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Feature Article
July 2003

Tony Rybczynski photoMaking Business Realities Work For You

Part VII: How to satisfy exponentially growing user requirements with ever-shrinking budgets and headcount.



Business Reality: You have to do more with less.

In the dark days of a three-year slump, every IT organization has felt the pressure to: (A) respond more quickly to (B) constantly changing demands with (C) higher-performance networking, while (D) trimming workforce and costs by as much as 30 to 40 percent. The old adage used to be, �Fast, cheap, quality; pick any two.� Now it�s, �Deliver all three -- plus a fourth, adaptability, and a fifth, profitability.�

That�s right, profitability. In an Information Age economy -- where information is the value-add, and not just a by-product of business -- executives are looking at IT in a new light. Could the network be doing more? It supports business functions, but could it also be creating new revenue and productivity gains? Could it be revolutionizing the very nature of how business is done and how information about suppliers and customers is shared and used?

Businesses haven�t traditionally been thinking this way about IT, but now CIOs are challenged to transform their cost centers into revenue centers, and to use the network to drive employee productivity and new business opportunity.

CIOs face several difficult challenges in this regard. For one, IT organizations don�t have excess idle capacity to support new strategic initiatives, such as multi-channel customer care, wireless eBusiness access, data warehousing, and collaborative tools. They�re already expected to support a growing number of enterprise-wide applications while facing drastic budget restraints. Second, IT staff are already stretched to the limits with the daily tasks of managing, upgrading, and engineering their networking and computing environments. It�s not getting any easier to train and retain skilled staff to run these complex IT environments.

Technology Response: Deploy network solutions that pay for themselves.

Consolidate servers. While 15 to 20 percent of the IT budget is typically allocated for in-building and wide-area networking, the vast majority goes into desktop computing, servers, storage, I/O, and applications -- and the staff to support them. Many enterprises have deployed highly distributed client-server architectures, with one or more servers at each site. When bandwidth was expensive, network latency was high, and processing/storage capacity on computers was expanding as fast as prices were shrinking, this distributed strategy made sense, even though it meant a lot of redundant servers.

Times have changed. Bandwidth for the buck has risen so dramatically that IT organizations should reconsider historical assumptions and revisit the economics of networked computing models.

According to IDC and HP/Compaq, consolidating servers at regional and central sites can reduce support staff costs by 7:1 and overall costs by 20 percent to 40 percent. For example, if it costs $2,000/month for remote server maintenance for 50 remote sites, you could be trimming $1.2 million from the budget by consolidating those servers into a central data center and providing browser-based access to applications. Most enterprises have undertaken some level of data center consolidation, but the norm is still to have widely distributed print, e-mail, and file servers. The new model brings the user to the application instead of bringing the application to the user -- and slashes total application costs by 25 to 35 percent, according to Gartner Group.

This new model capitalizes on a high-performance, application-optimized infrastructure, such as Optical Ethernet interconnecting metro sites. By providing efficient, low-cost bandwidth for server centralization, Optical Ethernet has demonstrated a 33 percent reduction in operating costs, four percent reduction in total cost of ownership (TCO) for metropolitan-area networks, and five to seven percent savings in overall metro IT budget.

Need to trim the budget even more? Store and distribute content more effectively with content switching technology in the data center, and with content distribution networks. Intelligent load-balancing improves server utilization and application reliability; IP security services enable confidential transactions to traverse efficient IP networks; and SSL acceleration mitigates the performance penalty normally associated with that security. Content distribution networks manage information caching to improve both user and network performance. One online retailer used Layer 4-7 intelligent content-switching and load balancing to achieve a five-month payback, while increasing Web server performance and utilization and raising service availability to 99.999 percent. One of the world�s largest multi-service financial institutions recouped its investment in six multi-Gbps switched firewalls in only nine months.

Looking to trim the cost of customer care? Take advantage of interactive voice response (IVR) systems, which now use advanced speech recognition, tailored scripts, and other sophisticated features that make them not only tolerable, but preferred for many uses. In fact, IVR systems are key enablers for the �engaged� business model. Using an IVR solution for customer self-service, a major brokerage trimmed agent hours by 50 percent while handling four million quotes per month -- and recouped the cost of the system in only 10 months. This is just one example of how technology can lower the cost of serving the customer, while delivering superior service.

Are you finding that bandwidth requirements double about every 12 months, while your annual budget decidedly does not? If more traffic than ever heads out across the network instead of staying in the LAN -- and it�s getting too expensive to feed the bandwidth hunger of all the network�s users, converge networks. You can dramatically lower the cost per Mbps by converging onto one high-performance, application-optimized network that eliminates boundaries between services, users, and locations.

A converged network offers a consistent experience no matter where users are or how they access the network. It enables your organization to engage with customers, not just react to them. It streamlines every aspect of operations, administration, and maintenance. A simpler network means fewer boxes, simpler network design, and easier network installation and maintenance. Convergence also opens the door for improved collaboration across an increasingly distributed work force.

The ultimate converged network consists of two major elements:

1. Optical networking natively transports Ethernet traffic among major metropolitan sites, and storage traffic among data centers; and

2. IP VPNs provide secure connectivity for remote user and remote-office access.

Storage Area Networks and IP VPNs pay for themselves both in dollars and peace of mind. For example, although the events of 9/11 destroyed billions of dollars in IT technology, there was no reported loss of financial data, thanks to metro DWDM systems that enabled real-time mirroring of content on backup data centers. One large insurance company repaid its investment in secure IP VPN gateways in less than six months and saved $7 million annually by providing remote access VPNs for 25,000 employees. A customer business case for remote office intranet VPNs shows savings of 67 percent, compared to upgrading routers with IP VPN capabilities.

If you need immediate gratification toward reducing total cost of ownership, implement IP telephony. The foundation of engaged applications, IP telephony lowers capital and operating costs by converging disparate voice and data networks into a single, multi-service network with a communications server at its center and Web-based network management. For example, by deploying a VoIP office-in-a-box to converge its communications infrastructure at the branch level, a regional bank enhanced business agility and reduced overall expenditures by more than 30 percent.

Calculating The ROI -- In Dollars And Sense

In today�s budget-lean environment, IT investments must be justified with sound business-case reasoning, not just for technology�s sake. Yet the ROI calculation must also consider the high cost of maintaining the technology status quo.

Today�s user experience, built around today�s network solutions, can be frustrating and incredibly non-productive at times. Connections are slow, hung, or dropped. Data is lost or must be re-entered after lost sessions. Desktop computers freeze and have to be rebooted. Root causes range from misconfigurations, desktop OS and application interactions, insufficient support skills, sluggish networks, and more. Root results range from frustrated employees and disgruntled customers to overall loss of productivity and revenue.

It�s time to exploit technology advances to deliver better network performance and better service -- while simultaneously reducing costs. Innovations in multimedia packet networking have fundamentally reshaped the economics and possibilities of enterprise network computing. Take advantage. Your competitors probably are, or soon will be.

A converged network that uses Optical Ethernet and IP VPNs lowers lifecycle costs by simplifying the network from LAN to MAN/WAN to the Internet, and by driving down cost per Mbps. Add up the efficiency and productivity gains from load-balancing, content caching, server acceleration, server and storage consolidation, Web application delivery, and IP telephony -- then add bonus points for lower software licensing fees, better resource utilization, and lower operations cost.

It starts to look like real money, easily doubling strategic funding available for new strategic initiatives. What you do with the savings is up to you. Let business realities work for you.

Tony Rybczynski is director of strategic enterprise technologies for Nortel Networks with 30 years experience in networking. For more information, visit the company�s Web site at www.nortelnetworks.com.

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