Imagine being the IT director faced with this problem: Your company has just been bought by a private equity firm that wants to take the operation global. You need to upgrade a 10-year-old network, but you don’t know what countries you’ll need to support or when you’ll need to support them.
That’s the challenge the IT team faced at Shaklee, a provider of natural foods and household cleaners based in Pleasanton, Calif.
Shaklee ended up signing a four-year, multimillion-dollar network-outsourcing deal with Virtela Communications this summer, after having chosen the VPN provider for several smaller projects.
“Now we can walk into any meeting and say to the management team, ‘Give us 60 days and an address, and it will be done,’” says Greg Fina, director of IT architecture and quality at Shaklee. “We don’t even need the full 60 days to get our circuits in place,” he says.
Industry analysts say virtual network operators (VNO) like Virtela are a good fit for businesses going global.
“For any small-to-midsize business with global aspirations, this is a great way to go,” says David Passmore, research director at Burton Group. “Where VNOs make less sense is with very large enterprises that can cut their own deals with carriers and gain economies of scale,” he says.
Shaklee is a 50-year-old company that was purchased in 2004 by investors who planned to expand it rapidly worldwide. At the time Shaklee had businesses in the United States, Canada, Mexico, Japan and Malaysia. “We had no global network, and no flow of data among the five countries,” Fina says. “Our technology was outdated. . . . We hadn’t made a major investment in 10 years.”
The aggressive goal of Shaklee’s new management team was to expand into 50 countries in 10 years. “In order to do that, we not only needed to enable technology in the countries we already had, but we had to build a foundation for rolling out in two countries a year starting in 2006,” Fina says.
Shaklee’s IT team determined its data and telephone networks could not support global expansion, so they outlined a three-step replacement process: First, they would hire a WAN provider, next, they would upgrade the company’s voice and data network gear, and finally, they would hire someone to manage the network end-to-end.
IT staff spent six months evaluating bids for the WAN contract and ended up choosing Virtela. Other bidders included MCI, AT&T, Sprint and Infonet. “We felt that they had a very innovative solution. We thought the price point for what they were providing was good, and we liked the relationship we had developed with them over the six months” of the procurement process, Fina says.
Shaklee signed a two-year contract with Virtela for a fully managed IP VPN service, including line provisioning, router management and trouble ticketing. The network supports 500 users and runs key applications including data warehousing, CRM, e-mail and VoIP.
The new WAN was completed in November 2005 for around $250,000. Once the IP VPN was in place, Shaklee closed its processing centers in Canada and Mexico and consolidated operations at its headquarters location. “Through that consolidation, we were able to pay for the WAN in its first year and recover all of the initial investment,” Fina says.
Next, Shaklee upgraded its U.S. and Canadian offices’ voice and data equipment. After evaluating equipment from Cisco and Avaya, Shaklee bought NEC phone systems and Foundry Networks data switches, and rolled out 100Mbps Ethernet to its desktops, replacing 10Mbps Ethernet connections.
“We have Power over Ethernet on the Foundry switches,” says Kirk Allen, director of technology at Shaklee. “We’re using this to power the instruments for NEC’s VoIP solution. We went to VoIP in any facility that required a technology refresh.”
Shaklee spent $1 million on the network equipment upgrade, which was completed in March 2006.
Meanwhile in December 2005, Shaklee upgraded the remote-access system for its 500 employees, and again chose Virtela, which had bid against Fiberlink and iPass.
When it came time to hire a company to provide end-to-end management of its LAN and WAN devices, Shaklee asked Virtela to submit a bid. “We were so impressed with their ability to win our business on the WAN procurement and the quality of service we had received in the last six months, that we went out with a no-bid deal,” Fina says.
In July, Shaklee rolled all of its business with Virtela into a single four-year, seven-figure contract. “This is the first company that I’ve ever dealt with that is a one-stop shop. . . . With Virtela, if I have a problem, I call one number,” Fina says, pointing out that Shaklee’s global account representative handles problems, as well as requests for additional services.
“Also, the install engineers that started with the WAN project have stayed on through phase three of our project,” Fina says. “It’s that same group of engineers that do all the work, so they have almost as much understanding of the network as we do. It’s very reassuring,” he says.
Analyst Passmore says it’s not surprising that Virtela won Shaklee’s global network business. “If you’re trying to provide site-to-site connectivity across multiple carrier boundaries, the carriers are not anxious to peer with each other for services like MPLS, so really the only place you can go to is a VNO like Virtela or Vanco,” Passmore says. “Companies like having [service-level agreements] that span multiple service provider clouds,” he says.
So far, Virtela has taken over network management in Shaklee’s three U.S. sites. “I don’t know the exact figures for the return on this investment, but we will be able to open new markets sooner than we anticipated because of Virtela’s global reach,” Fina says.
Shaklee has a rigorous SLA with Virtela that includes delivery of service anywhere in the world within 60 days. In addition, Virtela has to notify Shaklee of an equipment failure within 15 minutes.
“We’ve had stuff that hasn’t gone perfectly well,” Fina admits. “When there’s a problem, we escalate it to their technical staff and they solve the problem.”
Next, Virtela will take over managing Shaklee’s firewalls and network security devices as part of its outsourcing deal.
In December, Shaklee is opening operations in Taiwan that Virtela supports. “We were able to open up Taiwan one month sooner than anticipated because of Virtela,” Allen says. “They set up the circuits in five weeks instead of six weeks,” he says.
Thanks to the network upgrades, Shaklee’s IT staff can support whatever growth the company’s management team wants. “Two years ago, from an infrastructure perspective, we couldn’t have executed on this business strategy,” Fina says. “Now we have agreements in place with all of our vendors to deliver services into whatever country we want to go.”
