in other areas.

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Fabbi believes that "much of the $100 billion is simply being wasted on technologies that are not necessary, fixing problems that don't exist, while investments in areas that could transform the business are missed."

"You have to build the network not just to build a network," he said. "You have to understand what's going to make a difference and build a network around that."

For example, companies are buying Gigabit Ethernet to the desktop for users, but the recipients are using less than one-tenth of what is installed. Fabbi said that in many cases Gig E offers 100 times more bandwidth than users need or can use.

IP desktop phones with display screens are also a major money waster, Fabbi said. Putting IP screen phones next to a PC on the desktop makes no sense, he said, because IP screen phones are expensive and in many cases the applications that run on them are custom-developed under proprietary software and often already exist on the PC.

"Why should I spend $500 or $600 on a five-inch screen?" Fabbi asked, adding that most IP phones without a display screen run in the $100 to $150 range. For the amount of money thrown away on fancy desktop IP phones, he said, companies could be buying unified communications tools and applications to link the PC to a less expensive phone, enhancing both the phone's and PC's functionality.

Along with IP screen phones, many enterprises are following vendor recommended network architectures, Fabbi said, buying features and functions that they will never use "just in case." He said the total waste in network equipment purchases through 2011 will be around $45 billion, and that's being conservative.

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When it comes to services, Fabbi said, one financial drain is "buying bandwidth as a potential cure-all," when in fact companies should be looking at ways to optimize and get more use out of the bandwidth they already have. He said new WAN technologies can allow enterprises to use the WAN more efficiently and defer WAN bandwidth upgrades for more than three years. Gartner estimates that more than $55 billion will be wasted on services, and buying bandwidth will in many cases not even fix the problems the purchase was supposed to solve.

A portion of the money that companies save by making smarter decisions and purchases should be spent, Fabbi suggested, but on technologies and services that improve business processes, such as mobility and collaboration, two key productivity drivers that are often overlooked because companies either can't or won't justify the expense.

Fabbi said Gartner recommends that network architects become part of the application project teams to better anticipate and drive investments in areas that will have a strong business impact. Gartner also suggests that enterprises review network spending plans focusing on near-term needs and cautions companies not to invest without an identified business need that provides a productivity boost for a large number of users.

"Don't fix problems for areas that are not broken, and don't prepare for functionality that will never be used," Gartner and Fabbi recommend. "Do not follow traditional network design best practices; these are now outdated. Do not simply grow bigger and faster in any portion of the network."

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