Managed LAN services growing up

LAN services from Verizon, AT&T, IBM, EDS help customers support VoIP, wireless networks

Why outsourcing LAN management makes sense

The LAN is the new WAN.

With the increasing popularity of such applications as VoIP and mobility, LANs are getting so complex and so critical that companies increasingly are handing them over to experts to run.

Sales of LAN management services by carriers, such as Verizon Business and AT&T, as well as by systems integrators, such as IBM and EDS, are rising fast. Managed LAN services are growing hand in hand with LAN design and implementation services and managed WAN services.

"Clients are increasingly looking at their networks as enablers of global transformation,'' says Warren Hart, vice president for Integrated Communications Services, Strategic Outsourcing at IBM. "We're seeing clients really shifting their view of the network. The network is now like electricity: You turn on the switch, and it's on.''

Insight Research estimates that the U.S. market for managed LAN services will more than quadruple from $2.6 billion in 2006 to $11.3 billion in 2011.

"Metropolitan Ethernet services, IP telephony, IP PBXs and management of campus wireless access points will drive new traffic into managed service providers' networks,'' says Robert Rosenberg, president of Insight Research.

Managed LAN services represent a sliver of the overall managed services market, but it is now the fastest-growing segment of that market.

2007: A banner year

Indeed, 2007 could shape up to be the year of the LAN. A September 2006 study by Forrester Research found that more than half of North American and European enterprises planed to refresh their LAN infrastructures within two years. The Forrester study found that more companies were investing in such LAN technologies as virtual LANs, application acceleration and port-based authentication.

As companies start to tackle LAN infrastructure upgrades, more of them are deciding to outsource LAN management. Among the companies that use managed LAN services are Lexmark, ABN Amro Bank, Cigna and Kraft Foods.

A network upgrade is what prompted National American University (NAU) of Rapid City, S.D., to outsource management of the LANs at its 14 locations. In 2005, NAU migrated from an aging frame-relay WAN with a hodgepodge of LAN technologies to an all-IP MPLS network with a standard LAN configuration.

NAU hired Verizon Business to upgrade and manage its entire network, including WAN and LANs. Verizon Business provides network monitoring, maintenance, repairs, traffic analysis and reporting.

"Verizon already was going to be managing the routers and the WAN. We thought it made sense to extend that and have them manage the entire WAN/LAN infrastructure,'' says John Buxton, director of system information technology at NAU.

NAU spent around $35,000 per site for the upgrades and pays an additional $2,500 per site in ongoing monthly fees.

NAU has 1,000 users on its network, including employees and students. The network's key applications are student records, online courses, e-mail, Internet and VoIP.

Moving to VoIP was a big driver of NAU's decision to outsource LAN management.

"When we started this upgrade, every campus had a different network and every campus had a different phone system,'' Buxton says. "Now we have a consistent VoIP structure throughout the entire organization. I can four-digit dial anyone at any location.''

By outsourcing LAN management, the fast-growing university has been able to hold down the size of its central IT staff to eight people. "Cutting people was never part of our goal,'' Buxton says. "It was more of our goal that if we offload LAN management, then we can take our IT resources and reassign them to other projects. What we were doing was never about reducing employees but about providing better service and better utilizing the resources we have.''

With Verizon handling LAN management, NAU has cut down the time it takes to fix problems at its campuses in South Dakota, Minnesota, Kansas, Missouri, Colorado and New Mexico.

"The issue was that when we had problems with the LAN equipment at a remote location, the time to diagnose and fix it was so high,'' Buxton says. "Before, it could take a day or two to fix it. Now, when something happens, it's resolved within an hour.''

NAU also can roll out IT systems at new locations at a much quicker pace. The university is opening a new location in Austin, Texas, this year. "With our previous network design, there is no way we could have supported the university's growth,'' Buxton says. "Now when we open a new campus, we just call Verizon Business. . . . It takes about a month to six weeks for them to have everything up and running.''

Another benefit of offloading LAN management is the improved audit trail for LAN configuration changes.

"We don't even have access to the equipment anymore,'' Buxton says. "We can log in [to the portal] and request configuration changes at one of our sites. They have a technician who goes in and makes the change. We have an audit log of all changes that are made. We have better controls than we had before.''

Vertical market growth

NAU is not alone in its decision to outsource LAN management. Industries across the spectrum - financial services, healthcare, manufacturing and retail - are choosing to outsource LAN management.

Experts say the shift to managed LAN services has occurred in the last 18 months, as more companies are planning to add VoIP, wireless, streaming video, collaboration and other demanding applications to their LANs. "A few years ago, a LAN was a fairly well-defined entity. It usually existed within the four walls of an office, and it primarily handled data access to internal resources,'' says Meryle Rosenfeld, product manager for managed LAN services at Verizon Business.

"The number and types of applications that are moving across the LAN infrastructure have changed considerably. And the complexity of managing that, of ensuring the quality and performance and uptime, have caused many to begin to look at [outsourcing],'' Rosenfeld says.

Rick King, vice president of packet and managed services for AT&T, says LANs used to be inexpensive, so companies just overprovisioned them. Now LANs are getting more expensive for companies to buy and manage themselves.

"What drives outsourced managed service is two things: one, the complexity of the environment and the skill set required to manage it; and the other is the cost of the environment,'' King says. He added that AT&T is seeing its managed LAN services grow at a faster rate than the 34% CAGR cited in the Insight Research study.

VoIP especially drives interest in managed LAN services, because many IT shops don't want to manage IP PBXs and are under pressure to provide higher-quality LAN service for voice applications.

"LANs are now becoming extremely important because they provide the dial tone for VoIP,'' says Cliff Cibelli, senior manager for managed WAN-LAN services at Verizon Business. "VoIP makes the LAN infrastructure as important as the WAN infrastructure.''

At the same time that LANs are becoming more complex, the cost of buying LAN and WAN management tools is on the rise. That means it's getting more cost effective for companies to outsource this capability.

"You're looking at a minimum of four people to provide 7-by-24 network management,'' Cibelli says. "Globalization and the Internet are now requiring companies to run their businesses around the clock. . . . You're probably looking at $400,000 in just the people you need, never mind the tools you have to buy.'' These trends are the reasons why Verizon Business now manages 60,000 LAN devices for its customers. "We're seeing 25% to 30% growth in all managed services,'' Cibelli says.

Experts say the lines between LANs and WANs are blurring, making it easier for IT executives to feel comfortable outsourcing management of the entire network.

"Traditionally, the WAN and LAN have been viewed as two separate entities, with different groups to manage them,'' Rosenfeld says. "With IP telephony, there's very much a blurring of all of these groups. . . . Now it's just the network.''

Service providers say they can provide sophisticated service-level agreements (SLA) around managed network services, including managed LANs. These SLAs include provisioning, notification of problems, restoration and service availability.

"For the most part, it's not just that customers want their LANs to run a certain way. It's more that they want the applications on top of their LANs to run a certain way,'' King says. "As customers outsource, they are looking for SLAs that really impact their business.''

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Copyright © 2007 IDG Communications, Inc.