InformationWeek

October 19, 1998

The Cost Of Networking

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Illustration by David Flaherty

Reynolds Metals Co., a maker of aluminum products in Richmond, Va., also runs SNA over IP. "We still support SNA, but we've worked away from SNA as a protocol," says Tom Smith, Reynolds Metals' manager of network infrastructure operations. With TCP/IP on the mainframe, the amount of SNA that the company runs has been dramatically reduced, Smith says. But the major downside of TCP/IP is there is no quality-of-service capability that can give designated traffic higher priority. "We can't prioritize, and we can't do the quality-of-service management that we can with SNA," he says.

As a result, there is no way to keep Reynolds Metals' low-priority E-mail, file transfers, and Web browsing from interfering with important terminal-emulation applications. When the company completes its planned implementation of enterprise resource planning software from J.D. Edwards & Co., there will be no way to give that priority either. Reynolds Metals is looking into various options to prioritize traffic, but Smith says he fears that by doing so, the company will have to give up some of the gains from reducing the number of networking protocols supported. "We are about ready, unfortunately, to reintroduce some complexity by introducing the technology that will enable us to do quality of service over TCP/IP," Smith says.

Practical Solutions
Is corporate networking bound to be an expensive, complex operation, or are there ways to gain the benefits of enhanced networking technology without big increases in complexity and spending? One option is to outsource the entire WAN to a third party. Of 250 companies recently interviewed by CIMI Corp., 30% reported declines in worker costs because of network outsourcing, says Tom Nolle, president of the Voorhees, N.J., consulting firm.

But outsourcing comes with its share of problems, says Compass America president Alan Gonchar. "It's not a silver bullet," he says. Companies tend to underestimate the time and expertise needed to manage an outsourced arrangement, he says. There must be a way to separate networking into measurable pieces, such as the cost of management and the cost of transport. That way, customers understand the cost structure of each and don't subsidize one with the other, Gonchar says.

A variant of this strategy is to outsource parts of the network. Southern New England Telecommunications in New Haven, Conn., outsourced its data center and then tried to outsource its desktop services, but quickly pulled back. "We underestimated the impact on our customers, the end users of our internal network," says Richard LeFave, VP and CIO of SNET. "So we gave responsibility for support to the individual LAN administrators in each geographic location. We've seen that pay back tremendously in terms of customer satisfaction."

With that lesson in mind, SNET decided not to outsource its WAN. Instead, it outsourced procurement, which is the best part of outsourcing in terms of costs, LeFave says.

Single-Vendor Strategy
As with desktop software and hardware, most companies are trying to realize efficiencies of scale by standardizing network technologies. These efforts range from standardizing on network server operating systems and network-management tools, to choosing enterprisewide protocols and physical-layer connectivity.

In the near term, standardization can raise costs, says Winstar's Kudel. For example, a company might have to retrain staff or be forced into layoffs. However, in the long run, most of the executives interviewed for this article see standardization as a big step toward containing costs by reducing complexity and cutting support time.

Standardization should accompany any planned increase in network capacity, says PG&E's Keast. "Once you start adding capacity, the more standardized you are, the better," he says. "The fewer the different technologies you have to upgrade, the less complicated your life will be."

Reynolds Metals downsized last year. Among the cost-cutting moves, it reduced the number of network protocols and standardized on switched Ethernet for the LAN. Reynolds Metals is also replacing its Fiber Distributed Data Interface backbone with high-speed Ethernet and its desktop token-ring switching with 10/100-Mbps switched Ethernet.

Reynolds Metals consolidated on single vendors as well: AT&T for its WAN and Bay Networks Inc. equipment for its LAN and WAN. "As long as the vendor has an enterprise view, and isn't just a box vendor, then it makes sense," Smith says. Operations people have to worry about only one network-management platform, he says, and the company gets better discounts on purchases and maintenance because it has more leverage with the vendor.

Smith admits that the downside to such consolidation is dependence on a single vendor. "You do need to re-examine the decision every so often," he says. "But in the short term, if you keep bringing in new vendors, you will drive your costs up."

Commercial Financial Services has consolidated on Bay Networks for LAN equipment. Bay bears full responsibility if something goes wrong with the equipment, CFS CIO Horrocks says. "Blame management" is one of the best reasons for opting for a single vendor, he says.