U.K.-based virtual network operator is winning over multinationals.
The telecom business is not an easy one today, although it seems a little bit more manageable for one company that while light on physical assets has a growing enterprise customer base. Vanco is a virtual network operator from the U.K.
The telecom business is not an easy one today, although it seems a little bit more manageable for one company that while light on physical assets has a growing enterprise customer base.
Vanco is a virtual network operator (VNO) from the U.K. While not new to the industry, the company is only recently becoming a player among U.S.-based multinationals. VNOs essentially own no network assets and instead rely on wholesale agreements with service providers worldwide. Established in 1988, Vanco has enjoyed stable leadership and steady growth since its founding.
“Vanco seems to be doing awfully well,” says David Passmore, research director at consulting firm Burton Group. “Last year the company’s revenue grew by 40%. They have quite a niche with international enterprises that need coverage in multiple geographic locations.”
While Vanco started out as a U.K. and European player, the company now supports services in 230 countries and has made a major push in the U.S. over the past two years.
“The beauty of its business is that it’s not capital intensive like a traditional carrier since it’s just riding on top of other people’s networks,” Passmore says. “They provide a buffer for carriers that may seem unstable or are having business problems. They have the ability to pick the providers with the best performance in any given geographic region.”
Bermuda-based Bacardi, with sites in the U.S., fits the description of the new customer Vanco is hoping to attract. The spirits producer and distributor started looking for a new service provider in 2003, says Ron Stan, director of IT, and selected Vanco to deploy its global 37-site MPLS VPN. Bacardi is using Vanco’s MPLS Matrix service, which offers a single management view into a user’s entire MPLS network regardless of how many underlying physical network providers are involved. The deployment is just under way with five sites up and the remaining expected to be online by mid-September, Stan says.
“We went through a fairly extensive RFP process,” Stan says. “Then we looked at the overall fit of the solution that was being provided from tool set, analyst rankings, to the financial stability of the providers. And most importantly, we did reference customer checks for all providers.”
Vanco won Bacardi’s business for several reasons, Stan says, including the completeness of its RFP response, its presentation, pricing, overall fit of technology, network management tools, financial stability, industry rankings and references.
But because Vanco is not widely known in the U.S., the company faces challenges in winning large contracts. And while Vanco reaps financial benefits from not owning a network, it also does not have ultimate control over that underlying infrastructure.
Passmore says customers have to know the VNO they’re working with and be sure they are willing to take end-to-end responsibility for any faults or problems on their network. Users are depending on their VNO to fix things rather than having to deal directly with the provider.
Global perspective
The fact that Vanco works with many network service providers around the world was one of the reasons Pilkington, the global, $5.5 billion glass company, selected the VNO about two years ago.
“Vanco works with the best they can find in terms of cost and quality,” says Bill McCreary, CIO for Pilkington’s North American businesses and CTO for the company’s global operations.
The VNO manages about 350 sites around the world for Pilkington using multiple technologies, including Internet-based VPN, MPLS and frame relay. Most of the sites are in North America and Europe, with a few in South America, McCreary says.
Prior to moving to Vanco, Pilkington had many internally run WANs around the world, he says. And in North America the company outsourced its frame relay network entirely to AT&T.
“We decided to go with someone who was independent,” McCreary says. “We selected [Vanco] based on price and experience.”
But because Vanco was new to Pilkington, the company proceeded cautiously, initially outsourcing only its European network service needs to Vanco. “If we weren’t OK with how that went then we wouldn’t bring them anywhere else,” McCreary says. And at that time, Vanco did not have geographic coverage in the U.S. or South America.
But the European deployment was a success and ultimately Pilkington moved forward with its worldwide network deployment with Vanco, which represented a large portion of additional business.
“We debated the topic of going with an independent provider a lot,” McCreary says. Because at that time all the multinational service providers would have to work through other providers in certain regions. McCreary says it made sense to go with a company that was separate from the network infrastructure. And in the end the “underlying infrastructure is a commodity,” he says.
Both Bacardi and Pilkington say they have seen cost savings by moving to Vanco. Yet Vanco doesn’t own network assets, so how can it offer better rates than providers that do own those assets?
Passmore says Vanco is in a “terrific bargaining position and can get one heck of a deal because of its volume.” Because Vanco is buying in such large quantities from the largest providers around the world it is able to be more selective and offer customers flexibility that network operators cannot, Passmore says.
