The global IT spend across enterprises, governments, and SMBs was estimated (from various sources) to be a whopping $1.4 trillion on a global basis in 2004. Only three percent of this amount was for networking equipment and yet, the strategic importance of networking goes well beyond this. Networking is central to CIO priorities of doing more with less across IT, enhancing employee productivity, and strengthening customer engagement.
The enterprise segment is diversified, ranging from single site businesses with a few employees to multinational corporations and national governments. So theres no such thing as a typical IT budget across these diverse environments, but there is value in looking at the distribution of global IT spend as a surrogate for an enterprises IT budget, with the intent of better understanding how IT costs can be reduced.
Attacking The Monthly Bill
Roughly one-third of the global IT spend is paid to service providers. Two-thirds of this is for traditional services, such as inter-site and public phone calls, including 1-800 number and calling card, Internet access, and inter-site connectivity frame relay and leased lines. The other third and growing portion is for cell phone charges. There are three major implications.
Firstly, converging all forms of traffic onto a properly engineered and designed converged IP network can shift the task of finely engineering multiple networks to minimize the bandwidth costs to optimizing the price/performance of a single network. Even if you are paying a penny a minute for voice today, saving half a cent per minute can put money in your pocket if you have a significant amount of monthly call minutes.
Secondly, further efficiencies can be achieving by performing WAN optimization through the intelligent deployment of QoS mechanisms, application-aware dynamic routing, and compression at the link, network, or application levels. Saving 10 percent of your monthly bill by investing in WAN optimization in your edge device (e.g., a Secure Router) can drive a fairly straightforward business case through reduction in bandwidth costs or deferral of new bandwidth procurement. There is an added bonus, particularly if such WAN optimization results in increased WAN reliability and faster recovery from network failures.
Thirdly, cell phones have become indispensable to business, and will continue to grow in importance with the introduction of third-generation broadband mobility (e.g., EV-DO, CDMA wideband, WiMAX, metro WiFi). As a result, there is tremendous pressure on IT to gain control over cellular costs whether paid for directly by IT or personally expensed by employees. Given that it is estimated that over 50 percent of cell calls are made or received from inside buildings, the marriage of voice and enterprise WLANs and so-called dual mode devices have created an opportunity to substantially lower these cell costs. Dual mode mobile devices allow you to use the public network when on the road, and then to use the enterprise wireless LAN network when within buildings. This will result in better coverage within buildings than available from cell networks, seamless roaming, and an opportunity for more consistent user experience (e.g., single mailbox and enterprise feature operation) across public and private
environments).
Server Centralization Over Converged Networks
Approximately twenty five percent of the global IT spend is spent on software and hardware, including PCs, servers, and storage. Not only does this expense drive traffic and rely on secure, reliable connectivity, but there are two significant opportunities to lower the investment in these elements through networking.
Firstly, with convergence, the enterprise has one network to build, secure, and make reliable in support of voice, emerging real-time converged communications and mission critical data (including storage) applications. Having a single higher speed network with QoS creates opportunities for centralization of data centers and storage facilities. Worried about application performance, business continuity and regulatory compliance? The answer lies in integrated server/optimization solutions that accelerate applications including e-mail and file sharing, provide in-flight encryption for enhanced regulatory compliance, and deliver business continuity via effective desktop backup and recovery capabilities. Centralization delivers economies of scale by requiring fewer servers, better management of software licensing and more effective operation.
Secondly, the distributed nature of IP Telephony also creates an opportunity to follow a similar model for voice, eliminating the traditional nodal deployment of voice systems. Contact centers can also be virtualized with servers located in data centers and agents distributed through IP telephony. Centralization of IP Telephony is consistent with the trends to mobility and enables disaster recovery/business continuity.
Networking: A Utility for Users and a Strategic Asset for the Business
Budgets are flat, while overall complexity, traffic, applications and security threats keep growing. While the acquisition of networking technology may represent a small part of the overall IT budget, this investment can help reduce overall bandwidth and computing costs, while improving performance. These freed-up resources allow enterprises to address strategic imperatives that transform the business through real-time converged communications and stronger customer engagement. IT
Tony Rybczynski is Director of Strategic Enterprise Technologies at Nortel (quote - news - alerts). He has over 30 years experience in the application of packet network technology. For more information, please visit www.nortel.com.
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