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Defining The Business Value Of Technology
February 7, 2000
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Vendors agree, judging by the mad scramble to carve out a share of the potential market. About 12 vendors are developing multiservice provisioning platforms. Some are startups such as Alidian Networks, Chromatis Networks, and Mayan Networks. Bigger vendors also are getting into the game by spending huge sums to snap up these fledglings. Redback Networks Inc. bought Siara Networks for $4.3 billion. And Cisco Systems recently spent $6.9 billion for 300-employee Cerent Corp. In fact, Cisco has dished out nearly $10 billion for seven optical networking companies--and says it's not done yet. "We plan to make multiple acquisitions to ensure that we have the right portfolio of products," says Graeme Fraser, VP and general manager of Cisco's optical internetworking business unit.
This new optical gear is different from the conventional Sonet equipment that has been around since the '80s. That Sonet gear was designed to carry voice; the new optical products are designed to carry all types of traffic. That reduces the need for asynchronous transfer mode or routers to be installed in networks, allowing carriers to deliver faster services, more quickly, and for less money. Services based on multiservice provisioning platforms should give customers three benefits: better price/performance, low latency, and flexibility.
Most service providers haven't decided on prices, but the prospect of incredible deals is indicated by Swedish startup carrier Bredbandsbolaget AB. It's already run trials of a service that offers TV, telephony, and game and software rental over the same wiring. Commercial services are scheduled to start next month. The carrier runs fiber into basements of buildings, with dedicated 10/100 Mbps Ethernet connections to apartments. Users pay $25 a month, less than the cost of their phone lines, for the connection and Internet access. "It's very much a loss leader," says Bredbandsbolaget CEO Peter Ekelund. But he expects to profit on the services and information offered over the links.
It's unclear whether businesses can expect such bargain rates. Gullqvist told carriers bidding for his project that he expects them to use optical technology to double the bandwidth they provide every 18 months--without raising prices.
Gullqvist plans to connect branch offices at 34 Mbps, rather than the 64-Kbps lines used today. "In the past, we've struggled to develop applications to minimize the use of the wide area network," he says. The increased bandwidth will let Swedbank use video to promote sales, train staff, and provide access to experts for advice on pensions, life insurance, and investments.
Low latencies also are key to Gullqvist's strategy, because they will let him centralize interactive applications. Users in branches will access them via Java clients. "It's a dream for me," he says. It will eliminate monthly software upgrades to the bank's PCs, which cost $50 million a year. Instead of branch staff having software on their own PCs, they'll access it on a central server. This means the bank only has to upgrade software on the central server--not on thousands of PCs in branch offices.
The third big benefit, flexibility, stems from service-provisioning software. Vendors of multiservice provisioning platforms are working on features that will let carriers allocate capacity from a console in minutes. That's a major consideration for businesses that want to order new lines or make changes to their service agreements. With traditional optical networking equipment, bandwidth is nailed down in fixed circuits. It can take days to go through every node and change circuits in each device.
Bear in mind that this new carrier gear also incorporates switching and routing functions--meaning that there's no need for additional technology to provide frame relay, virtual private networks, or telephony.
Service providers also plan to use the optical equipment in their ASP strategies. It's a logical move. ASPs such as Corio, EDS, and Portera Systems are making inroads, but their success is limited by the amount of bandwidth available.
By massively increasing that bandwidth and virtually eliminating network delays, optical networking could galvanize the ASP market, analysts and users say. Optical networks should open ASP services to a whole new market: big business. "ASPs have found that running the current generation of business applications over the wide area network is problematic," says Meta Group's Sholler. But boosting bandwidth will let ASPs offer quality-of-service guarantees. "Bigger companies demand quality of service. When they get it, they'll dive in," he says.
ASPs agree. "There's no doubt that we need more bandwidth. The public network infrastructure poses a challenge, especially in the metro area, which is a huge choke point," says Amit Jasuja, Corio's senior director of system engineering. "Businesses will feel happier when they click on an app and it launches in three or four seconds."
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Illustration by Campbell Laird
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