Special Focus: Managed services moving more international data

Selecting a service provider to handle your company's international data communications requirements can be an overwhelming chore. As the largest companies in the world set up e-commerce and industry-specific electronic exchanges that span many borders, more users will be faced with this daunting task. Consulting firm Giga Information Group predicts that by the end of 2003 at least 42% of global 2000 companies will be buying fully managed data services. Today, only about 12% of the largest companies in the world are buying such services, says Brownlee Thomas, a senior analyst at Giga.

"These companies are selectively outsourcing parts of their wide-area network services," Thomas says. To expand a frame relay network overseas, a typical company will need to dedicate 80% of its IT staff to the project. Most companies cannot afford that manpower, which is why it makes more sense to use managed service offerings overseas when possible, she says.

There are a handful of newcomers entering the international scene offering dedicated IP, frame relay and ATM, and other fully managed services. They include Global Crossing, Vodafone and KPNQwest. There are also a handful of established international service providers that fall into the same realm, such as WorldCom, Infonet, Cable & Wireless, Equant, AT&T and British Telecom's joint venture Concert, and France Telecom's Global One. France Telecom is also in the process of buying Equant, which will be merged with Global One.

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No obvious choice

It's not easy for users to choose an international service provider, because they can't simply pick one that has the most diverse service offerings or is the market leader. No single provider covers 100% of the globe, and no one has broken from the pack in terms of market share. Each established international service provider has service revenue hovering in the $1 billion to $1.2 billion range for 2000, except for Infonet, which has revenue of about $500 million.

Instead of focusing on market leaders, users should shop based on a combination of factors, including a provider's geographic reach, service variety, overall cost, level of expertise, network performance and support policies, Thomas says.

State Street Bank's top priority was finding a limber provider when it started shopping for a new international service. Three years ago, State Street issued a "request for information" to several international telecommunication service providers to connect more than two dozen sites overseas with the company's headquarters in Boston. State Street was looking for more than straight frame relay connectivity; it wanted flexible pricing, says Gary King, senior vice president at the financial institution. Equant was the only provider that stepped up to the plate, he says.

Sliding scale pricing

State Street negotiated a sliding scale pricing program with Equant-based aggregate traffic sent per month. "As the volume of traffic goes up, the marginal price declines," King says. "The biggest benefit is we can aggressively seek out international opportunities without the risk of paying for a fixed network."

Typical frame relay networks require users to pay a port charge and a committed information rate (CIR) for each site connected to the network. State Street essentially eliminated the CIR charge.

State Street pushed beyond the standard "brochure ware" to craft a service that best suits the company's needs. The financial institution was able to make this happen by negotiating with the carrier's engineering staff in addition to the sales and marketing teams.

The company has a diverse 2M bit/sec pipe from Boston to its major facilities overseas. The undersea cable connects State Street headquarters with three Equant international points of presence (POP). The POPs are directly connected to the carrier's network that supports IP, ATM and frame relay in 220 countries. State Street is connecting 27 remote offices over Equant's network.

"After a long courtship, we started to make a major shift in our international strategy about two years ago," he says.

Use multiple service providers

But King is not a believer in the one-stop shopping model that many service providers tout these days. While the majority of State Street's data flows over Equant networks, the company is also using international services from AT&T and WorldCom in select cities. State Street also has ISDN backup set up for most points on its frame relay network.

Other users are waiting for international services to catch up with domestic offerings.

"We're interested in two upgrades for our European operations," says Robert Krestakos, director of IS at Steelcase, a Grand Rapids, Mich., office furniture manufacturer. The company wants to upgrade the bandwidth between its Grand Rapids and Strasbourg, France, headquarters, while also upgrading 30 remote offices overseas to AT&T's Integrated Network Connect Service (INCS). But both upgrades are on the back burner.

Steelcase started rolling out AT&T's INCS service last year to its regional offices around the U.S. Today, the company has six sites up and expects about 30 domestic offices will be upgraded to INCS within the next year. INCS is an integrated access service that dynamically allocates the bandwidth of a single T-1 for voice and data traffic.

Today, the service is limited to a single T-1 and is not offered overseas. Steelcase has a standard T-1 between the company's domestic and international headquarters and a frame relay network that connects its 30 European offices.

"Our current setup is meeting our needs, but we can see a time when it won't," Krestakos says.

AT&T has not announced when it will offer INCS services that support bandwidth above 1.544M bit/sec or when INCS may be available internationally.

As more service providers try to break into the international service provider arena, businesses should have more flexibility when it comes to tweaking services to suit their business practices. Users need not settle for the standard offering, but instead can prioritize their requirements and seek out a provider willing to work toward a common goal.

Managed services moving more international data

No obvious choice

Sliding scale pricing

Use multiple service providers

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