Vanco plc is holding its 7th International Media Conference in the ancient city of Prague in the Czech Republic.
To my mind, the London, U.K.-based virtual network operator (VNO) exemplifies the word “paradox.”
• Vanco doesn’t own any network infrastructure at all, yet it offers customers access to what it calls the “world’s biggest network” – spanning 230 countries;
• Some of its biggest competitors – asset-based carriers – are also its principal collaborators and partners;
• It is self-admittedly “100 per cent technology and supplier agnostic”, yet harnesses am amazingly broad range of network technologies, and has assessed the technologies of more than 300 suppliers;
The Vanco conference flags off on Wednesday morning. But as I flew into Prague the previous afternoon, I had ample time to reflect on certain points of similarity, if you will, between a country called the Czech Republic and a company called Vanco.
In the Czech Republic, powerful regional sentiments that nearly two decades ago contributed to a country splitting suddenly and painlessly into the separate Czech and Slovak Republics still run strong.
Yet on the other hand, the country continues its integration at breakneck speed into the economic and social structures of a global economy, and visible signs of that transformation are witnessed everywhere. Street scenes are a kaleidoscope of colour, promoting products of an international economy long craved for by the Czechs.
This paradoxical quality – a strong regional focus coupled with an inexorable march towards “internationalization” – also seems to characterize Vanco’s business model and mandate.
Interestingly, the very first session of this Media Conference is titled: ‘The importance of global reach and local selection.’ The presentation will be delivered by Axel Freyberg, vice-president at global management consulting firm A.T. Kearney.
Of course, many industry observers will assert that in the past few years the emphasis has been on the first part: expanding global reach.
That’s not surprising when you consider the ground realities: the extraordinary growth in “foreign affiliates” of larger enterprises, and the opportunities and challenges this has spawned for providers of voice and data networks.
A case in point: the number of foreign affiliates of U.S. multinationals (MNCs) nearly doubled from 2003 to 2006, according to Millis, Mass.-based UniWorld Business Publications Inc., a directory publisher that maintains information on American and overseas firms operating internationally. (In 2003 there were 3,127 U.S. MNCs with 36,540 foreign affiliates, while in 2006 there were 4,112 MNCs with 60,159 foreign affiliates).
In Canada, more than 70 per cent of large enterprises have foreign affiliates.
Global reach – all the world’s my stage
With such ever-increasing globalization, it’s clear that providers able to offer network services to large enterprises across multiple geographies will have an edge. Larger enterprises are clamouring for communications infrastructure that is multi-regional, if not global.
Studies confirm what common sense already reveals.
A joint study by telecom market research firm Ovum (acquired by Datamonitor plc in December 2006) and EVUA, a non-profit global ICT network user group for multinational companies indicates that “global coverage” is vital to large MNCs.
The 2005 survey was conducted with a small sample of 42 members of the Enterprise VPN users association, each having telecom spending of more than US$10 million. It looked at usage of fixed, mobile, conferencing and outsourcing services. Top considerations cited by these companies included: cost, converged (voice/data) networks and geographic coverage.
More than half of MNCs polled by EVUA in survey conducted in October 2005 said they would prefer to source services to telecom companies providing end-to-end services rather than systems integrators.
Local selection – familiarity breeds creativity
A report on Global WAN provider share by analyst firm, Forrester Research in Cambridge, Mass. indicates that 48 per cent of this market is cornered by global network operators, 37 per cent by systems’ integrators, virtual network operators/global IT outsourcers and 15 per cent – regional network operators.
This again should come as no surprise given the premium placed on multi-country coverage by MNCs and large carriers alike.
However, as some industry insiders point out, regional providers often offer value that bigger operators cannot.
Vanco’s lead technical consultant Ciaran Roche (who will be presenting at the Prague Media Conference) made this point in a Web cast last year.
Domestic incumbent providers, he said, are generally able to implement new and innovative products before the larger global carriers. “The reason for this is they own the infrastructure. We’ve seen this with DSL. The DSL infrastructure is owned by the incumbent providers. The same goes for fibre-based products, such as Metro Ethernet.”
Notwithstanding their ability to create innovative offerings faster than global behemoths, the limited reach of regional network operators accounts for their relatively meagre marketshare. For large enterprises using their services there’s also the “nuisance factor” to consider – having to negotiate and sign discrete agreements with multiple small regional providers, which could be a time-consuming and potentially expensive effort. So is the choice then between “innovation” and “global reach?” Not necessarily.
Roche, for example, asserts that a virtual network operator (VNO) can offer clients both. The VNO model, he says, brings together a range of different technologies from a variety of regional providers – so larger enterprises can have access to “far more creative and cost effective” solutions.
At the same time, he says, the model takes away the complexity, cost and aggravation of negotiating separate agreements with regional carriers.
Best of both “worlds”
“Network density” is another value proposition VNOs such as Vanco emphasize a lot.
Their argument runs something like this: Large enterprises seeking to extend their global footprint have a couple of key options: either they opt for a large global operator with services across different geographies, or they go with multiple in-country providers to take advantage of the density of their networks.
While the latter option offers certain distinct benefits – a regional operator may have hundreds of points of presence (PoPs) in a country versus a global operator with only one or two – the downside again is you have to deal with multiple providers, manage an array of relationships, sign multiple contracts et al. By going to a VNO you can have your cake and eat it too. You get the network density you crave but leave the task of managing supplier relationships to the VNO. Heck, the VNO model, on the other hand, is completely based around supplier management!
And those are some of the arguments Vanco executives are likely to make on Wednesday as well.
Admittedly, the logic is compelling. But it’s well to remember the old adage about the proof of the pudding….
What I’d be most interested hearing are actual user case studies – enterprises that can demonstrate with facts and figures how opting for a VNO brought