Convergence rather than economy driving managed LAN services

There was a time when the decision to manage LANs in-house was a no-brainer. LANs by definition cover a small area and have traditionally been simple operations to run and maintain.

But last year, telecom analysis firm Insight Research reported that managed LAN services were the fastest-growing segment of the managed services market, with growth rates 50% higher than aggregate managed services.

The recent economic downturn won't result in "any kind of drastic change" in demand for managed LAN services, says Insight president Robert Rosenberg. While his firm is still working on projecting growth rates for this year, he doesn't expect the updated projections to differ significantly from 2007, during which Verizon Business, AT&T, as well as by systems integrators, such as IBM and EDS were leaders.

Vendors, analysts and customers typically point to three major factors driving IT departments to look into managed LAN services: the increasingly dispersed locations of company branches; the security challenges that come with relying more on wireless access points; and the advent of high-bandwidth applications that have made managing local networks much more difficult than when networks were only for data transfers.

With regards to using LANs for high-bandwidth applications, Rosenberg says that the big driver in LAN complexity is the desire to make network systems relatively simpler by moving all major applications they support to IP. Irwin Lazar, an analyst at Nemertes Research, says that more companies want to have outside parties manage their LANs to ensure that critical applications such as voice and video experience minimum latency and jitter.

Click to see: Chart of what's available for managed LANs

"Companies are much more interested in managing VoIP, Web applications and video quality on their LANs than they used to be," Lazar says. "Application performance is key, and companies that are deploying local VoIP or videoconferencing networks are often looking to the ISPs to provide managed services for them."

Patricia Wilkey, the director of global desktop and mobility services for IT and business process outsourcing firm EDS, says much of the growth that her company has seen in managed LAN services has been the result of desktop applications such as instant messaging becoming converged with network management.

"If you look at how Exchange '07 works, for instance, you can now have unified messaging so your voice messages can be put into the Exchange environment. The enterprise is trying to really harness these productivity gains and link them to unified communications," she says.

Increased number of branch offices also a big driver

Moving all applications to IP is just one of the major factors driving managed LAN adoption. As companies invest more resources into creating branch offices, many of them are looking for ways to cut down on the number of IT staff they employ. So instead of having an entire IT department dedicated to managing LANs at branch offices, many of them are merely relying on third parties and consolidating their expenditures. Jim Pazour, a network supervisor at National American University, says that his network has to support about 6,000 students systemwide, in addition to 1,000 employees spread across 17 locations. There is simply no way for him and his staff to manage all the minutiae of campus LANs given their finite resources, he says.