The enterprise appetite for Carrier Ethernet services appears to be insatiable. After a slow start in 2004 to 2006, use of various flavors of Ethernet services has skyrocketed to a whopping 73% across all industries (see chart below). Usage of Ethernet services is up even more dramatically in some sectors, including higher education, and state and local government.
Source: Nemertes 2009 Benchmark (Ethernet Deployment Trends)
What's driving the demand? In a nutshell, telecom service providers understand that enterprises perceive Carrier Ethernet to be a "cheap and cheerful" service: low-cost, high-bandwidth, easy to manage, and the ultimate in flexibility.
Specifically, enterprises continue to grapple with flat or declining IT budgets. Eighty percent of companies benchmarked by Nemertes Research in the spring of 2009 (see chart below) say their IT budgets are flat to declining, and 70% said Ethernet's cost justified its deployment.
Source: Nemertes 2009 Benchmark (Ethernet Deployment Trends)
Yet at the same time, bandwidth requirements continue to rise (an average of 34% year-over-year in 2009). What's driving the growth? Increased reliance on collaborative applications across a distributed user base, for one -- meaning that users increasingly share data across the WAN. These are often multimedia applications, including video conferencing and video streaming, and thus require extremely high bandwidth and low latency.
Data center consolidation driving Ethernet services
Another Ethernet services driver is data center consolidation. As companies continue to consolidate data centers from a dozen to two or three,
servers that used to be down the hall from users are now across the WAN, which increases requirements for both bandwidth and performance. Another consequence of data center consolidation is an increased need for reliability and redundancy. As the Mark Twain quote goes, "Put all your eggs into one basket -- then watch that basket." As enterprises increasingly move servers and applications into consolidated data centers, they need to ensure that those data centers are adequately backed up and available, which drives a need for high-bandwidth, low-latency links between data centers.
So one clear driver for Carrier Ethernet services is the need for low-cost, high-quality bandwidth, both to link data centers together and to link larger branch offices to the data centers.
Carrier Ethernet offers enterprises QoS shortcut
Another driver is perceived simplicity. One of the benefits of most flavors of Carrier Ethernet is that they don't require enterprises to share routing information with the carrier. In fact, some enterprises don't even bother with routing across the WAN: They hook up switches directly to the Ethernet pipe, although this approach doesn't scale particularly well.
It's also worth noting that enterprises sometimes seek to ensure quality of service (QoS) by simply throwing bandwidth at the problem. Carrier Ethernet makes that easy by providing high-bandwidth connectivity. Fully half of all multi-protocol label switching (MPLS) users don't use any QoS whatsoever -- despite the fact that the ability to ensure QoS is part of MPLS's raison d'etre. Why do folks avoid using QoS? Quite simply, it's complex. Most of the companies we work with require multiple attempts before they get the correct mappings among applications, users, sites and QoS. So short-circuiting the challenge of QoS complexity is yet another advantage of Carrier Ethernet.
The Carrier Ethernet services opportunity
Here's how carriers can capitalize on the growing interest in Ethernet services.
- Marketing services based on applications, not geographies or architectures. Too often, carriers offer a "metro Ethernet service" or a "virtual private LAN service" (VPLS). Both definitions are meaningless to users. At what point does a metro Ethernet service become a WAN Ethernet service? And what is the significance of VPLS? In short, these are inside-baseball terms that impart no real meaning to end users. Instead, carriers should consider offering "data center interconnect" services or "high-speed distributed office interconnect" services -- offerings that focus on user requirements rather than arcane carrier definitions.
- Peering with other providers. One of the biggest concerns users have about Carrier Ethernet services, particularly internationally, is that they simply can't get them everywhere. If carriers lack physical plant in a particular geography, they should structure peering arrangements with in-country providers, enabling them to offer end-to-end service-level agreements (SLAs) -- which brings us to the next point.
- Offering end-to-end performance guarantees. One reason Carrier Ethernet has been slow to take off (until recently) has been the lack of service provider guarantees. There's a perception that all traffic is "best-effort" -- despite the fact that it's traversing high-speed links, often across a carrier's MPLS backbone. Carriers should stress their ability to offer end-to-end performance management and guarantee that high-bandwidth, latency-sensitive traffic can make it across the Net. SLAs that stress end-to-end performance guarantees can become a go-forward differentiator.
In summary, carriers should capitalize on the thirst for Ethernet services by making their offerings even easier to use and more widely available.
About the author: Johna Till Johnson is the president and senior founding partner of Nemertes Research. She has decades of experience in IT structure, processes and organizations, and has worked closely with senior IT executives at leading organizations across a broad range of industries. A highly regarded expert, Ms. Johnson regularly speaks at trade shows, conferences and seminars.
