Adaptive Private Networking - Show me the money

The last few newsletters have discussed the relatively high cost of wide area networking and described how adaptive private networking (APN) has the potential to significantly reduce the price/performance of enterprise WANs. This newsletter will discuss a case study that quantifies the potential APN cost savings.

This case study involves a multi-national high-tech company that has headquarters in California, annual revenues of approximately $2 billion and currently interconnects most of its sites using MPLS. The company's current cost for MPLS service per location ranges from a low of $133 per Megabit/second/month to a high of $1,250 per Megabit/second/month. Their monthly recurring cost for MPLS services is $216,233, which translates to an annual recurring cost for MPLS services of $2,594,796. If the company does not do anything, they can expect that over the next three years that they will spend just less than $8 million on their WAN.

The company's IT organization did an ROI analysis relative to deploying APN. They determined that the necessary APN hardware would cost just less than $900,000. The IT organization also determined that if they deployed APN, they could increase their WAN bandwidth on a site-by-site basis by a factor that ranged between two and 12 while simultaneously reducing cost significantly. For example, the WAN bandwidth costs at their remote offices that used DSL would drop to $40/Mbps/month in places such as India and to $13/Mbps/month in the United States. Analogously, the bandwidth costs at their data centers, where they would use traditional WAN access services such as T-1/E-1 and T-3/E-3, would drop to $100/Mbps/month in India and to $56/Mbps/month in the United States. These bandwidth costs are significantly lower than the bandwidth costs for traditional WAN services.

The company's IT organizations, like many others, is somewhat conservative. Hence, one of the deployment scenarios they analyzed called for leaving some MPLS circuits at the company's midsize and large size sites in Europe, the Asia Pacific region and India. This conservative approach resulted in a three-year WAN cost of just over $4 million, a payback period of seven months and an internal rate of return of 57%.

More details on this case study, including the details of a more aggressive deployment scenario, can be found here. In addition, Jim will be moderating a session at the November Interop conference in NYC on the topic of breakthrough network technologies. APN is just one of five technologies that will be discussed by the panelists. If you plan to attend Interop, you might want to make sure you attend that session.

Steve Taylor is president of Distributed Networking Associates and publisher/editor-in-chief of Webtorials. Jim Metzler is vice president of Ashton, Metzler & Associates.