InformationWeek
Defining The Business Value Of Technology
February 21, 2000
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Rite Aid evaluated various options for its broadband data needs before deploying the VSAT system, and has reexamined its choice regularly. "Satellites have turned out to be a much more cost-effective technology than any of the land-based alternatives," Whiting says. He adds that his analyses consistently show the satellite system is half as expensive as any land-based alternative would be for his applications, though he declined to discuss the specifics of the value that satellites deliver, citing the proprietary nature of that information.
Consultant Bull suggests that the crossover point to satellites as the more cost-effective transport occurs somewhere between 500 and 10,000 sites, depending on local terrestrial costs and the satellite equipment chosen.
Cracker Barrel Old Country Stores Inc. in Lebanon, Tenn., actually falls below that lower limit, but its choice of satellites wasn't driven primarily by cost. About 415 Cracker Barrel country-style restaurants and gift shops are scattered from the East Coast to the Rocky Mountains. But wherever they are, they tend to be off the beaten data path. As a result, since 1995 the business behind the stores' folksy customer face has run over satellite technology supplied by Hughes Network Systems, a Hughes Electronics Corp. unit. Stores send sales data to the company's headquarters and receive price updates and menu changes via satellite. The system carries credit-card authorization requests, and is also used for live video broadcasts that originate in a Nashville studio.
For Cracker Barrel, access was more of a driver than cost. "We're strong in the South along interstates typically," says Mike Matheny, the company's CIO and VP of information services. "We really didn't have a reliable, robust way of communicating--frame relay, and some of the other options just weren't reliable when you're out in the middle of Kentucky or Tennessee. In looking around at the alternatives, some of the large retailers--the Wal-Marts and Kmarts--were doing this satellite thing."
Cracker Barrel evaluated satellite technology and embraced it. Though Matheny also declined to discuss specific costs, the numbers work pretty well, he says. He describes the monthly cost as "extremely competitive with land-based technologies," but notes that setup can run to a four-figure sum per site.
In the case of Rockwell Automation, the arm of Rockwell International Corp. that manufactures and sells industrial automation products, systems, and software, satellite data transmission is about getting streaming video out to company personnel and to channel partners. The company runs two business TV networks--one for sales, service, and administrative staffers at its nearly 130 North American offices, the other for distributors of its Allen-Bradley brand.
Michael McKenney, director of operations for Rockwell Automation, says the company chose satellite technology not only because it's the most cost-effective way for the company to get its bandwidth-intensive programming out to the field, but because "there's no pipeline I have to deal with. I don't get clogged up." Also, many distributors in this security-conscious age have firewalls that won't easily allow the broadband signal through--not an issue when it's delivered by satellite using a secure dedicated connection.
Satellite systems offer businesses a number of advantages in addition to their broad coverage and ability to substitute for inadequate terrestrial infrastructure. One of the most compelling is that they are uniform systems, in sharp contrast to the heterogeneous WAN environments over which most enterprise IT departments preside. As Bull says, "Once you have tested a new application on one VSAT, you can guarantee it will work on all other units you deploy it on. So you have taken one major rollout issue completely out of the equation."
Bull says deployment and cost-of-ownership comparisons between terrestrial and satellite carriers are difficult to make, since the VSAT is equivalent not only to a frame relay access device but to the associated routers as well. Thus, the satellite services vendor handles far more of the network management than will a frame relay vendor.
As a corollary, satellite systems come close to offering business user the single point of contact that is the Holy Grail of wide-area management. VSATs found success in the United States because customers were tired of dealing with regional Bell companies and long-distance carriers, each charging different rates, says Rick Abbasi, global manager of satellite business for the Australian carrier Telstra Corp. By contrast, VSATs required them to deal with only one provider. England concurs. "By the time you deal with the long-distance carrier and the local loop, the magnitude of the charges just overwhelm you, compared with dealing with just one provider."
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Illustration by Brian Raszka
Photo of Whiting by Bill Cramer
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