Aviation parts distributor Aviall has experienced a major financial turnaround over the past three years that executives attribute in part to a strategic investment in Internet-based network technology.
Founded more than 70 years ago, the Dallas company is the largest independent provider of aircraft parts and related services. In January 2000, it brought in a new management team that emphasized IT investment as part of its turnaround strategy. Since then, revenue has increased from $380 million to more than $1 billion.
"We wanted the very best technology and the very best tools for our people to use," says Joe Lacik, Aviall's vice president of information services, who joined the company on the same day as the new CEO. "We proposed to the board that we invest about $40 million in technology to bring this place to where it needed to be."
That investment represented more than three times the company's annual IT budget at the time.
Included in the $40 million were purchases of new software, servers, workstations and a network infrastructure. Aviall's small IT shop - it has fewer than 50 people - initially focused on rolling out the new software architecture to 700 employees in 40 sites around the world. The software includes CRM systems from Siebel Systems, e-commerce systems from BroadVision, middleware from Sybase , and new software packages for inventory control and inventory management.
Last year, Aviall decided to replace its point-to-point frame relay network, which didn't meet the company's requirements.
"We were experiencing very poor reliability in the field," Lacik says, adding that the company averaged only 93% availability but needed to support around-the-clock operations. "We were putting a lot of the remote sites out of business every day."
The legacy network also lacked many of today's common network management features.
"We had no alerts, no alarms, no monitoring, no capacity planning," Lacik says. "We only had what we could put together with our skills . . . and we have only one WAN engineer."
Aviall chose an Internet-based VPN and outsourced the management of it to a service provider. Migrating to IP made sense for Aviall because one of its business units runs a successful electronic marketplace that offers 5 billion parts used in the aerospace, marine and power utility industries.
Aviall executives created a detailed RFP, and five top-tier service providers bid on the job. Aviall signed a four-year, $7 million contract with Equant , which earlier this year connected the 40 Aviall sites to the new VPN.
Aviall executives selected Equant because of the service provider's Multi-protocol Label Switching (MPLS ) footprint and strict service-level agreements. But Equant wasn't the lowest bid.
"We didn't make the decision on price," Lacik says. "Some of the big carriers were so desperate that they really lowered their prices. We chose them for their reliability and their accountability."
Because of the drop in pricing for IP VPNs, Aviall was able to purchase a larger and more flexible network along with the managed services for slightly more than the cost of operating its old frame relay network.
Aviall's focus on service and reliability over price is becoming more common in IP VPN purchases by U.S. corporations today, analysts say.
"Applications are driving VPN purchases," says Vijay Bhagavath, telecom analyst with Forrester Research. "It used to be the case that network executives wanted to save a few dollars over frame relay. Now everyone is asking if the VPN can support voice and if it can support CRM."
Equant provided Aviall with a fully managed, high-speed VPN that carries the company's data, fax and some voice traffic simultaneously. The network offers five classes of service so Aviall can prioritize mission-critical applications.
Aviall's new VPN has been up and running for more than six months, and so far Lacik is happy with Equant's service.
"With Equant, we have very precise points of control," he says. "We had a couple hiccups during the installation. Not only did they solve the problem, but they shared the financial load."
Lacik also is pleased with the reliability of Aviall's VPN.
"Since we put Equant in, our reliability is 98% and climbing," Lacik says. "Now I don't have network issues. I have application issues. But I'd like the network reliability to be at 99.9%."
The only drawback of Aviall's outsourced VPN is that the company has lost the ability to control its own routers. Initially, the company's WAN engineer was worried about this feature of MPLS.
"Some of the pushback was from our WAN engineer, who could see the routers but not access them. He was pretty violently opposed to that. But when we explained that he wouldn't have to do the router configuration but that he could still manage the capacity, he saw that this [feature] actually enables him to do his job better," Lacik says. He adds that the switch to an MPLS VPN "definitely requires some cultural changes" for network managers.
Aviall isn't alone in its move to IP VPNs.
"My outlook for the IP VPN market is bullish because of VoIP and back-office applications," Bhagavath says. "IP VPNs are getting a lot of momentum."
Next up for Aviall is migrating its voice traffic to the Equant VPN. Some of the company's branch sites are piloting VoIP services.
"Within three years we will go to a fully converged network," Lacik says. "The way our branches work in North America is that if a site goes down or the phone rings more than three times, the phone call automatically gets routed to our hub in Dallas.... We want to tie all of remote sites to Dallas with VoIP."
Aviall executives say that their VPN and their new application architecture played a major role in the company's turnaround. The VPN helped "quite a bit because we don't have the downtime," Lacik says. "Every time we had those outages, we lost revenue. I don't know if I could put a dollar figure on it, but it represents a percentage of the increased revenue."