Network Transformation: Market Opportunity Truly Worth the Hype
For large enterprises the tech industry is rife with buzzwords, battle cards, and sell sheets, all hyping the next big thing.
They promote nebulous concepts like Digital Transformation, Software Defined Networking and everything Cloud – ideals that are never achieved, and results that aren’t easily measured in quantifiable terms. Attractive as these over-hyped capabilities may be, often corporate enterprises aren’t well positioned to leverage any investment in these “new” technologies.
Yet, some emerging industry dynamics are truly worthy of excitement, (at least I can truly get excited about them).
I’m talking about Network Transformation. Or, in plain terms: the process of simplifying and modernizing network services from the data center to desktop with the goal of improving performance, reducing risk and returning millions in savings to the bottom line (or to re-invest in further innovation).
What’s so important about Network Transformation? To truly understand the magnitude of the opportunity, it’s important to consider just how disadvantaged the enterprise has become due to market dynamics over the past few decades.
The Forgotten Enterprise
If we look back, (way back), we can see that the evolution of today’s enterprise networks has been complicated and understandably messy.
The first major commercial telephone network operated as a government-approved monopoly for many decades. When AT&T was broken apart and competition was first introduced in 1984 an aggressive (and at the time, very welcome) battle to win customers was set in to motion. Competition was based upon price rather than real product innovation.
New and emerging network suppliers like MCI, WorldCom and Sprint vied for market share, which in turn benefitted large enterprises and their high-volume, global businesses. Rates fell precipitously and enterprise customers enjoyed a new level of attention from the carriers who sought to grab their account share.
Fast-forward to the explosion of cellular services in the late-90s, and suddenly network suppliers had new priorities in sight. Mobility services were the newest, margin-rich growth opportunity, and the industry began to pivot toward the consumer market, with the carriers focused on signing up as many new subscriber lines as possible – a new source of growth, eagerly embraced by the market at the time.
The combination of lower margins on wired services (owing to healthy competition) and fast-growing, higher margins on consumer mobility services meant suppliers slowly started to abandon their focus and attention on the enterprise market in favor of the consumer market. This trend continues today, as the large carriers have progressed from offering cellular voice, to high-speed data enabling content distribution, and now to content creation itself.
By the end of the 90s, the Internet explosion turned the industry upside down. (Or was it right side up?) Ever since then networks have been more important than ever. Just ask any IT professional what their day (or night) is like when the network is down, and you can gauge the importance of network technology quite easily. As a result, many large enterprise customers collectively invested billions of dollars to build first class data centers to help fuel their businesses. These data centers were connected by expensive dedicated global data networks – an additional enterprise investment targeted toward improving network performance and resiliency, and the highest level of security available (or at least the hope thereof).
Today, however, many of those same companies that spent years building, fortifying and securing their data centers are now migrating aggressively to Cloud services, and shared colocation data centers. Although data center strategies have been challenged by cloud-based technology, this disruption has created opportunity. It has also made network solutioning much more complex for the enterprise.
To be fair, enterprises aren’t facing these challenges without help. There’s a multi-billion dollar industry focused on enterprise networking solutions. I would argue, however, that this industry underserves the enterprise customer since it doesn’t organically offer solutions that are customized, well integrated or deployed with the long-term in mind.
Each supplier has its own product, support system and even a professional services team (for an additional cost) to help implement its own point solution. But these suppliers often struggle to take the view of the enterprise customer, which requires consideration for unique technical requirements, sunk investments in current network technology, risk tolerance and other operational constraints. In short, there is little help for enterprise customers requiring integrated network solutions.
Without a holistic view, end-to-end performance will suffer, if not fail. And, without a long-term plan leveraging legacy technology and investing strategically in new services, companies will overpay for technology that underperforms. With a comprehensive and systemic plan for Network Transformation, however, enterprises can successfully navigate the gaps in today’s market. The result means better performance, reduced risk, and tens of millions in OPEX savings.
What is Network Transformation?
When we talk about transformation, we’re looking beyond just products and technology. It’s important to establish a deep understanding of how an enterprise develops, operates and consumes global network services. Then, you need to analyze that information in the context of how each enterprise does business. What is the workforce profile, and what end-user support is required? What is a firm’s tolerance for risk? What are the operational boundaries and resource constraints that must be navigated now and in the foreseeable future?
A sound plan for Network Transformation will identify short-term efficiencies, capture them, and then re-invest them (at least partially) in an actionable plan for technology change that truly meets the current and future needs of the business.
To accomplish this, we focus on four distinct areas: Rationalization, Optimization, Transformation and Implementation:
- Rationalization: It sounds straightforward: companies shouldn’t purchase services they don’t need. But it’s shocking to see how much waste exists across the average enterprise: growth through acquisition; poor inventory and expense management systems; over-provisioning; flawed design assumptions; employee churn; real estate changes. These are all factors that contribute to the abundance of waste within the enterprise. However, with the right data collection and discovery process this waste can be eliminated, often yielding significant short-term savings. By having the right level of visibility and the willingness to challenge convention, companies are well positioned to remove costs. And the good news is this activity can be managed unilaterally, without interaction, negotiation or navigation with a third-party.
- Optimization: Even with the above accomplished there is still great opportunity to demand – and receive – more from your network suppliers. It’s interesting to note that most billing errors are not in the favor of the customer. (This has been the case for decades). And we don’t see many suppliers proactively notifying their customers when market conditions shift and rates for products and services decline. Instead, we see aggressive fire sales at quarters’ end, not because that’s when the enterprise requires a purchase order, but because that’s when the supplier needs to hit their financial targets. We see aggressive pushes to sell next generation products without carefully mapping that investment to real business requirements. And we observe endless cycles of product refresh requiring companies to invest millions and millions just to retain the same functionality they had yesterday. Large enterprises spend significantly on network services each and every year, and even more so when the refresh cycle rolls round. However, the enterprise has more power than it realizes, and targeted programs that ensure suppliers step up to share commercial and financial risk will yield millions of dollars in both short-term and long-term savings.
- Transformation: Once the current environment has been right-sized and optimized, a targeted plan for transformation can be crafted. (In actuality, these activities should, and often do, happen in parallel). Network Transformation involves a fundamental change in the way an enterprise consumes a service: moving to a hardware-agnostic (software) based routing solution; moving from TDM to Ethernet WAN services; deploying ubiquitous Wi-Fi across all branches and offices; or migrating from multiple web-conferencing applications to a single integrated collaboration platform. These are all examples of Network Transformation. But it’s much more complicated than simply choosing a new technology and placing a purchase order. A holistic plan for Network Transformation involves: identifying and mapping business and technical requirements; vetting InfoSEC approvals; confirming application integration capabilities; ensuring internal policy and regulatory compliance; caring for implementation and transition support; minimizing bubble costs; outlining and documenting process changes for Day 2 performance management and operational support; and communications planning. These are just a few of the components required to fuel a successful change program. It’s a wonder any large enterprise is able to successfully deploy next generation solutions!
- Implementation: Finally, successful transformation requires more than just recommending a target end-state or selecting a preferred technology supplier. Change management is often difficult for large companies. So, large-scale implementations can present an even greater challenge. Unfortunately, companies often make the mistake of spending too little time planning and monitoring their implementation programs. After spending months and sometimes years painfully mapping requirements to solutions and scoring suppliers and negotiating optimal terms, an implementation program is tossed to the project management team for execution, often with little communication or explanation, and with no measures to track actual results against the initial business case. What are the priority locations? Where is there maximum savings? How will construction costs be funded? What if we can’t afford construction costs? Where are dual running costs? Again, there are numerous considerations that are easily overlooked, and unfortunately this happens at the enterprise customer’s expense. In the meantime, suppliers benefit from additional charges, incremental expenses, delayed savings and dual operating costs. Another area that’s also easily overlooked: the operational support model. On Day 2, when the implementation team has left the building, how do things work? And more importantly, what happens when things don’t work as they should? With scores of toolsets and different performance management structures and procedures across LAN, WAN, telephony and collaboration services, this can be an incredibly complex answer to unwind. Third parties. Systems integration. Tooling. People. Training. There is much to be cared for.
Achieving Systemic Change
At this point, you might be wondering, “Why bother?” Or you might be thinking, “Yeah, we’re doing that already.” Frankly, everyone is doing some form of Network Transformation.
Every day we hear the roar from hype touting SD-WAN, cloud services, AI, RPA and many other three-letter acronyms. These advancements and those that preceded them are undeniably exciting and hold great promise for large enterprises.
The challenge arises when companies are fooled in to believing they are transforming simply because they are buying next generation product, release or hype. Such technology adoption actually introduces operational risk when it’s done piece-meal, in response to the refresh cycle, or without a comprehensive, integrative plan that addresses business requirements. And, a fragmented approach most certainly sacrifices savings opportunity. Yet, large enterprises are fragmented by nature, with each department owning a small piece of a holistic solution.
That’s when you end up with incompatible gear… Legacy applications that render the preferred solution inadequate… Equipment that’s purchased and not deployed... OPEX savings that can’t be realized because new CPE can’t be purchased due to budget constraints... Oh, and what about forgetting to decommission your legacy technology? You would be surprised how often that happens out there. These are all good examples of what can happen without a systemic plan for change, an important requirement for any successful Network Transformation program.
A systemic plan for Network Transformation will yield tens of millions of dollars in savings when orchestrated and coordinated across rationalization, optimization and transformation work efforts. $30M. $50M. $20M. These are the annual savings returns our customers are realizing as a result of thoughtful, proactive Network Transformation programs. That’s why they bother.
If that bottom-line impact surprises you, it simply underlines how little attention Network Transformation seems to receive within the enterprise these days. Vital as the network may be, unless the network suffers some kind of failure, or doesn’t have capacity to support a new service/delivery capability, the network generally seems to hum quietly in the background. Networks are rarely the highest priority of the CTO or the CIO. And that makes a lot of sense given what the CIO has to juggle these days.
But if you agree that the network is the foundation of the business, and network performance and reliability are valuable and critical to the success of the business, then you must pay attention to Network Transformation and the promise it holds for the enterprise. Network Transformation improves performance, often through materially greater levels of service availability and time to respond/repair. And, it reduces operational risk by leveraging the best of what these new technologies have to offer.
Today, many enterprises are getting a bad deal in the network space. With impaired visibility and downgraded priority on the IT agenda there are many unseen risks and opportunities to be addressed. It takes knowledge, creativity, and sheer determination to unravel and address these obstacles, but for the enterprise that takes on that challenge the results are more than worth the effort.