Going with a managed WAN

Outsourcing the day-to-day maintenance of your WAN can save money and free up your staff for important, strategic projects. Handing the planning and implementation of a WAN upgrade to a third party can be a lifesaver, especially if you’re under a tight time frame or having trouble finding qualified staff.

And besides, managing a WAN is simply a thankless job. Your corporate management and end users expect instant access to resources anywhere in the world and show little or no appreciation for what you must do to enable this.

Despite these selling points, however, many companies are not buying managed WAN services. “In our last survey, only about 15 per cent of the total had them,” reports Melanie Posey, an analyst with International Data Corp. (IDC) in Framingham, Mass. Market researchers now concede that they overestimated the size of the market for managed network services and how fast it would grow. For example, only between 15 per cent and 20 per cent of all frame relay ports — the most popular type of managed WAN — are managed by third parties, according to IDC ‘s latest estimate. IDC projects that the number will slowly creep up to only 25 per cent in five years.

Ellen Carney, principal analyst at Dataquest Inc. of San Jose, Calif., says the largest companies are the most resistant to managed network services, while midsize companies below the Global 1000 are increasingly coming to the conclusion that the benefits of outsourcing their WANs outweigh the risks.

Analysts say the big bugaboo for large corporations is largely emotional — companies are afraid of losing control of their networks, Posey says.

“The biggest companies could benefit the most from managed network services (MNS), and they are the most reluctant to let go,” she adds. Fortune 50 enterprises in particular seem determined to keep WAN management in-house, even though networking isn’t their core competency.

Of course, fear of letting go isn’t the only factor. Some network professionals are confused by all the permutations of managed services that are currently being hawked. Companies offering MNS range from local and long-distance telecom carriers to traditional outsource specialists such as EDS to service providers that don’t own any wires but function more as brokers that give you a single point of contact.

Some MNS companies merely perform simple red-light/green-light router monitoring. Others can provide custom-design services and comprehensive management of your premises, including moves, adds and changes, and could even manage devices all the way to the desktop.

Claims about dramatic savings aren’t particularly effective at larger shops, either, partly because most organizations don’t have a clue how much it is costing them to run their networks. WAN management expenses disappear into a black hole of IT spending, and there is nothing to compare to the number in the service provider’s proposal.

“Service providers are using a total cost of ownership pitch, but the numbers are oversimplified,” Posey says. “People whose job functions got outsourced are shifted to other things and are still on the payroll, so the company just sees a big new expense — the outsource bill — and not any savings.”

Plus, not everyone who tries a managed WAN has an entirely positive experience. American Honda Motor Co. in Torrance, Calif., decided last year to turn the management of its 65-site frame relay network over to Comdisco.

“Because of the problems we’ve run into in outage situations, we’ve had to take some of the router management back in-house,” says Stephen Roberts, manager of network services for American Honda. “Right now, our response time internally is faster. Also, our staff understands our business objectives and network requirements better and are in a better position to assess implementation risks vs. value to the business.”

American Honda’s internal staff is responsible for network design, router configuration and software maintenance on network equipment. Comdisco oversees the physical wires — provisioning lines, adjusting committed information rates and port speeds, and troubleshooting circuit problems.

What type of relationship other companies should establish with managed services providers, if at all, depends on the size and scope of their networks and the internal resources they have, Roberts says. “You definitely need MNS for international locations, but nationally, the jury is still out.”

But many companies can’t wait for the jury to finish its deliberations. They have to move quickly. Maritz, a US$2 billion performance improvement and travel services company based in St. Louis, needed to upgrade a 10-site point-to-point network that was being managed by one person to a frame relay network to support a critical business application that was being deployed worldwide.

“I was one resignation away from implosion,” says Gerry Imhoff, vice-president of communications services for Maritz. He outsourced deployment and ongoing management of the WAN to Comdisco.

And analysts say Imhoff’s staffing woes are not unusual. “I’ve been stunned by how lean the networking staffs at user organizations are,” Dataquest’s Carney says. “Our studies show that 80 per cent of companies with US$100 million or more in revenue have 10 or fewer people running their networks, and 75 per cent have five or less.”

In fact, the tight labour market may be the single biggest reason right now to outsource. Even if you do have the budget to pay the six-figure starting salaries for all the Cisco Certified Internetworking Engineers you need, there aren’t enough to go around. There is simply no way you can match the pooled expertise and world-class talent that service providers have on their staffs.

Helena Chemical Co. in Memphis, Tenn., is another company that turned to outsourcing because it needed to move quickly and didn’t have the staff to pull off a major WAN upgrade. The agrichemicals producer was replacing an old mainframe and AS/400 network as part of a Y2K project and needed a new WAN to connect its corporate headquarters, four manufacturing plants, 14 divisional offices and 210 retail stores spread across 48 states. A lot of the users are non-technical types — people in remote locations who sell fertilizer, pesticides and seeds to farmers.

“It all had to happen very fast,” says IT Director Stephen Kyriakos, who was in charge of the Y2K project. “Our management was looking at doing it internally, using tools like Tivoli, but I didn’t hear anyone talking about a staff to use these tools. I had one network engineer on my staff, and Memphis doesn’t have a big pool of frame relay and WAN experts to recruit from.”

Demand on the WAN also fluctuates considerably because Helena Chemical makes most of its money during the spring planting season. Maintaining an internal staff year-round just to provide 24-7 support during these critical months is highly inefficient, so Helena Chemical turned to NetSolve. The new managed WAN went live this month, and Kyriakos is quite pleased.

“The outsourcing model works very well here and makes us very flexible,” Kyriakos says. It also saves the company money while providing a higher level of service. “The original plan was to go with a dial-up network, which we would have had to manage in-house. I estimated the cost of this and the staff it would take, and it was more than what we are paying NetSolve for a dedicated network,” he says.

“Our studies absolutely point to cost savings for companies that outsource MNS,” says Yankee Group analyst Kitty Weldon. “We look at four different scenarios that show savings ranging from 20 per cent to 53 per cent — 56 per cent in the case of a four- to five-year contract.”

Despite their misgivings, many network executives are beginning to realize that managed network services is a concept whose time is coming. Managing a WAN is difficult enough now, and growing network complexity is just going to make things worse.

“More of our clients are considering it now,” Carney says. “And we are starting to come across venture capitalists who are telling clients, ‘Don’t spend money on building WANs-outsource them.'” Carney adds that she is also seeing an increasing number of government requests for bidders to run proposed networks, not just implement them.

Adds James Slaby, Giga senior industry analyst: “You need to keep your best and brightest people challenged and working on the most strategic projects, like the transformation to electronic business. These are scary new waters that people have to navigate, and they don’t need the distraction of managing a WAN infrastructure.”

(Breidenbach is a consultant and freelance writer in San Mateo, Calif.. She can be reached at SBreide@aol.com.)