Wasted network spending estimate tops US$130B

When most people find more money, it’s good news. When Bob Hafner finds money, it’s bad.

That’s because the Gartner analyst is part of a team that calculates the amount of money network managers around the world waste in buying technologies they don’t need, misuse or put in the wrong place.

A year ago he estimated it came to US$100 billion over the five years ending 2010. Going over his figures recently he “ended up finding quite a bit more money.”

The latest estimate is US$130 billion over the five years ending in 2011, up significantly from the previous figuring of wrong-headed buying the research company claims IT managers make.

These range from throwing away US$20.3 billion on IP phones with small monitors for telephony for all staff when simple handsets will do for most of them to blowing away $US10 billion by unnecessarily running Gigabit Ethernet to every desktop in an organization.

Where did that extra US$30 billion come from? Some of it is that the cost of GigE switches has not fallen as fast as Gartner thought, “so the cost is much worse than we even thought,” he said.

Another $2 billion came from the realization that that GigE uses more power than 10BaseT. So those unneeded switches add to the electric bill. Similarly, an additional $1 billion in unnecessary electric costs got added because some of those wasteful IP screen phones use Gigabit Ethernet.

A further US$6.5 billion was added when Gartner figured that much could be saved by organizations moving to IP trunking – assuming, Hafner admits, it’s offered by a local service provider. Finally, poor negotiating with vendors or suppliers will result in US$25 billion in overspending, up from the original $US15 billion estimate.

Some estimates haven’t changed. Hafner and his colleagues believe that organizations around the world could save a total of US$20 billion by using WAN optimization products to boost bandwidth. Such technologies can achieve reductions in network traffic of at least 60 per cent, Gartner believes, delaying bandwidth upgrades for almost three years.

Making the network more reliable by taking full advantage of the Internet as an alternative to private services could generate another US$35 billion in savings, it says. In an individual company “these are not huge dollars,” Hafner said, “but they all add up.”

“It’s paying $35 to $50 more per Ethernet port, it’s paying $75 to $100 for a Gigabit phone and then paying an up to $300 extra for one with a big screen on it.” He estimates an organization could save 10 per cent of its network spending by moving to the Internet from private WAN services. “In an organization that spends $10 million on network services that’s $1 million a year.”

“You’re probably are going to still spend the money (saved), but spend it on things that are of more value to you,” such as network automation.

His point is IT and network managers have to reassess how they spend: Don’t upgrade to your favourite vendor’s newest product automatically; align your spending to the CIO or CEO’s priorities; look to a broad business view of the network and not on specific technology solutions; determine a single, clear benefit of unified communications applications to justify them; and install wireless LANs not to save money but to improve staff mobility.

Through 2011, companies will pay an extra 20 to 50 per cent for technology features they’ll never use, Gartner estimates.