As enterprises grow more dependent on applications that run over wide area networks (WANs), they are now looking...
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to telecom service providers for managed WAN and application optimization services.
"The network has to be able to support a whole mix of traffic, ranging from traffic that is very business critical, right across the range to applications like Web browsing," said Peter Hall, research director with Ovum. "The business depends on it. Poor performance slows down the company."
Hall said Ovum recently surveyed 150 large enterprises in North America and Europe about their WAN optimization efforts. The survey found that companies are generally dissatisfied with their internal programs for monitoring and optimizing the performance of applications over the WAN. These companies are open to hiring their telecom providers to provide these services.
The survey found that companies are generally dissatisfied with their internal programs for monitoring and optimizing the performance of applications over the WAN.
Among North American companies, 26% say they currently use their network service provider for monitoring and optimizing application performance. Forty-two percent use an IT services company. In Europe, the trend is even more pronounced, with 50% of companies saying they pay telecom operators for these services.
About 78% of companies said they would consider paying their network service provider a premium for improved quality of service to guarantee performance of business-critical applications, and 76% said they would pay for the improved ability to optimize bandwidth and justify bandwidth upgrades.
Managed services need better marketing
Enterprises are generally not aware, however, that they can buy these kinds of services from service providers, Hall said. Often a customer will approach a telecom about a poorly performing enterprise application. "They'll say, 'We've tried to investigate this. Can you help us?' " he said. "The telco goes in and puts some probes on the network, does some monitoring. And then the telco establishes what the problem is. Once it has addressed the problem, it might say, 'Have you thought about doing this on a continuous basis? We could catch it before you have a problem.' "
In the survey, only 45.3% of companies reported good performance out of the tools they use internally to optimize business software over a WAN, and only 38.7% rated the tools they use to optimize voice applications as good.
This dissatisfaction with internal processes is sure to spur action, since 38% of companies said a degradation of networked application performance could have a critical impact on the company, severely affecting revenues. Another 40% said such degradation would have a powerful impact on the company, slowing productivity and customer support.
Lack of resources contributes to problems
Part of it is a resource problem. These large companies need high performance out of critical applications at all hours, yet they can't afford to perform 24/7 monitoring and optimization.
"Even large companies with big IT departments tend not to do 24/7 monitoring," Hall said. "They're able to throw tools and resources at it when they've got a problem. But by the time they've got a problem, it's affecting thousands of users. I think they're able to put resources on something when they have a critical problem, but it's being able to provide that 24/7 monitoring that's more of an issue. You don't want to use up the staff to do that. If you can do that with managed services, that's the ideal situation."
Amy Larsen DeCarlo, principal analyst with Current Analysis, said some telecoms like Verizon and AT&T are already offering some WAN optimization services to enterprises.
"There are definitely a number of different providers that have been offering this for a while, and interest will continue to grow," she said. "They're obviously looking for any place where they can increase not just their revenues but their holdover customers. With each additional service, they have a great chance of maintaining long-term customer loyalty, and then they don't have to go out and seek those very hard-to-find enterprise customers."
Optimization services in themselves do not represent a sizable market opportunity, DeCarlo said, but packaging them with other managed services will be useful to telecoms that want to extend their footprint among enterprise customers and grow beyond the most basic telecom services.
"Providers are trying to get away from standard, basic services and provide the kind of value-adds that they can charge more for," she said.
Let us know what you think about the story; email: Shamus McGillicuddy, News Editor