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  • 27 May 2004 10:28

Executives make plans for utility networks, Increased network spending

The need for simpler, more reliable and cost-effective networks is prompting companies to make their first steps towards shared IT resources, says new survey and report.

Forty four percent of executives plan to adopt some form of utility computing within the next two years, according to a new survey and report on networking and business strategy from AT&T in co-operation with the Economist Intelligence Unit. The finding suggests that utility computing, an Information Technology (IT) model where companies share IT resources for greater efficiency, is becoming an accepted business strategy for a growing number of companies.

The survey, which captures the views of 254 senior executives worldwide on the future of corporate networking, suggests that companies are seeking new ways to reduce the cost and complexity of their existing networks. Only 6% of respondents thought their network is well-equipped for all of the business challenges they face over the next two years. These and other findings are presented in a new report called Self-managing networks: building the infrastructure for utility computing.

The survey suggests corporate spending on networks is set to rise, with 61% of companies saying they will make very significant or significant investments in their networks in the next two years. One of the key challenges in managing legacy IT networks is the astounding demand for new applications along with increased data traffic. According to the AT&T / EIU survey, more than 40% of all respondents anticipate implementing customer relationship management applications, Voice over Internet Protocol, videoconferencing and wireless access options, such as WiFi within the next two years.

One of the key conclusions of the report is that many companies’ existing networks are too complex and costly to manage, prompting executives to seek more flexible network models.

“The survey highlights the increasing levels of complexity – and frustration -- faced by corporations worldwide,” said Steve Lowe, Vice President of AT&T Business, Asia Pacific. “Research like this highlights the need for networking companies to provide enterprise customers with the clear road map, tools and global reach to take networking from being a burden on their business to becoming an asset.”

Utility computing is about making IT services available “on tap” without users having to worry about how those services are delivered. The concept is made possible by network automation technologies that enable complex computers and networks to manage themselves.

For many companies, utility computing will entail working with a managed service provider, allowing companies to reduce their costs by not having to buy, install, maintain and operate hardware or software beyond their desktops. Instead, usage-based pricing will mean companies will pay only for what they need. The new computing model also brings greater economies of scale, since state-of-the-art IT resources can be shared by multiple companies.

AT&T’s Application Aware Network (SM) AT&T’s model for utility computing is called ‘Application Aware Network’. Application Aware Network will be built on AT&T’s global, IP Multiprotocol Label Switching networking infrastructure and will address the need for computing that is more cost effective, scalable and reliable than has been generally possible with traditional IT networks. “The significant long-term cost of owning technology lies in its ongoing maintenance and administration,” says Hossein Eslambolchi, President, AT&T Global Networking Technology Services. “Automation is the key to achieving significant rates of productivity growth and expense reduction along with flawless reliability."

AT&T’s Application Aware Network allows customers to move away from a fixed cost, fixed capacity IT architecture, where network investments are sized for rarely used peak loads. Instead, fixed costs are converted to variable costs as servers, storage and operational systems move from the customers’ books to AT&T’s. Because infrastructure does not need to be purchased, the economic penalties associated with accelerating, delaying or even cancelling the deployment of a new project are significantly reduced, as are the risks associated with deploying a new application that might experience unpredictable demand.

The result is a continuously adapting infrastructure, enabling a more efficient use of computing power and optimised network speed and throughput. The fact that applications and their data can be replicated and moved around the globe also lessens the need for companies to physically duplicate data centres and applications.

Responding to market demand, AT&T now offers a managed utility service for its hosting customers, enabling them to leverage shared infrastructure without sacrificing the security, availability and redundancy of their hosted applications. This also enables customers to add applications, bandwidth and storage capabilities more easily in real-time, without having to invest in additional equipment. AT&T delivers this capability through the Virtual Service Switch from Inkra Networks of Fremont, Calif.

AT&T will continue to leverage its application-aware network to deliver more comprehensive utility computing solutions over the next 12 to 18 months.

The report Self-managing networks: building the infrastructure for utility computing is the first in a series of four thought-leadership articles written by AT&T in co-operation with the Economist Intelligence Unit on the future of networking. Subsequent papers will examine the topics of security, remote working and Voice over Internet Protocol (VoIP).

Survey & Research Methodology: As part of the research for the paper, the Economist Intelligence Unit conducted an online worldwide survey of 254 executives. The majority of respondents came from Europe (40%), North America (27%) and Asia-Pacific (21%). Other respondents came from Latin America the Middle East and Africa. The top five industry sectors represented by the survey respondents were financial services, professional services, manufacturing, transportation and energy. In addition to the survey research, the EIU conducted a series of one-to-one in-depth interviews with senior executives and analysts. All of the survey research took place in March and April 2004.

About The Economist Intelligence Unit The Economist Intelligence Unit ( is the business information arm of The Economist Group, publisher of The Economist. Through its global network of over 500 analysts, the Economist Intelligence Unit continuously assesses and forecasts political, economic and business conditions in nearly 200 countries. As the world's leading provider of country intelligence, the Economist Intelligence Unit helps executives make better business decisions by providing timely, reliable and impartial analysis on worldwide market trends and business strategies.

About AT&T For more than 125 years, AT&T (NYSE "T") has been known for leading-edge technology and unparalleled quality and reliability in communications. Backed by the research and development capabilities of AT&T Labs, the company is a global leader in local, long distance, Internet and transaction-based voice and data services.

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