build or buy?

Build or Buy?THE CISCO GUIDE TO MANAGED NETWORK SERVICES

This is an automated PDF presentation. Please choose your option:1. If you wish to see this presentation now:

just press any of your mouse buttons to begin. Then continue simply with the navigation arrows.

2. If you wish to print or see this presentation later: just press the escape button (ESC) on your keyboard


The move to managed servicesaccelerates

page 1 of 37


Managed Network Services

Can your company benefit from these managed services advantages?> More integrated and extended IT resources

> Improved IT economics

> Increased productivity and responsiveness

> Improved risk management and business continuityMore effective decision making

IP Telephony and contact centres

IP VPNs

internet accessand WAN dataservices

Data centreapplications and hosting

Choosinga serviceprovider

Closerlook

Businesscase

ManagedServices inaction

Introduction

MobilitySecurity

page 1 of 37


The move to managed servicesaccelerates

page 2 of 37


The move to managed services accelerates

Table of contents:Intro: The move to managed services acceleratesThe managed approach delivers stable, high performancenetwork and IT resources – while enabling better cost models.

Part I. Managed network services in actionWhat managed network services are and how they work.

Part II. The business case for managed network servicesAn overview of 5 pressing business challenges that are uniquelyaddressed by managed network services.

Part III. Closer look: Seven key managed service areas > Managed IP VPNs> Managed security> Managed IP telephony> Managed hosting and data centre services> Managed wireless and mobile computing> Managed Web contact/call centres> Managed WAN data services

Part IV. Choosing a managed network service providerThere is a provider for virtually every type of networking and ITrequirement, for large and small companies alike.


Closerlook

Businesscase


Introduction

page 2 of 37



Today companies must cost-effectively focus technology andhuman resources on activitiesthat lead to competitiveadvantage and long termprofitability. Consequentlybusiness managers are movingnon-core activities to externalservice providers throughoutsourcing of major networkfunctions (IP telephony, WAN,VPN, extranet, etc.) or “out-tasking” of specific internaltasks (firewalls, hosting, wireless,remote access, storage, etc).This approach allows liberatedinternal resources to bereallocated to more strategic,revenue generating initiatives.

Many experts and leading enduser organisations now agree: self-managed networks are indecline – managed services willbe a major growth area for yearsto come. One sign of this trend isthe diversity of managed networkand IT services that are nowbeing offered to large and smallcompanies across EMEA.Increasingly, the question is: buildit yourself? ...or, buy it from a provider?


Closerlook

Businesscase


Introduction

page 3 of 37

Gartner, Inc. Strategic Planning Assumption:By 2005, more than 50 percent of enterpriseswill source the operation and management ofpremises network infrastructure to externalservice providers.



What managed services are:The list of managed services thatis widely available today fromEMEA service providers includes:managed virtual private networks(IP VPNs); managed businesstelephony over IP; managed datasecurity services; managedhosting and servers; managedstorage and backup; managedwide and local area networkservices; managed wireless andmobile applications; managedcontent caching/distribution; and a range of network-basedbusiness productivity applicationsthat are hosted in provider datacentres (Microsoft ExchangeServer, sales force automationtools, unified messaging, etc).

Managed network services areproving to be an optimum solution for EMEA companies that cannot maintain the internalhuman resources, capitalinvestments or managementfocus that is necessary to stay ontop of fast moving networktechnologies and network-dependent applications. Serviceproviders generally have largerand more experienced staffand more robust, reliableinfrastructures. Managed servicecustomers are freed from routine,low-level operational tasks sothey can develop new ways ofapplying technology to yield apositive return on investment.


Closerlook

Businesscase


Introduction

page 4 of 37

BUILD

Core Activities

Specialised ERP andLine of Business software

Email, e-commerce, hostingarchiving, disaster recovery

network security, etc.

Custom manufacturingand production systems

WAN/LAN, IP VPN, wireless,storage, IP telephony,

video conferencing, etc.

Non-Core Activities

BUY

Applications

Infrastructure

Diagram 1.0Which services to build and which to buy


Managed services in action

Managed services can be used as ashort term tactical tool for reducingcosts and increasing functionality(e.g., outtasking) – which keepsexisting business processes intact.Or, managed services can be usedstrategically as part of a major planto integrate, reengineer or extendcore business processes. This is thecase when companies use themanaged approach as part of alarge IT infrastructure project suchas a strategic e-businessapplication, Enterprise ApplicationIntegration (EAI), Real TimeEnterprise (RTE) extended supplychains or company-widecollaborative multimedia workflows.Managed services are alsoemerging as an important strategyfor companies that must simplifyand streamline the overly complexand non-standardised ITarchitectures that result wheninternal departments and businessunits have greatly different IT goals,budgets and technology biases.Managed services have come along way in the past five years.

They are now an effective, provenapproach for companies that wantto move to an all-IP enterprisenetwork with converged data, voiceand video communications.

Rob Lloyd, President of Ciscooperations in EMEA, explains theimportance of this trend: “It’s notalways easy for businesses to takeadvantage of powerful newtechnologies. So, many companiesin EMEA are turning to managedservices from telecom providers tohelp close the technology gap.” Mr.Lloyd goes on to say that managedservices have special significancefor European companies, “InEurope, managed services aresomewhat ahead of other regions,with a number of service providersand large telcos offering a widevariety of packages. This range ofchoice gives Europeanorganisations a tremendous degreeof flexibility in how they captureand harness new technologiesdesigned to drive productivity.”


Closerlook

Businesscase


Introduction

page 5 of 37


Managed services in action

How to startFor companies that are new tomanaged services, a good first stepis to start by isolating a specific“pain point” ...for instance, pooremail service or overloaded datastorage or inadequate remotenetwork access. With a specificproblem in mind, an RFI (requestfor information) is used to obtaininformation about costs andservices from one or more serviceproviders. Providers will in somecases offer a free analysis of acustomer’s existing networkresources, applications, businessgoals and cost structures. Providerscan use TCO (total cost ofownership) comparisons to showthe economic differences betweenthe self-managed vs provider-managed approaches.

The consultative approachToday’s managed network serviceproviders are similar to high-endintegrators that possess a largeamount of hands-on ITknowledge. Today’s providers

have valuable insights intonetwork technologies, data centreoperations, e-business methodsand vertical applications, whichlarge and small companies canbenefit from all the way up to thedirector level.

With the combined knowledgeand aptitudes of the provider and customer, its possible for the managed services agreementto stipulate a number of key best practices and architecturalimprovements that will greatlybenefit end users andapplications.

Once a managed services contractis in place, the provider takes fulloperational responsibility fordelivering a network or IT service,while the customer maintainscontrol of its business processesand strategic direction. Typicallythe customer will dedicate one ofmore employee to liaise with theservice provider.


Closerlook

Businesscase


Introduction

page 6 of 37

Managed Data Access / Connectivity Services

Network Connectivity WAN / LAN / Wireless

Managed Value-Added Services

ManagedSecurity

ManagedVPN

ManagedVoice/IP

Telephony

ManagedMobilityServices

ManagedWeb andbusiness

applications

Not a Core Business Activity

Cost Savings

Lack of in-house Expertise

Lack of Staff

To gain More Value

Reasons For Out-Tasking Networking Products

Percent of CIOs 0 10 20 30 40 50 60

54%

51%

51%

45%

37%

Diagram 2.0A managed service for every IT challenge



Business relationship scenariosIn some cases, the provider willtake ownership of the customernetwork/IT equipment through a formal transfer of assets. Inother cases, the customer retainsownership of capital equipmentthat the provider manages (see Diagram 2.2). In largerprojects, it’s not unusual for aprovider to hire a portion of thecustomer’s in-house technicalemployees as part of themanaged services relationship.Those staff members may workin the provider’s network facilitiesor on the customer site.

Managed service providers arecontractually responsible forsuch tasks as network design,installation, monitoring, faultisolation, repair, upgrades,maintenance, helpdesk, andrelated duties.

Performance and reliability levelsare guaranteed by stringentservice level agreements (SLA)that include penalties andpossibly monetary or “credit”compensation for non-compliance. To achieve a servicelevel comparable to what theprovider can offer, mostcompanies would have to greatlyincrease their in-house staffinglevels and IT budget allocations.Managed service financialmodels are flexible and variedbut generally, the customer paysa monthly payment or fixed feethat makes budgeting andplanning much more efficientand predictable than is generallythe case with build-it-yourselfnetworks and applications.


Closerlook

Businesscase


page 7 of 37

Service demarcation formanaged service whereprovider maintains CPE*

* Customer premise equipment

Service demarcation formanaged service whereprovider maintains CPE

NetworkAccessDevice

Customer LAN

Service ProviderNetwork

Introduction

Diagram 2.2Sphere of serviceprovider action

Managed Data Access / Connectivity Services

Network Connectivity WAN / LAN / Wireless

Managed Value-Added Services

ManagedSecurity

ManagedVPN

Voice/IPTelephony

Not a Core Business Activity

Cost Savings

Lack of in-house Expertise

Lack of Staff

To gain More Value

Reasons For Out-Tasking Networking Products

Percent of CIOs 0 10 20 30 40 50 60

54%

51%

51%

45%

37%

Source: Cisco primary research 2003

Diagram 2.1Reasons for out-taskingnetworking products


The business case for managednetwork services

In the current economic climatecompanies must somehowdecrease costs and risk exposurewhile at the same time achievingbetter IT services. A stable,secure, high performance networkis essential for companyprofitability and competitivesuccess – but budget allocationsfor large capital IT investmentsare often not possible. Withmanaged services, companies canshift much of the financial burdenand risk of network and ITexpansion to the provider whileachieving:

> More integrated and extendedIT resources

> Improved IT economics

> Increased productivity and responsiveness

> Improved risk management and business continuity

> More effective decision making

The next section looks at howmanaged services generallyaddress these 5 business andfinancial concerns.

More integrated and extended IT resourcesThe goal of integration is thecoveted “fusing” of backoffice,front office and supply/demandchain applications into abusiness-process orientedarchitecture that cuts acrosstraditional departmental andautomation boundaries. In thismodel, when a customer wants toplace an order via an e-commerceWebsite, the back-office inventoryand fulfilment systems respondwith product availability andshipping information in real time.Integration is a complextechnology challenge but it candeliver massive benefits in termsof lower total cost of ownership,more streamlined networkoperations, faster applicationintegration and higher networkperfomance.


Closerlook

Businesscase


Introduction

page 8 of 37

If companies are to successfullyintegrate internal workgroups,departments and business units,while at the same time movingtowards voice, data and videoconvergence, the correct solutionis a unified IP-based network. A company-wide IP infrastructurecan integrate diverse front- andbackoffice applications that havebeen traditionally supported bymultiple parallel frame relay, ATM and private line circuits. Themove to an all-IP infrastructureshould take place rapidly butwithout disruption of users orline-of-business applications.



More integrated and extended IT resources (continued)Given enough time and money,build-it-yourself enterpriseintegration is indeed possible, but more and more companies are finding that managed servicesallow them to take immediateadvantage of the mature, scalableIP connectivity that already exists in service provider backbonenetworks. If a company wishes tointegrate existing circuit networksand isolated automation “islands,”in-house technical teams mustmaster advanced MPLS(multiprotocol label switching),QoS (quality of service) routing,BGP (border gateway protocol),dense wave optical switching andother daunting technologies.

Providers have been buildingconverged IP networks with greatintensity for several years now. Byprioritising traffic flows intodifferent classes of service,provider networks can handle voiceand video over IP on the network

as data traffic. This means thatcompanies can converge allindependent data networks alongwith voice data and video on to ahigh performance providerbackbone. Many providerscompliment converged networkinfrastructure with a convergedportfolio of managed data centreapplications that achieve largeeconomies of scale by sharing acommon set of well managednetwork, IT and human resources.

Reaching out with managedservicesThe use of the service provider’sadvanced network, data centre andknowledge resources can helpcompanies create a “borderless”enterprise that shares businessprocesses and workflows withtrading partners and customersacross the network.

When company sites areconnected to the provider’s robust infrastructure, they can access a rich array of IP-based


Closerlook

Businesscase


Introduction

page 9 of 37

Gartner, Inc. Strategic Planning Assumption: By 2005, more than a quarter of IT capitalbudgets in at least 70 percent of large andmidsize enterprises will be directed totransforming the enterprise using external focus and agility. IT leaders should championopportunities for IT-enabled business partnershipstrategies and align competencies andarchitecture capabilities with them. [InSide Gartner This Week Vol. 20, No. 17 January 2004]

value-added services that areoffered by ISPs, e-commercevendors, new media houses and service organisationsthroughout EMEA andinternationally. Managed networkconnectivity and managed datacentre resources can be usedto facilitate good businesspractices, including businessprocess outsourcing (BPO), e-marketplaces, extended supplychains, and “data-centre to data-centre” interactions with keytrading partners and collaborators.



Improved IT economicsFor decades, IT and networkimplementations have requiredmajor investments and largeamounts of fixed costs that aresunk into equipment that rapidlybecomes obsolete. Whencompanies build network and ITinfrastructure with in-houseresources they must deal withcomplex issues relating tocapitalisation, depreciation, ITportfolio asset management andthe financing of implementation(labour) expenses that can greatlyexceed the costs of hardware andsoftware products. In many casesfinancial planning is hampered bya large number of unknowns andinexact estimates regarding thescale and duration of ITimprovements.

The picture is very different withmanaged services, which allowmajor savings and theopportunity to move fromunwieldy capital expenditureburdens to controlled, conciselydefined operating expenses.Managed services are essentiallypay as you go, with set fees thatare stable for the life of thecontract. In some cases, providersoffer on-demand or utilitymodels, so customers pay onlyfor services and bandwidth theyactually consume. Somemanaged services can be paid forby the seat or by the transaction,or some other “unit” of use:megabits of throughput orgigabytes of storage, for instance.In general, managed services letcompanies move from rigid costsand debt service burdens toflexible “virtual asset” models,greatly reducing financialcomplexity and uncertainty in theIT planning process.


Closerlook

Businesscase


Introduction

page 10 of 37



Improved IT economics(continued)When Gartner conducted in-depthinterviews with 10 midsized andlarge enterprises, they found costsavings in the range of thousandsto millions of Euros. Gartnerfound that managed networkservice customers:

> Accrued an average of €225,000 worth of benefits per year from improved availability

> An average 85 percent reduction in critical faults, and 65 per cent reductions in total faults

> Increased customer satisfaction

> Improved change management effectiveness and efficiency

> Predictable performance and support costs


Closerlook

Businesscase


Introduction

page 11 of 37

Service Fees 49%

IT Costs 21%

Hardware 20%

Transport 10%

Diagram 3.0 Typical recurringcost reductionswith managedservices



A closer look at cost reductionsfrom managed servicesBased on numerous case studiesby Cisco Systems, it’s beendetermined that companiestypically realise cost advantagesfrom managed services in fourprimary areas: service fees, ITcosts, hardware costs and transportcosts (see Diagram 3.0). Forinstance, when a conventional PBXis replaced with a managed IPtelephony system, the customer isno longer “locked into” largeperiodic management fees that arenormally paid to the PBX vendor.There is also typically a substantialreduction of costs for PBX moves,adds and changes because theseroutine tasks are accomplished at afraction of the cost in the IPenvironment. Managed servicescan also reduce service fees inother areas, for instance in the areaof specialised data centreequipment maintenance andmanagement fees.

Reduction in IT and hardware costsare possible because of a shift ofmajor IT staffing and equipmentoutlays to the provider, who canmake more efficient use ofresources by load balancing themacross numerous managedservices customers. Reduction innetwork transport costs occurbecause internal staffs are nolonger responsible for timeconsuming routine monitoring,maintenance, and upkeep ofnetwork connectivity throughoutthe enterprise. Also, consolidatedand provider-managed networkaccess links can reduce the largemonthly telecommunicationscharges that are associated withmultiple parallel frame, ATM orleased line circuits.


Closerlook

Businesscase


Introduction

page 12 of 37

Managed services can createsignificant savings because theyleverage the powerful economies of scale that many network serviceproviders enjoy. Providers buy themost robust and up to datetechnologies, they have shorterreplacement cycles, and they candistribute the cost of coreinfrastructure equipment, softwareand other resources across multiplecustomers. By hiring the mostqualified and experienced networkand IT engineers, providers createan internal knowledge pool that thetypical end user company cannotcost justify.




Closerlook

Businesscase


Introduction

page 13 of 37

In general, managed servicesenable a much more economical,streamlined and predictable ITfinancial model by:

> Reducing large capital investments

> Reducing maintenance and operations costs

> Reducing internal IT staff and service head count

> Reducing lost revenues due todowntime

> Leveraging provider’s economies of scale

> Providing predictable costs fortechnology

Although they are welldocumented, the cost advantages ofmanaged services will vary fromcompany to company. Companieswith distributed operationsinvolving a number of remote sitesand users will benefit considerablyfrom managed network services.Companies without a great deal ofinternal IT or network expertise can

also realise strong economicbenefits from managed services –managed services are lessexpensive than building asophisticated in-house IT andnetworking capability. In contrast,companies that have already builtin-house expertise, best practices,state of the art data centres andVPNs will not see the same benefits.

Increased productivity andresponsivenessCompanies are today undertremendous pressure to speed uptheir business processes so they can become moreresponsive to dynamic customer requirements and marketchanges. The goal is a “real time” enterprise (RTE) thatremoves internal operational anddecision making delays so thecompany can respond immediatelyto external events. But when acompany’s network, servers, emailsystems, business applications andsecurity software performs poorly,overall responsiveness decreasesand business processes degrade.



Increased productivity andresponsiveness (continued)Unlike many existing company-built IT architectures, the serviceprovider’s robust wide areanetwork and secure data centresare maintained with consistentlyhigh standards of performanceand reliability. Service providerproject teams use the latest inproject-, asset- and change-management software tools.Consequently, managed servicescustomers often experience aboost to the responsiveness oftheir business applications. Thisbenefit is not surprisingconsidering that a managedservice agreement will often replace over a dozenseparate IT contractor companieswho are all attempting to workon their own small piece of the puzzle – a finger pointingnightmare! With managedservices, project managementand IT workforce efficiency aregreatly improved, which can lead to a generally moreproductive company.

With build-it-yourself networks,the more limited capacity ofnetwork resources can beexceeded during peak trafficspikes (see Diagram 3.1). Incontrast, the large capacity andhighly redundant topology of theprovider’s backbone network canabsorb unpredictable customerdemands and peak seasonaltraffic levels without causingbusiness disruption. Withmanaged services, if the accesslink between the customer siteand the provider backbone limitsperformance, it can be easilyupgraded in most cases withoutmajor cost or disruption. With thepower of the provider’s backboneand data centres supportingthem, business planners canrespond immediately to marketand competitive demands,without engaging in lengthy selffunded deployments and riskytechnology selection decisions.


Closerlook

Businesscase


Introduction

page 14 of 37

Diagram 3.1 Comparison of networkperformanceconsistency

Scalable provider capacity

Demand

Build-it-yourself capacity



Improved risk management andbusiness continuityManaged services are very relevantfor companies that want to movetowards a consolidated riskmanagement function thatincludes, company-wide riskassessment, business continuityplanning and disaster recovery.Service providers offer completebackup and recovery solutionsthat can help companies achieve a planned response to floods, fire, industrial accidents,terrorism and catastrophic failureof IT components that candamage customer relations andreduce revenues.

In many cases, serious businesscontinuity failures are not caused by major natural disastersor accidents. The cause is moretypically a combination ofunusual application loadscombined with relatively minorlapses in IT, network upkeep orconfiguration. To avoid failures incomplex multi-vendor systems,

service providers constantlymonitor and manage their coretransport resources and customeraccess networks.

By building a business plan aroundadvanced network and ITinfrastructure, providers can oftenachieve better network design,installation and support than acompany’s in-house team.Managed networks andmanaged applications generallydeliver more stable andcontinuous service with lessdowntime, which substantiallylowers the risk associated withfailure or degradation of businesssoftware.

Service providers now haveexpertise at all levels of the ITarchitecture, from low level datapipes to high level applications. This means providers can addressrisk and disaster management


Closerlook

Businesscase


Introduction

page 15 of 37

Gartner, Inc. Strategic Planning Assumption: Through 2005, the greatest benefit offered byManaged Service Providers will be the reductionof risk, not cost.



from an end-to-end and top-to-bottom perspective that looks atpossible failures in terms ofbusiness processes, software,hardware and human factors. Incomplex, heterogeneous multi-vendor distributed systems,this holistic approach is the onlyway that high levels of businesscontinuity can be achieved.

More effective decision makingsummaryToday’s business managers areregularly challenged byunpredictable market dynamicsand an ongoing series of mergers,acquisitions, divestitures,partnering, and ever changingsupply/demand chainrelationships. The business andfinancial aspects of all this changeare monumental in themselves–and there are also the related ITand network issues to beconsidered as part of every newbusiness manoeuvre. Acquired

networks and data centres must bedeconstructed or merged intoexisting networks, and duplicateresources must be gracefullycombined. To adapt efficiently tocontinual change, companies must consolidate and streamlinetheir IT planning processes so that IT governance can be folded completely into strategicbusiness planning and financialmanagement.

Managed services are proving to be a major advantage forcompanies that are attemptingto align IT management withbusiness decision making.Managed services must be well monitored and measured if service level agreements andcontracts are to be effective.Because they are welldocumented, managed servicesmake network and IT departmentsmore accountable and governable.


Closerlook

Businesscase


Introduction

page 16 of 37

“Service provider business models have grown up and become better understood since the telecom boom period, and this has improved provider business viability. No longer are providers able to build/buy network, construct vague business models and hope it will pay off. Now business models need sharper focus, which makes it harder to enter the market but the result is better plans that are now in place.”

JAMES EIBISCH, IDC, RESEARCH DIRECTOR



Service providers maintainsophisticated network, systemsand asset management systemsthat create reports which can givecustomers a clear picture of thecurrent and future capabilities ofIT/ network resources. The result isa reduction in the uncertaintiesand lack of information that oftenplague the IT dimension ofbusiness planning. Serviceproviders should be thought of asa knowledge partner who can helpcompany planners make betterbusiness decisions. Providers aretypically involved in hundreds orthousands of different customer ITarchitectures, and all this realworld experience can helpbusiness planners anticipateproblems and avoid possible ITand network mistakes.

Managed services can helpstabilise and simplify the ITenvironment while delivering the advantages of betterintegration, collaboration,

finances, productivity,responsiveness and decisionmaking. Using these businessdrivers as a foundation, we willnow examine seven specificmanaged service areas that areavailable across EMEA:

> Managed IP VPN

> Managed security

> Managed IP telephony

> Managed hosting and data centre services

> Managed wireless and mobile computing

> Managed Web contact/call centres

> Managed WAN data services


Closerlook

Businesscase


Introduction

page 17 of 37


A closer look – seven key managed service areas

Managed IP VPNsManaged IP VPNs are one of themost significant trends in ITtoday. IP VPNs can provideunified, secure, high performanceconnectivity for all users, remotesites, distributed applications andextranet partners throughout acompany’s IT architecture. InEurope, North America, and otherparts of the world, managed IP VPNs are successfully replacingaging frame relay, ATM, andprivate line networks and in theprocess greatly reducing networkcomplexity and total cost ofnetwork ownership. Theexpensive of multiple parallelcircuits to each remote site can bereduced to a single cost effectiveIP VPN access link.

Benefits delivered by managedVPNs:> Seamless data/voice/video

connectivity betweencompany sites

> Create a foundation for powerful distributed applications and multimedia workflows

> Improved performance, scalability and reliability – leverage the provider’s world-class backbone resources

> Efficient, secure access for home and remote users

> Consolidated and simplified network infrastructure

> Reduce expensive parallel access connections

> High levels of data security andaccess authentication


Closerlook

Businesscase


Introduction

page 18 of 37

Extranet

Internet

IntranetFirewall

Trading partners

IP VPN

Diagram 4.0 Intranet, Extranetand Internet access fromIP VPN



A managed IP VPN can transformchaotic network resources into aunified, efficient reliablecommunications fabric. The result ishigher productivity for end usersand IT staff, and more responsivebusiness processes. Managed IP VPN contracts can stipulate thatnetwork and IT equipment must berefreshed at periodic intervals. Thisensures that productivity stays highas the network keeps up with thelatest technology and best practices.

With traditional frame relay, ATMand leased line networks, virtualcommunities of users andapplications are created via timeconsuming, manual configurationof each virtual network. Managed IP VPNs in contrast canautomatically sense when a newsite has been added or removedfrom the company network.Because IP VPNs can automaticallysense changes in networktopologies, business planners havea great deal more flexibility in

moving and repurposing processesand human resources. This level ofplanning and operational flexibilityis not possible with existing circuitbased networks. Note that managed IP VPNs accommodate both older“hub and spoke” traffic flows andnewer peer-to-peer applications, soconsequently they are the idealfoundation for companies that arecontinually redesigning businessprocesses to adapt to changingcompetitive challenges.

Managed IP VPNs for improvedIT economicsTraditional wide area and accessnetworks too often becomebudgetary black holes thatintroduce hidden andunpredictable equipment/labourexpenses into the financial picture.Managed IP VPNs reduce CAPEXcosts and free capital for morestrategic undertakings. ReducedOPEX comes in the form oflowered recurring line charges andgreatly reduced labour expenses.


Closerlook

Businesscase


Introduction

page 19 of 37

Managed IP VPNs traffic is secure, monitored andcontrolled by the provider 24 hours a day year round,so the risk associated with distributed applications isgreatly reduced. VPNs can use a variety of securityand encryption methods to limit the possibility ofexternal threats to data and applications. In general,providers of managed IP VPNs can give companies aunified, dependable approach that creates an end-to-end IP connectivity solution.

Current use 53%

Plan in one year 17%

Plan after one year 5%

No plans 17% Current use 53%

Plan in one year 17%

Plan after one year 5%

No plans 17%

Diagram 4.1 Usage and plansfor IP VPNs




Closerlook

Businesscase


Introduction

page 20 of 37

Managed security servicesAs businesses integrate businessfunctions and reach out to customersand trading partners throughnetworking, there is an increasingdanger that distributed systems willbe compromised by viruses, hackersand other external or internal threats.The most secure IT resource in theworld is a sealed data centre with nooutside links. The more extendedand open business networksbecome, the more vulnerable theyare to security attacks.

Managed security is one of thehottest areas of managed servicestoday. There is a very large range ofmanaged security services on themarket in EMEA, including securityfor servers, local networks, wide areanetworks, applications, desktopcomputers, wireless users and so on.

Benefits delivered by managedsecurity services:> The latest security best

practices, software andhardware

> Reduced cost and riskassociated with data theft anddata corruption

> Reduced productivity loss romdowntime and networkoutages

> Proactive administrativepolicies to combat hackingand viruses

> Protection from internal andexternal threats

> Managed security can protectphysical assets as well as data

> High performance firewallsand security resources thatare remotely managed

> Ongoing testing andupgrading of security systems

> Detailed reporting of securityincidences and vulnerabilities

Security is an area that has become extremely fastmoving, new threats and new threat aversiontechnologies are emerging every day. For instance,firewalls are being built into VPN equipment, routers,switches, and servers. The software for detecting andneutralising viruses and other attacks is advancing allthe time as well. Given the enormous cost and effort ittakes for a company to stay on top of securitytechnologies, it’s difficult to justify a build-it-yourselfapproach. In general, the total cost of ownership isvery high for building in-house security measures.There is also a very high cost associated with the lossof productivity, revenue and intellectual propertywhen in-house security measures fail.

At its best, data security is a highly proactive activitythat involves constant monitoring of networks,servers and desktop computers on a continual basis.Focused security providers protect companies fromincreasingly sophisticated attacks with the latest anti-virus and anti-hacker tools, managed firewalls, andremote intrusion detection systems. A serviceprovider’s security teams can remotely monitor andprotect all the devices on the company network fromthe provider’s secure 24x7x365 data centre.


A closer look – seven key managed service areasManaged IP telephonyWith IP-based business telephonysystems and related unified businesscommunication services, serviceproviders are now able to match andexceed the capabilities of traditionalenterprise PBX phone systems.Many companies are attracted to thelarge cost savings that can beachieved by running voice and dataon a converged networkinfrastructure. But ultimately thebenefits of lower costs may be farexceeded by powerful multimediatraining, collaboration and customer-relations applications that arepossible when phone services areaugmented by computerapplications and network services –the highly coveted goal of computer-telephony integration (CTI).

Benefits delivered by managed IP telephony systems: > Major cost reductions

compared to conventional PBXs> IP telephony is foundation for

a wide array of powerful e-commerce, collaboration and customer service applications

> Phone system adapts rapidly to changes in business processes and business organisation

> IP phones that can plug into any standard Ethernet hub

> Unified messaging, directories and search services

> One number calling, call follow-me, call forwarding and call filtering

> Voice mail and voice/email integration

> Auto-attendant and automated call handling


Closerlook

Businesscase


Introduction

page 21 of 37



In the IP telephony approach, eachuser is assigned an IP address thatbecomes a central contact point forcalls, messages, conferences, paging,and a wide range of unified internaland external communications.

An IP telephony system can deliver avery high level of functionality; it canalso greatly lower recurring tollcharges by routing calls across thecompany’s data network whereverpossible. Companies that are movingto managed IP VPNs are particularlygood candidates for IP telephony.Business telephone systems aregenerally considered mission critical,with a very demanding requirementfor high performance and reliability.The robust, fault tolerant nature ofthe provider’s backbone and datacentres are the ideal foundation forIP-based business phone andmessaging solutions. IP phonesignalling and voice calls can berouted across a managed IP VPNwith great efficiency, using the VPN’snative class of service capabilities.

The low jitter, latency and packet losscharacteristics of managed IP VPNsensure that voice calls will take placewithout distortion or disruption. Thecombination of IP telephony andmanaged IP VPNs delivers inherentlystrong business continuitycapabilities that lower a company’srisk profile.

Traditional business PBXs have avery long life cycle of up to 8 yearsor more. Some companies whowould like to move to IP telephonyand converged businesscommunications are holding backbecause their phone equipment hasnot reached the end of its life cycle.But considering the reducedoperating costs and productivityadvantages of IP telephony, waitingfor replacement cycles is in manycases a false economy. Savvycompanies are using managedservices to move as quickly aspossible toward converged IPvoice/data business applications.


Closerlook

Businesscase


Introduction

page 22 of 37

“According to Yankee Group data, 76 percent of large European enterprises are committed to convergence of some portion of their voice and data infrastructure within the next two years.”

[TELECOMMUNICATIONS STRATEGIES EUROPE, FEBRUARY 2004, BY AMY RODGER]



Managed hosting and data centreservicesFor many years, data centres wereconsidered the proprietary innersanctums of corporate competitiveprowess. These days many datacentre hardware and softwareresources have become commoditiesthat are best outsourced/tasked tofocused network service providers.Today there is a very large range ofmanaged data centre hardware andapplications available from EMEAproviders. Service providers haveaggressively invested in data centrefacilities, servers and personnel,allowing them to offer a lower TCOcompared to self-built and managed data centres.

Benefits delivered by managedhosting and data centre services:> Telco-grade data centres with

high levels of performance and reliability

> Greater scalability and larger national or regionalIT “footprint”

> Cost effective support Microsoft Exchange Server and other messaging software

> Major Web and databaseserver products

> Remote storage/backup/archiving

> E-commerce markets and “storefronts”

> Content streaming and caching (CDN)

> Multimedia streaming, video multicast, etc.

> CRM and sales force automation (SFA) applications

In the managed data centre model,if applications need more network,storage or server capacity, theprovider has the resources to scaleoperations up, so companies canrapidly respond to changingbusiness needs.


Closerlook

Businesscase


Introduction

page 23 of 37

Diagram 4.2 European enterprise driversfor convergenceSource: The Yankee Group, 2004

15

26

30

39

40

46

69

0 10 20 30 40 50 60 70

Percent of Respondents

Lower staff/training costs

Easier moves, adds, changes

Equipment obsolescence

Support bandwith-intensive apps

Deploy converged apps

Ease of network management

Lower operational costs

Communication startegies Europe, February 2004, by Amy Rodger



Pay-as-you-go data centre servicesallow more flexibility in business andfinancial planning and finance, asspecial projects and unusual spikes indemand of customer requirementsare rapidly addressed without hugeinvestments or lag times. Whencompanies build their own datacentres, capacity is much lessscalable compared to the situationwhere the company has an ongoingoutsourcing relationship with aprovider who has world-classcomputing resources and secure24x7x365 operations.

There is a high amount of risk withthe deployment of critical data centreapplications, as can be seen in theprominent failure of major ERP andCRM initiatives. There is also high riskassociated with system and networkmanagement systems that attempt tomonitor, diagnose, maintain andreport on all the diverse networks anddevices inside a company. Therehave been many visible failures ofintegrated management systems inrecent years, when companies chosethe wrong products or deploymentmethods. With a total core focus ongetting system management anddata centre operations right, serviceproviders take on the risk ofdeploying complex network and ITinfrastructure, hence lowering theircustomer’s exposure downtime andwasted expenditures.


Closerlook

Businesscase


Introduction

page 24 of 37



Managed wireless and mobilecomputingWireless LAN and wireless WANcomputing is rapidly becoming a business-critical dimension to IT.Users are travelling between offices,cities and countries with laptopcomputers and handheld devicesthat have virtually all the power andfunctionality of desktop PCs. Userscan check their messages, look upcorporate documents, querybackend transaction data and keep intouch with their customers from anylocation. At first glance wirelesscomputing may seem like aconvenience or an employeeperk, but studies have found asubstantial ROI is associated withwireless computing investments, due to enhanced productivity,responsiveness, and better customerrelations. Mobile computing letscompanies leverage their preciousinternal human and information

resources in ways that wouldhave been unthinkable just a fewyears ago.

As with wired LANs and WANs,wireless data services are greatproductivity and collaboration tools,but their deployment is not a “core”activity for most companies. Hencemany managed service providershave developed complete managedwireless and mobile computingsolutions that allow companies toavoid the capital expenses,complexity and deployment effortassociated with mobile computing.


Closerlook

Businesscase


Introduction

page 25 of 37



Benefits delivered by managedwireless and mobile computing:> Rapid deployment of revenue

generating wireless initiatives> With the latest mobile

computing tools, travellingemployees are free to focus oncustomers, field service andfield sales

> No requirement to developinternal expertise in a fast-moving technology area

> Secure provider data centresare ideal place to host mobileapplications

> Provider economies of scalecan mean lower TCO formanaged mobile computingservices

> Extensive provider help deskand support resources meanthat mobile users will get thesupport they need forbusiness critical mobileapplications.

> Providers can often maintain,repair, and upgrade mobileresources remotely

Providers often host wireless e-mail, scheduling and sales forcesoftware in their secure datacentres, where they are accessed byfield workers via wireless WANconnections. Providers often owntheir own wireless infrastructurewhich allows them to rapidlydeploy managed mobile computingsolutions that include wireless WANair time, mobile applicationsoftware hosting, end user support,remote management and updatesfor mobile computing devices. Inthe wireless LAN area, manyproviders are actively involved inthe deployment of WiFi hotspots forwireless VPN and Internet access incompany premises and publicareas. WiFi is available as a fullyinstalled and managed service inmany EMEA countries today withlower TCO and higher resiliencythat is possible with the averagebuild-it-yourself approach.


Closerlook

Businesscase


Introduction

page 26 of 37



Managed Web contact centresBefore the advent of IP telephony,traditional call centres required majorCAPEX and OPEX expenditures anda rigid infrastructure with fixedphysical locations and assets. Incontrast, Web enabled contactcentres combine traditional callcentre features with Internet-enhanced communications andaffordable pay-as-you-go costmodels. Web contact centres are amajor advancement for sales,marketing and CRM departmentsbecause they allow cost effectivecustomer support via an integratedworkflow of email, phone, Web,instant messaging, fax and otherhuman or automated forms ofcontact. Web contact centres deliverhigher customer loyalty, reducedchurn, greater customer lifetimevalue, and reduced sales costs.

Benefits delivered by ManagedWeb contact centres:> Rapid deployment of powerful

customer relations and salesapplications

> Location independent – virtualassets: call centre software isembedded in provider’snetwork

> Very flexible deploymentmodels, customer agents canwork together or separately –home, office or boiler room

> Greatly reduced Capex costs –agents can access system withstandard office PCs

> Very controlled andpredictable Opex costs:usually cost is per seat or byusage

> Integrates well with VPNs;leverages IP networkinfrastructure


Closerlook

Businesscase


Introduction

page 27 of 37



Companies can build multi-mediacontact centres themselves, but this is another network service thatgreatly benefits from the economiesof scale and provider focus that arepart of the managed servicesapproach. Given the cost andcomplexity of building an onlinecontact centre, outsourcing is veryoften a better option. Web contactcentre software runs reliably in aprovider’s data centre and can beaccessed by agents on any PC with aWeb browser (see Diagram 4.3). Theprovider takes on the technology riskand financial responsibilities bymaking the virtual contact centreavailable on a subscription basis.This approach requires no specialCTI, ACD or programming skills onthe part of in-house company staffmembers.

Managed Web contact centres arecomplete solutions that can be upand running in a very short time.Web centres can start with as little asone agent and scale up to hundredsof agents as customer demandgrows,which frees business planningand decision making from theconstraints of heavy capitalinvestments and long riskdeployment efforts. Managed Webcontact centres are a good choice forcompanies that need bettercustomer relations but without thein-house effort of integrating e-mail,Web, CTI, messaging and workgroupcollaboration tools around a centralcontact tracking database.


Closerlook

Businesscase


Introduction

page 28 of 37

Diagram 4.3 Managed contactcentres: Rapiddeployment with low capitalinvestment



Managed WAN data servicesGiven the importance of non-stopreliability for network connectionsbetween company sites, the WANis a natural area for managednetwork services. It is possible for a company to purchase, install and maintain its own WANconnections, but there are veryfew companies that can achievethe high levels of reliability andsupport that a focused managednetwork services can provide. Inaddition to reliability issues, thecost aspects of do-it-yourself WANdata services are not as good asthey may first appear. In manycases the hidden costs of ongoingsupport, maintenance, repair,configuration, and downtime aremuch greater than what’s apparentat first glance. The TCO formanaged data services is oftensuperior to the build-it-yourselfapproach.

Benefits delivered by managedWAN data services:> Lower total costs compared to

self-built WAN services

> Higher reliability and enforcedservice level agreements for WAN links

> Providers generally have moresophisticated troubleshooting and problem resolutions resources

> Providers 24x7x365 operationsmean less downtime and better end user support

> Providers will in many cases manage and maintain custom premise equipment on site

> Improved reporting and capacity planning forWAN links


Closerlook

Businesscase


Introduction

page 29 of 37



Today EMEA network providers offer a wide range of managed WAN connectivity services that overthe entire “lifecycle” of frame relay,private lines, ATM, metro Ethernet,and other wide area services. Serviceproviders guarantee service levelswith binding Service LevelAgreements that specify minimumacceptable performance andavailability. For mission critical WAN applications, providers arecapable of delivering 99.999%availability for both core and accessaspects of the WAN.

There are many variations but acomplete package will deliver an endto end network service includingedge devices, ATM switches, WANrouters, network managementsystems, asset and changemanagement software, help andsupport functions, design,maintenance and so on. In somecases network providers will providea managed WAN data service basedon CPE owned by the customer. Inthe next few years, many large andsmall companies will begin to movekey parts of the WAN networkinfrastructure to managed services asthe total cost of ownership picturebecomes clearer.


Closerlook

Businesscase


Introduction

page 30 of 37


Choosing a Managed Service Provider

Managed network services shiftmuch of the design, installation andmaintenance responsibilities to theservice provider, but enterpriseplanners must make an effort toensure that the correct providerrelationship is established. The firststep is to understand and define yourbusiness needs:

Internal assessment of needsEven the most qualified and well-resourced network services providercannot create an optimal solution ifthere is inadequate knowledge ofthe enterprise’s business andtechnology needs. Ideally thedesired goals of each managednetwork service should be defined,prioritised and communicated bythe enterprise. The success of amanaged services project can belargely affected by the up frontneeds assessment. In many casesservice providers can helpenterprises determine needsrequirements before a service isspecified.


Closerlook

Businesscase


Introduction

page 31 of 37

Number of sites and locations Security criteria

Number of users Risk vulnerabilities

Target applications Budget resources

Bandwidth requirements Projected downsizing/growth

Acceptable latency, jitter, Merger and acquisition error levels plans

Support and help desk Strategic business requirements and financial goals

Reliability/availability needs Macro economicand competitive factors

Some of the key areas to look at whendetermining enterprise requirements are:



Step by step approachExperience shows that managedservices will be more successful if business requirements aredeveloped with a cross functionalteam of management, technical staffand end users. Once a company’sbusiness and financial goals areestablished, these should betranslated into IT criteria. After ITgoals and applications needs areunderstood, then an accurate pictureof managed network service criteriacan be determined. With a set ofvalid criteria (see Diagram 4.2), it isthen possible to identify a managednetwork service provider with theright levels of technology expertise,transport infrastructure, geographiccoverage and price levels. Using thisstep by step approach, companiescan maximise the performance,security, reliability, and costefficiencies that managed networkservices can deliver.

Provider strengths and limitationsSome carriers are more focused onnetwork connectivity and operationalexcellence, while others have deeplevels of IT and applications hostingexpertise. Given the very largerange of managed network servicesthat have emerged, it’s importantthat you understand the corecompetencies of candidate serviceproviders. It also helps tounderstand the size and financialresources of your vendor. Learn thetrack record and history of theprovider’s management team anddirectors, and find out where theirgreatest strengths lie. Once you starttalking to managed serviceproviders, ask questions about howthey fit your specific vertical industryneeds.

Please have a look at the followingpage where you can find a set ofquestions, which help you toidentify a service provider who bestfits your needs.


Closerlook

Businesscase


Introduction

page 32 of 37

Diagram 4.4 Example business,IT and managednetworks criteria:




Closerlook

Businesscase


Introduction

page 33 of 37

Which service provider meets your needs> Has the provider ever worked

in your industry?

> Does the provider have experience supporting your specific business applications?

> Does the provider often work with companies that aresimilar to yours in size, location, etc?

> Who are the provider’s business and technology partners?

> What is the financial and cash position of the provider?

> Does the provider have a goodtrack record for customer support and SLA execution?

> Does the provider have a network backbone coverage that provides the connectivity the enterprise requires?

Service level agreement strategiesThe best service level agreements(SLAs) are ones that are crafted withthe end-to-end performance of keybusiness applications in mind. AnSLA should be oriented towards thespecific needs of end users andapplications. It is also important tomake sure that SLAs have enoughdetailed criteria to be measurableand enforceable. An over-vague SLAis as bad as none at all. SLAs mustbe able to evolve and adapt asconditions in the network,applications and the managedservice relationship change asinevitably they will.

Each type of managed serviceSLA has a different set ofmeasurements and metrics thatare relevant. For instance:

> Managed IP VPN SLAs can include network delay, packet loss, jitter, and mean time to restore values

> Network storage SLAs can include metrics for available storage levels, disk access speed, levels of raid redundancy, backup/archive frequency and so on

> SLAs for voice over IP servicescan include the quality ofvoice calls in terms of end toend latencies, voicebandwidth, echo levels, callset-up time, call re-route time,etc.

For all types of network services,SLAs aren’t enforceable withoutadequate network performanceinformation, so thorough and regularreporting on network operationsshould be made available by theprovider. Metrics and performancegoals should be end-to-end and as“close to” the application as possible– SLA values that are divorced fromend application performance are ofquestionable value.




Closerlook

Businesscase


Introduction

page 34 of 37

In addition to performance andreliability metrics, it may bedesirable to include less tangiblecriteria in agreements. For instance,there can be a clause about theservice provider’s responsibility toprovide a support staff andhelpdesk team with a high level ofprofessionalism and a positive,helpful attitude towards theenterprise’s employees andbusiness goals. Whenever possible,ensure that contracts have theflexibility to beexpanded/contracted using coststhat are in line with expectationsand budgets. If you anticipate forinstance upgrading bandwidth inyour access lines, get someunderstanding in advance howmuch this will cost within theframework of the existing managednetwork services contract.

Keep in-house talentA world-class managed servicesprovider gives you access to alarge pool of talent and experience,but that doesn’t mean that you cando without technically savvy staffinternally. It takes business andtechnical knowledge to manage anetwork services contract.

The simple truth is, if you eliminateall in-house technology talent, youcan’t manage the outsourcing andout-tasking relationships properly.The skills of your in-house staffwon’t need to be as granular asbefore. But additional skills likecontract management and theability to analyse network reportingand accounting will come to thefore. Managed services are a goodway to free up staff to thinkstrategically and develop theservice provider relationship in thedirection that will most benefit theenterprise and its key revenue-generating IT applications.

Managing the services contractPut an in-house person in place tooversee the managed networkservices relationship. This personwill monitor service levels andmake sure they fall within SLAparameters. The in-house contractmanager can also ensure that theenterprise is getting the full valueout of the contract, ie, that theservices contracted for are actuallybeing used. If the contract isproviding an excessive or deficientlevel of services for enterpriseneeds, the in-house contractmanager will be aware of this andthe contract can be adjust “midflight” or during the contractrenewal process. This will avoid thesituation of over-buying or under-buying network services. And it willalso ensure that communicationsbetween the enterprise andprovider flow smoothly.




Closerlook

Businesscase


Introduction

page 35 of 37

Cisco Powered Networkdesignation: The service provideradvantageCisco Systems is the world’s leadingnetwork equipment maker and amajor force behind the developmentof innovative managed networkservices for enterprises. Whenseeking or assessing a serviceprovider offering managed networkservices, enterprises should considerthose with the Cisco PoweredNetwork designation because theyare committed to:

> End-to-end cisco network technologies

> Advanced network design andplanning methodologies

> High standards of operational excellence

> High standards of customer service and support

When an enterprise chooses aprovider with the Cisco PoweredNetwork designation, there is addedassurance that network applicationswill get the best technology andexpertise possible. The CiscoPowered Network designation givesenterprises the peace of mind thatnetwork-based business operationswill perform reliably – so theenterprise can focus on what it doesbest in the marketplace.

Enterprises can search for Ciscorecommended service providersat www.cisco.com/cpn

http://www.cisco.com/cpn




Closerlook

Businesscase


Introduction

page 36 of 37

Why buy? – the top 10 reasonsThe reasons for buying managed IT or network services are different for every organisation but some of the most common justifications are:

1. Reduction of operating and capital costs

2. Take advantage of latest network and IT technologies without losing focus on core competencies

3. Streamline, integrate and standardise network resources for more efficient business processes

4. Extend network to customers, partners and supply chain members

5. Shift risk exposure to service providers

6. Move rapidly towards IP telephony, computer/telephony integration and voice/data convergence

7. Achieve a robust, reliable IP infrastructure for advanced distributed applications, multimedia and peer to peer computing

8. Move towards a real time enterprise (RTE) by reducing delays in internal processes and information flows

9. Get better asset, capacity and fault reporting on IT and network resources... for better decision making and better IT governance

10. Virtualise IT assets.... respond rapidly to dynamic market and competitive conditions


Cisco Systems has more than 200 offices in the following countries and regions. Addresses,

phone numbers, and fax numbers are listed on the

C i s c o W e b s i t e a t www. c i s c o . c o m / g o / o f f i c e s

Argentina • Australia • Austria • Belgium • Brazil • Bulgaria • Canada • Chile • China PRC • Colombia

• Costa Rica • Croatia • Czech Republic • Denmark • Dubai, UAE • Finland • France • Germany •

Greece • Hong Kong SAR • Hungary • India • Indonesia • Ireland • Israel • Italy • Japan • Korea •

Luxembourg • Malaysia • Mexico • The Netherlands • New Zealand • Norway • Peru • Philippines •

Poland • Portugal • Puerto Rico • Romania • Russia • Saudi Arabia • Scotland • Singapore • Slovakia

• Slovenia • South Africa • Spain • Sweden • Switzerland • Taiwan • Thai land • Turkey • Ukraine •

United Kingdom • United States • Venezuela • Vietnam • Zimbabwe

Copyright © 2004 Cisco Systems, Inc. All rights reserved. Cisco, Cisco Systems, and the Cisco Systems logo are registeredtrademarks or trademarks of Cisco Systems, Inc. and/or its affiliates in the United States and certain other countries. All othertrademarks mentioned in this document or Website are the property of their respective owners. The use of the word partner doesnot imply a partnership relationship between Cisco and any other company. (0402R)

Corporate HeadquartersCisco Systems, Inc.170 West Tasman DriveSan Jose, CA 95134-1706USAwww.cisco.comTel: 408 526-4000800 553-NETS (6387)Fax: 408 526-4100

European HeadquartersCisco SystemsInternational BVHaarlerbergparkHaarlerbergweg 13-191101 CH AmsterdamThe Netherlandswww-europe.cisco.comTel: 31 0 20 357 1000Fax: 31 0 20 357 1100

Americas HeadquartersCisco Systems, Inc.170 West Tasman DriveSan Jose, CA 95134-1706USAwww.cisco.comTel: 408 526-7660Fax: 408 527-0883

Asia PacificHeadquartersCisco Systems, Inc.Capital Tower168 Robinson Road#22-01 to #29-01Singapore 068912www.cisco.comTel: +65 6317 7777Fax: +65 6317 7799


Closerlook

Businesscase


Introduction

page 37 of 37

build or buy?

Documents