InformationWeek

October 19, 1998

The Cost Of Networking

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Illustration by David Flaherty

The prospects for controlling future spending differ by industry. For example, New York law firms have stopped investing in their networks, says Mark Kudel, executive director of strategic planning and product development at Winstar Broadband Professional Services, which designs and implements networks. "Probably 90% of the top 20 to 30 law firms intend to do very little to expand bandwidth because they have just spent a lot of time and money upgrading their environments," he says.

But it's different in financial services where projects are expanding. "There's a great deal of fat in some of those budgets," Kudel says. "They seem willing to spend the money. The idea is that the network has to be as fast as possible."

Costly Complexity
Upgrades frequently result in complex networks that are more expensive to run. The problem isn't so much due to a router or switch's occasionally breaking, says John Keast, CIO of PG&E Corp., a San Francisco utility, but the sensitive technical configurations and all the software inside these devices, along with the need to deploy multiple pieces of equipment across a broad geographic area. The quirks of internetworking, plus the behavior of different configurations and revisions of software, make for a lot of uncertainty. "One day, everything is fine," Keast says. "The next, you can't send a file bigger than so-many megabytes. It's those things that really drive you crazy."

The LAN-WAN interconnect is the point of greatest complexity--as the data coursing through big LAN pipes gets squeezed into narrower WAN links. Typically, the LAN staff and the WAN staff are separate; the WAN might even be outsourced. That leads to organizational issues that can waste time and money.

"A lot of trouble-shooting ends up with people pointing fingers," says Occidental's Settle. "They go to great lengths to prove why they are not the problem, the other people are."

Staffing to maintain and trouble-shoot complex networks has become a major part of the network budget. A third of the network budget goes to staffing, according to 150 IT managers in an InformationWeek Research poll earlier this year.

Once a company makes the initial capital investment in its network, "then the major cost is labor to manage and support that investment," explains Mark Mooney, chief technology officer at Houghton Mifflin Co., the Boston publisher. "It's very critical how you make that initial investment."

People costs tend to creep up over time. "Staffing levels are at their ultimate efficiency just following an upgrade or a new installation," Winstar's Kudel says. "Through the upgrade process, the efficiency of the entire environment improves. Some people who don't want to learn the new environment leave. The new environment is standardized, and the support staff is lean at that point."

Gradually, Kudel says, new applications pop up, become more prevalent, and then have to be supported. People are brought in on a temporary basis to support them. "After a while, they become part of the full-time administrative staff," he says. "So the administrative staff tends to bloom."

For many large enterprises, business-critical traffic generated by applications running on mainframes and minicomputers is still carried by Systems Network Architecture, the seven-layer WAN protocol IBM created in the 1970s. Nearly 40% of the 150 IT managers polled by InformationWeek Research say they are running SNA.

Other legacy protocols, such as DECNet and NetBios, and talky protocols such as AppleTalk, are being phased out as companies consolidate on IP, but many companies have no plans to ever stop using SNA. "There will always be an SNA network at Norwest," says David Grabski, senior VP of networking and distributed systems at Norwest Corp., a banking and financial services firm in Minneapolis. Others, such as Entergy, plan to phase out SNA over time.

bar chart

In the meantime, companies have to eat the costs of running two networking infrastructures. "Most companies still have a hard-core component of SNA costs that won't go away," says Nick Wray, network consultant at Compass America Inc., an IT benchmarking firm.

Companies that plan to keep some SNA can run part of that traffic over their IP networks. Norwest's mainframe front ends are being replaced by Cisco routers, and TCP/IP stacks are being installed in the big iron so that SNA traffic can run natively--and faster--over TCP/IP, rather than in encapsulated form.