Eight Ways to Slash Network and Telecom Costs by Half

About this research note: Operate & Optimize notes provide Eight Ways to Slash recommendations for effective and efficient IT practices that help Network and Telecom improve the performance or reduce the cost of technologies already Costs by Half deployed in the enterprise. Publish Date: December 12, 2008
More and more enterprises are being affected by poor economic conditions, and budgets are starting to get slashed. If the CFO walks into your office and asks you to cut IT spending, look to these eight tactics to slash network costs. © 1998-2008 Info-Tech Research Group www.infotech.com
Executive Summary The average enterprise spends 11% of IT budget on network communications services. Enterprises also allocate 11% of overall staff resources to network management and administration. When the axe falls on IT budgets, the capital, operational, and administrative costs allocated to networks and communications will undoubtedly be scrutinized. This research note will focus on the following: » Eight options to reduce network costs. » The key areas on which to focus. Hard to balance cost reductions with high service levels? Absolutely. Impossible to maintain high network service levels in a cost cutting environment? Absolutely not.
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Optimization Point When times are good, most enterprise IT organizations deliver a level of network services that at least meets, and often exceeds, what the business demands. When the economy tanks and cost reduction exercises are undertaken, there is a good chance that the network services group can deliver cost savings without material impact on network performance.
The objective of this research note is to identify cost reduction opportunities that the network and communications group can undertake while still delivering an acceptable level of network services to the business. Not every organization will be able to take advantage of every cost cutting strategy outlined, but most will be able to take advantage of enough to significantly reduce costs. Consider the options that make the most sense, and implement those that can have the most significant impact on costs with the least impact on service delivery.
Key Considerations
1. Replace Expensive WAN and Internet Links Most companies use expensive T1 links for WAN connectivity or Internet access. While T1s offer dedicated bandwidth and superior service level guarantees, they cost as much as 500% more than other broadband alternatives that often deliver more bandwidth. For instance, while a T1 (1.544 Mbps symmetrical) will likely cost approximately $500, an ADSL connection (3-10 Mbps download, 400Kbps-1Mbps upload) can typically be had for $100 or less. True, the ADSL connection will not have the same service level agreement (SLA) as the T1, but it is likely reliable enough for most scenarios, and if it is not dual homing can improve reliability to T1 quality or better. In order to know how much capacity is really necessary, network and telephony traffic should be monitored. Using a Network Management System (NMS) to monitor network traffic can quickly identify areas of over-capacity. It may be possible to reduce the capacity of WAN, Internet, and telephony connections, reducing costs significantly. For more information, refer to the Info-Tech Advisor research note "Slash Branch Office WAN Costs: Dump the T1s."
2. Buy Hardware on the Secondary Market The secondary market for network equipment has grown rapidly over the past few years. In many cases, this represents a considerable cost saving opportunity, but the growth of the market has also introduced undesirable elements that present significant risk. Identifying honest, reliable sources for refurbished network equipment is the essential first step to sourcing from the secondary market.
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Once successful partnerships have been developed with sound sources, the risks associated with purchasing refurbished network equipment virtually disappear.
Used and refurbished equipment is fair game, and is typically priced 50-90% below the list price of new gear. Whether used or refurbished, the equipment should come with a warranty - 90 days... [download for more]