The death of the corporate network
A white paper by Jaydeep Korde, Extrasys Business Unit Director.
Released on the 29th of June 2007.
What is a corporate network?
A corporate network (CN) is here defined as a closed and private computer network that affords secure communications between geographically dispersed LANs of an enterprise. These point to point connections have traditionally been delivered through leased lines.
The cost and perceived value of a leased line
According to a 2006 Ofcom survey, just under a third (31%) of medium sized UK businesses (51 to 250 employees) are currently using leased lines. They are particularly popular in the South where the average annual spend is £46,000. Of the telecom decision makers interviewed, 17% (the largest group) cited the main reason for continuing to have leased lines is that they were inherited when the respondent started work in their position; 10% felt the main reason was because the circuits suited their business needs; 8% didn't know; and only 4% said that the main reason was to access the Internet.
Why do businesses have a corporate network?
A business implements a corporate network to share applications and data between different computing devices and users in different locations. Unless the application is web based or database driven, this usually means copying files back and forth between a network drive and a local computer, where a desktop application is used to read and/or edit the files.
The increasing need to access corporate data from anywhere has led to changes in the nature of applications, the emergence of mobile devices and, this white paper asserts, the impending death of the corporate network.
Beyond the corporate network
The ubiquity of high speed Internet access is now changing the concept of the 'network' as the Internet becomes the secure method of access to a virtual IT infrastructure. Businesses will be managed via the web through internal IT resources and/or a mix of services from specialist SaaS providers. Depending on their size and individual requirements, they will attempt to keep costs low while retaining and protecting those technologies and processes that differentiate them. The barriers will break down further as businesses interact increasingly with their partners, suppliers and customers using web applications and web services.
Bespoke virtual IT infrastructure
Companies that use non-proprietary and/or bespoke software as a core component and differentiator of their business will be more inclined to build their own web based applications, as it builds value within the business and decreases dependence on external suppliers. An alternative or stop-gap approach, which requires less development time, will be to virtualise those applications that run within a Windows environment and stream them to end users anywhere.
Software-centric businesses like this will find a clear distinction emerging between their core applications and the commoditised applications that are needed like a utility. Word processing, spreadsheet and presentation tools are not optional for most businesses and the majority use Microsoft products for these purposes; but the single most common business critical application is email. By 2009 it will be rare for a business to have email as an application delivered internally and/or not available online.
Businesses can reduce costs by streaming their core applications along with standard applications from the same Internet servers; and their data can be stored online, too. Within this context the LAN/WAN become less relevant and the main concerns surround data security, intellectual property and Internet bandwidth requirements.
Hosted virtual IT infrastructure
Buying commoditised applications and data storage as a service will appeal most to those businesses where technology is a back office service delivered to make the rest of the business run. The software and data services available today have become more competitively priced and easy to understand. The point of conversion for established businesses with existing corporate networks will come when they are faced with the choice of upgrading their own existing hardware and infrastructure or using a supplier's virtual IT infrastructure. Most will choose to treat IT as just another managed service, realising that their business exists to deliver better margins, not own IT assets.
Free virtual IT infrastructure?
Some businesses may even choose to use free services like Google Apps or pay for the Premier Edition, but the applications will be unfamiliar to their users and they will often have problems viewing complex Microsoft Office documents received from non-Google users. There is, then, a danger of businesses becoming tied in to services provided by big players with whom they have no power to negotiate. They may also feel obliged to deal with businesses that have made the same technology choices because communication through calendaring and Google Talk, for example, will be easier.
Security in a virtual network
Despite the benefits of an online virtual IT infrastructure, new challenges, based around privacy, ownership and security present themselves, not only for businesses as a whole but individual users. Counter intuitively, perhaps, data security is enhanced in an online environment - whether it is hosted internally or by a third party. Centralisation and consolidation is preferable to having data sprawled across devices and corporate networks, which degrades security and reduces the business value of the data. Centralisation of data also adds a level of comfort in that lost laptops and broken servers have less effect.
Businesses that use a hosted services provider to host their data and applications will, of course, be reliant on a third party's security and some may fear sharing servers with competitors; but most will appreciate the value of outsourcing standard IT functions so that they can focus more on their core activities.
Concluding remarks
Assuming the threat of a two-tier Internet comes to naught, the next few years will finally witness the death of the corporate network, along with its costs and functionality limitations. The technology that people use at home now offers better mobility and performance than that which many currently experience in their office - and the users have noticed.
The pervasiveness of high speed Internet connectivity and the fact that consumers have become used to paying subscription fees for mobile phones, broadband and cable television, has increased expectations and created a rapidly growing market for hosted IT service providers.