Printer Friendly

The outsourced alternative: the distributed enterprise model presents technical challenges met by managed IP services.

Enterprise IT today faces dual challenges: expanding networking capabilities to support strategic corporate initiatives aimed at boosting productivity and customer responsiveness, while simultaneously holding down IT labor and operational costs. To meet these challenges, enterprises of all sizes are increasingly looking to managed IP services as a means to connect multiple remote sites, supply chain partners and mobile workers without having to take on additional management burdens or capital expenses.

The nature of this challenge can be expressed using two concepts--the real-time enterprise (speeding up enterprise processes and increasing productivity) and the extended enterprise (connecting remote sites, mobile workers, customers and partners).

The technical challenges faced by IT departments attempting to implement the real-time and extended enterprise are significant. IT resources are being called on to scale support of dynamic IT needs out to the corporate "hinterlands"--not only remote and mobile workers, but smaller and more remote sites, as well as smaller participants in the supply chain. In fact, many enterprises today are pushing business intelligence out to the point of interaction with the customer (e.g., gas station, bank branch or ATM machine, restaurant, store, pharmacy).

These locales are typically underserved in terms of bandwidth, as traditional WAN services like leased lines or frame relay are too expensive to deploy. Affordable broadband, especially DSL, is an option, but broadband alone simply offers access to the public Internet--it requires security, reliability and integration to become an integral part of the corporate-class WAN.

Yet, at these smaller sites, there generally is no resident IT staff to contend with installing, configuring, managing and maintaining complex equipment or networking technologies. This situation is compounded when the corporate-class WAN is also expected to extend out to gas stations and ATM machines.

Sparked by the availability of affordable broadband, and exploiting the economics and operational efficiencies of delivering advanced corporate-class services from the cloud, service providers are rolling out a host of services addressing the needs of today's real-time and extended enterprises. These services, including VPN-enabled broadband, integrated Internet access and extranets, combine network-based firewalls, IPSec and MPLS VPN technologies, and virtual routers to connect islands of broadband-enabled sites into the corporate WAN.


A virtual router, which is software that emulates a physical router and serves as the foundation upon which additional services are layered, is one of the newer technologies being used to implement managed services. Virtual routers, located in carrier-class service switches at the edge of a service provider's network, function as both an edge router and the managed service-creation mechanism. This technology makes each company's services fully customizable and isolates network users from one another to optimize IP service performance.

One new service being enabled by virtual muting is the routed private network (RPN). With RPN, enterprises connect all their sites into the service provider's cloud, where the customer's virtual router serves not only the firewall and VPN connection functions, but also provides the private routing. The customer not only VPN-enables all its locations, selecting the right type of access link from dial-up to ATM for each site, but also gains the benefits of a fully routed WAN backbone--without having to add staff, expertise or complex equipment.

Retailers represent one of the potential beneficiaries of the outsourced network model. They typically feature many small sites with little to no IT expertise on site and a limited staff to manage IT operations among all their locations.

The Cooker, headquartered in Nashville, Tenn., faced just such a challenge in streamlining its operations and creating a system where information could be exchanged and decisions made in real-time. This restaurant chain, with locations in the southern and midwestern United States, relied on traditional dial-up connectivity to connect its 33 sites. The firm's largely paper-based system of ordering supplies meant that managers spent an inordinate amount of time taking inventory and attending supply meetings.

Connectivity was an issue, as well. The Cooker was paying about $2,000 per month in long-distance telephone charges to maintain two phone lines at each site--one for credit card transactions and the other for faxing supply orders.


The company realized it needed to create a real-time and extended enterprise for exchanging information more effectively and to increase productivity across all its retail outlets, and decided to implement an RPN. The restaurant chain's fully managed, access-agnostic network now uses a combination of DSL, and to a lesser extent other access services, to connect all the sites to headquarters via a hub-and-spoke architecture that terminates at its service provider. When evaluating alternatives, IT staff determined that frame relay options were more expensive while providing less functionality: approximately 25-30% more costly per month for 56K speeds, and initial capital estimates of $130,000 for frame relay equipment vs. $26,000 for the RPN equipment.

The company's virtually paperless new system lets managers connect directly with six major suppliers like Sysco and Office Depot, placing orders as necessary rather than having lengthy supply meetings and placing orders in bulk. Moreover, this high-speed, "always on" network enabled The Cooker to eliminate its two phone lines per site.

The company now uses its outsourced network for executing all point-of-sale transactions and for storing corporate materials in a central public folder that can be accessed any time by managers at each site. Not only are all of these capabilities implemented without the need for more IT staff or resources, the entire network is managed 24/7 by the service provider.

In a different model for manufacturing, carriers are hosting supply chains that link everyone from small and large vendors directly with their volume customers. Traditionally, facilitating electronic data interchange and secure communications between large manufacturers and their supplier and distributor partners was the exclusive domain of large, expensive and proprietary value-added networks (VAN). While this provides one mechanism for supply-chain integration, it has traditionally presented a high cost of participation for smaller partners, reducing their ability to compete against larger competitors. This network structure is changing, as service providers have stepped in to support value chains that sideline the need for VANs, lower the cost of participation and allow smaller partners to compete on equal footing.

The automotive industry, where half of the top 10 automakers are using a network-based extranet service, is an example of the benefits managed services offer the real-time, extended enterprise. NTT provides the Japanese Automotive Network Exchange (JNX), a centralized network connecting hundreds of partners to some of the largest automobile manufacturers in Japan. Smaller sites leverage IPSec-enabled DSL, while larger sites use MPLS to the service provider's cloud, which also features network-based firewall protection.

Unlike VANs, which sit outside the supply chain and charge participants based on usage, NTT's service sits at the heart of JNX, providing participants with a centralized, uniform, yet more affordable system. The participants have received all the IT streamlining benefits anticipated from Internet-based supply chains, without the auto manufacturer having to assume the operational burden of integrating, securing and managing the system.

Although dramatically different in terms of organizational structure, these examples illustrate how enterprises can leverage managed services to boost productivity and customer responsiveness via the real-time and extended enterprise.

For more information from Cosine Communications:

David Messina is vice president, product management and marketing, CoSine Communications, Redwood City, Calif.
COPYRIGHT 2004 Nelson Publishing
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2004 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:Outsourcing
Comment:The outsourced alternative: the distributed enterprise model presents technical challenges met by managed IP services.(Outsourcing)
Author:Messina, David
Publication:Communications News
Geographic Code:1USA
Date:Jul 1, 2004
Previous Article:Consider remote-control options.
Next Article:The business case.

Related Articles
Global outsourcing of CRM: techniques and trends. (Outsourcing).
Push or pull?
Enhancing service and reducing costs with the IP-based virtual call center.
Servicing's next phase: the servicing business is moving into a new phase where outsourcing becomes central and business process management is key....
Networks move out.
Trends in WAN outsourcing: considerations reach beyond the perceived associated cost and risk factors.
MSPs on stage.
Reduce risk and complexity.
The PCB design outsource proposition: is outsourcing the right solution for your company?
The PCB design outsource proposition: is outsourcing the right solution for your company?

Terms of use | Privacy policy | Copyright © 2019 Farlex, Inc. | Feedback | For webmasters