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

Communications News, July, 2004 by David Messina

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.

THE ROLE OF VIRTUAL ROUTERS

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.

A LESS-COSTLY ALTERNATIVE

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.