IT will waste $100B on network overspending, analysts say

IT will waste an estimated US$100 billion over the next five years by overspending on network products and services.

That was the startling message delivered by Gartner analysts Mark Fabbi and Bob Hafner at a Gartner Symposium IT Expo presentation on network design. Fabbi created quite a buzz at the spring IT Expo when he told IT execs that Gigabit Ethernet to the desktop was a $10 billion waste of money.

He expanded on that premise to argue that network execs should only buy what they know they will need for the next two years, rather than buying more than necessary, just in case network requirements grow. More often than not, “just in case never comes,” said Fabbi.

He added that companies should use WAN optimization tools to reduce network traffic, rather than purchase more bandwidth. According to Fabbi’s calculations, WAN optimization tools can slash traffic by 60 per cent to 80 per cent. Of course, bandwidth needs will still grow by 35 per cent a year, but when you factor that in, the use of WAN optimization will allow a company to defer the purchase of additional bandwidth for 3.5 years.

Even though companies consider bandwidth to be cheap, mainly because they’re comparing today’s prices with what they were paying for private lines or frame relay, bandwidth is still a significant expense, Fabbi argues. He said companies could save $20 billion by tackling bandwidth costs.

Hafner added that companies should avoid spending money on things like IP phones with large display screens.

He said it makes more sense to buy the cheaper phone and take the $150 to $350 savings and use that money on unified communications applications that will make employees more productive.

Hafner said if you’re looking for a large display, it makes more sense to deploy a softphone that ties into the PC monitor. In fact, Hafner said that within 5 to 10 years, desk phones will be gone forever, so he’s recommending against making a huge investment in physical phones.

Another key area where companies can save money is by doing what Fabbi calls “bandwidth arbitrage,” which means that instead of running all WAN traffic over a service provider’s MPLS network, think about a hybrid approach that pushes more traffic over the public Internet. “The performance is not that different,” Fabbi argues.

He also says companies can save as much as $15 billion over five years by playing hardball with vendors.

Fabbi said companies which currently never look at alternatives to their current vendors should take a whole new approach that involves “making the vendors earn their business.”

Finally, Fabbi and Hafner say IT execs who save a big chunk of money on things like bandwidth should use that money on technologies like application acceleration, unified communications, mobility and voice over WLAN. “Don’t focus on a better network,” said Hafner. “Focus on a better business.”

Cisco CEO John Chambers delivered a keynote in which he said the company has saved $100 million in air travel expenses by switching to video-based collaboration. Chambers said he believes that “collaboration is the next frontier for productivity.”

Chambers was grilled by Gartner analysts David Willis and Tom Bittman, who wanted to know where Cisco fits into technology areas like virtualization, network management, middleware and services.

“I’m very proud to be a plumber,” Chambers said. He added that Cisco is staying out of areas like network management and services, focusing instead on virtualization, collaboration software, storage and mobility.

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