LAN outsourcing model becoming popular option

The LAN is the new WAN.

With the increasing popularity of applications such as VoIP and mobility, LANs are getting so complex and so critical that companies are increasingly handing them over to an expert to run.

Sales of LAN management services by carriers such as Verizon Business and AT&T as well as systems integrators such as IBM and EDS are rising at a fast clip. Managed LAN services are growing hand in hand with LAN design and implementation services and managed WAN services.

“Clients are increasingly looking at their networks as enablers of global transformation,’’ said Warren Hart, vice-president for Integrated Communications Services, Strategic Outsourcing at IBM. “We’re seeing clients really shifting their view of the network. The network is now like electricity. You turn on the switch, and it’s on.’’

Insight Research estimates that the U.S. market for managed LAN services will more than quadruple from US$2.6 billion in 2006 to US$11.3 billion in 2011.

“Metropolitan Ethernet services, IP telephony, IP PBXs and management of campus wireless access points will drive new traffic into managed service providers’ networks,’’ said Robert Rosenberg, president of Insight Research Corp.

Indeed, 2007 could shape up to be the year of the LAN. A September 2006 study by Forrester Research found that more than half of North American and European enterprises plan to refresh their LAN infrastructures in the next two years. The Forrester study found that more companies are investing in LAN technologies such as virtual LANs, application acceleration and port-based authentication.

As companies start to tackle LAN infrastructure upgrades, more of them are deciding to outsource LAN management. Among the companies that use managed LAN services are Lexmark , ABN Amro Bank , Cigna and Kraft Foods.

A network upgrade is what prompted National American University (NAU) of Rapid City, S.D. to outsource management of the LANs at its 14 locations. In 2005, NAU migrated from an aging frame relay WAN with a hodgepodge of LAN technologies to an all-IP MPLS network with a standard LAN configuration.

NAU hired Verizon Business to upgrade and manage its entire network, including WAN and LANs. Verizon Business provides network monitoring, maintenance, repairs, traffic analysis and reporting.

“Verizon already was going to be managing the routers and the WAN. We thought it made sense to extend that and have them manage the entire WAN/LAN infrastructure,’’ said John Buxton, director of system information technology at NAU.

NAU spent around US$35,000 per site for the upgrades and an additional US$2,500 per site in ongoing monthly fees.

NAU has 1,000 users on its network, including employees and students. The network’s key applications are student records, online courses, e-mail, Web and VoIP. Moving to VoIP was a big driver of NAU’s decision to outsource LAN management.

“When we started this upgrade, every campus had a different network and every campus had a different phone system,’’ Buxton said. “Now we have a consistent VoIP structure throughout the entire organization. I can four-digit dial anyone at any location.’’ By outsourcing LAN management, the fast-growing university has been able to hold down the size of its central IT staff to eight people.

“Cutting people was never part of our goal,’’ Buxton said. “It was more of our goal that if we offload LAN management, then we can take our IT resources and reassign them to other projects.

“What we were doing was never about reducing employees but about providing better service and better utilizing the resources we have.’’

With Verizon handling LAN management, NAU has been able to cut down the time it takes to fix problems at its campuses in South Dakota, Minnesota, Kansas, Missouri, Colorado and New Mexico.

“The issue was that when we had problems with the LAN equipment at a remote location, the time to diagnose and fix it was so high,’’ Buxton said. “Before it could take a day or two to fix it. Now when something happens, it’s resolved within an hour.’’

NAU also can roll out IT systems at new locations at a much quicker pace. The university is opening a new location in Austin, Tex. this year.

Another benefit of offloading LAN management is the improved audit trail for LAN configuration changes.

“We don’t even have access to the equipment anymore,’’ Buxton said. “We can log in [to the portal] and request configuration changes at one of our sites. They have a technician that goes in and makes the change. We have an audit log of all changes that are made. We have better controls than we had before.’’

NAU is not alone in its decision to outsource LAN management. Industries across the spectrum — financial services, healthcare, manufacturing and retail — are choosing to outsource LAN management.

Experts say the shift toward managed LAN services has occurred in the last 18 months, as more companies are looking to add VoIP, wireless, streaming video, collaboration and other demanding applications to their LANs.

“A few years ago, a LAN was a fairly well-defined entity. It usually existed within the four walls of an office, and it primarily handled data access to internal resources,’’ said Meryle Rosenfeld, product manager for managed LAN services at Verizon Business.

“The number and types of applications that are moving across the LAN infrastructure have changed considerably. And the complexity of managing that, of ensuring the quality and performance and uptime, have caused many to begin to look at [outsourcing],’’ Rosenfeld added.

Rick King, vice-president of packet and managed services for AT&T, said LANs used to be inexpensive, so companies just over-provisioned them. Now LANs are getting more expensive for companies to buy and manage themselves.

“What drives outsourced managed service is two things: One, the complexity of the environment and the skill set required to manage it. The other is the cost of the environment,’’ King said.

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