Remote Access: Goodbye Modem Pools, Hello Service Providers

Outsourcing remote communications is big business.

IT managers are trying to find ways to cut the total costs of supporting ever-increasing numbers of remote users that include telecommuters, travelers and users at other sites.

By the end of 1999, nearly half--or 49 percent--of large and medium-sized enterprises will outsource some or all of their remote access, according to the Cahners In-Stat Group consultancy.

The Gartner Group concurs, noting that enterprises are increasingly turning to service providers to configure, own and manage their remote communications infrastructures. Companies may not be trashing their modems and concentrators totally, but they are seeking better control over remote access equipment costs and management.

That certainly is the case with Hitachi Metals America Ltd., a global manufacturer of custom prefabricated metal products.

In the past, the company-which supplies products to the automotive, steel, telecommunications, computer and consumer products industries-had only small offices with two to 30 people in them. But in the past three years, "there has been phenomenal growth in the number of people, the number of sites and what we had to do," says MIS manager Ray Milano, whose head count totals about 2,500 remote users now.

Milano selected a managed network solution from Concentric Network Corp. to connect 15 sites to Concentric's IP-services and ATM backbone. Concentric is running T1 lines to all sites with most lines initially provisioned for 128-Kbps service.

As a result of outsourcing Hitachi's WAN to a service provider, three extra sites have connected to the corporate network, and twice the bandwidth is now available to each site.

Moreover, there's a total communications cost savings of $2,000 per month for the entire network. The savings are produced by connecting sites directly to Concentric's network vs. using long distance links between sites. And the entire network is managed by Concentric.

Hitachi's reasons for outsourcing its remote access seem typical: better resource allocation. The company's small IT staff of six was being stressed to handle ever-increasing chores. At the same time, the cost of connecting sites was climbing as more sites and high-performance applications such as videoconferencing were added to the mix.

For some companies, communications cost savings alone prompts the move to an outsourced remote access scenario. That's one of the reasons virtual private networks are receiving so much attention these days.

Many companies are turning to VPNs as a lower-cost alternative to traditional dial-up access. VPN technologies such as tunneling, encryption and authentication provide secure links and give companies a pretty good level of comfort about having their valuable data pass over a provider's shared network.

With a VPN, users replace their long distance phone calls with a local call into a service provider's network, for cost savings that can be quite substantial even if a company uses a consumption-based, premium Internet service provider access service where callers are billed by the hour of connect time.

"When we started looking at VPNs as a way to cut communications costs, we did our calculations based on giving every user a basic $19.95-a-month [Internet service provider] account," says Norman Davidson, a systems administrator at the privately held DeLain Plastics Co. "But we were soon looking at usage-based services that gave us network availability and latency guarantees."

Davidson notes that even after he figured in the extra expense of such services, his total communications costs were lower than with traditional dial-up service. Typically, quality services from an Internet service provider that offers service level guarantees can cost from $1.50 to $3.50 per hour of connect time-still substantially lower than using an 800 service that charges between $6 and $10 per hour to connect users to an in-house modem pool or remote access server.

Slicing The Pie
For some companies, the decision comes down to what outsourcing can do for the business and having the ability to do something that was nearly impossible before.

That was the situation for Mazzio's Corp., a privately held Midwestern chain of 255 pizza restaurants.

The company had two major business initiatives dictating its remote connectivity needs. First, it wanted to expand geographically, and second, it wanted all of its stores to use its two call centers for order-taking.

In the past, only stores in a limited geographic region used the centers, but Mazzio's wanted to extend the normal benefits of call centers-including professional order takers, the ability to scale up for promotional campaigns and peak hours, and better customer service-to all stores.

The way the system worked was that once a caller placed an order for a pizza, an agent in the call center entered it into a tracking system, which printed out the order in the pizza store closest to the caller. The store workers would make the pizza and a delivery person would enter a note on a terminal when leaving the store. In this way, agents in the call centers could tell customers the status of their order.

Trouble was, it was often too expensive to connect many of the existing stores and new stores to corporate intranet applications using traditional data communications services. In the past, the stores used ISDN or frame relay to make the remote connection.

Pat Patterson, Mazzio's vice president of information services, decided to look at a VPN to connect the stores. The idea was to replace the long distance call between sites with a local connection into a service provider's network and then secure that connection using VPN technology.

The VPN "eliminates the cost of long pipes in remote locations," Patterson says. "The Internet takes care of that piece of the link."

An interesting distinction between Mazzio's approach and Hitachi Metals' is the service provider's degree of involvement. In Hitachi's case, the provider delivers a combination of access and equipment and manages both of these elements.

At Mazzio's, only the backbone and raw Internet access are being outsourced. Mazzio's installed a VPN tunneling termination device at its headquarters that the company manages itself. However, it uses basic Internet access accounts to connect the sites and lets each store pick its own service provider. This wide range of mix-and-match outsourcing alternatives defines the remote access service market today: There are almost as many ways to outsource as there are companies looking for service providers.

Motives vary widely, as well. Although many network managers just want to reduce communications costs, others want to offload management tasks and free up their employees to work on other duties.

Still others seek a way to avoid dealing with personnel issues such as training and retaining workers.

"We used to have a hard time keeping staff," DeLain Plastics' Davidson says. "Every time someone was trained on a new access technology or a specific vendor's piece of equipment, they were out the door with a better offer in hand." Outsourcing his company's remote access "dumps this problem on the service provider," Davidson says.

Before You Leap
One concern about outsourcing remote access, particularly when using a VPN service as an alternative to traditional modem pool dial access, is that users will not be able to get through to their service provider.

Last year's horror stories of America Online's 80 percent call failure rate gave IT managers pause. After all, when a company outsources its dial access to a service provider, getting through would seem to be a necessary requirement.

The service provider community has addressed this point in general by simply adding more modems, according to Michael Watters, CEO of Inverse Network Technology Inc., the company that brought the call failure rate problem to the attention of IT managers last year.

Call failure rate, as measured by Inverse Network, looks at the likelihood of a user's failing to connect to an ISP on the first try because of factors such as busy signals, unanswered calls, failed

logins and modem problems. A high failure rate can produce anything from consumer annoyance-requiring a user to redial multiple times to get through-to a serious business problem.

"Suppose you use a service provider to manage your modem pool or for VPN access," says Raymond Lopez, an analyst at Rosewall and Associates, a consultancy that designs and installs remote access solutions. "You might have a sales rep in a client's office and that person needs a price quote or to check whether a certain product is in stock. If that rep cannot get through, it could cost your company business."

All service providers improved their call failure rate in the past year, according to Inverse Network. The industry average for a 24-hour period as measured by Inverse has fallen to about 4.5 percent this September, compared with about 8 percent a year ago.

Although the overall improvement is good news, some IT managers want more. Specifically, they want dial-access service level agreements when they outsource their remote access, mail and other services-such as virtual private networking-to service providers.

To address this issue, a couple of service providers have introduced premium dial access services, but it's an emerging field.

And, of course, the price must be right. When the University of Minnesota went looking for a provider to outsource its 2,000 modems last year, no bid came in at less than $1 million per year-an amount deemed too high.

And when Hitachi Metals was looking for a provider, some seemed to think the company would be a cash cow. "When you say 'managed' to [some providers,] dollar signs light up," Milano says. "We'd ask about Internet connectivity and they'd have another price list."

Milano's experience is not unique. Industry analysts say providers see managed services as a huge money-making proposition.

"Compared with basic access, there is a much higher profit margin for a service provider with managed services," analyst Lopez says. "It is not uncommon to find separate price lists for access, managed access and managed security services."

Another thing that should be considered is how to divide responsibility between the provider and the company.

Some providers are very flexible and let a manager retain control over only those duties they care.

For instance, one company might keep tight control over both access control lists and the distribution of encryption keys but leave the management of WAN access devices to the provider. Another company might want the provider to manage the WAN access gear and the encryption keys.

Despite some of these drawbacks, managers should be able to wave goodbye to many of those modems and say hello to some good outsourcing options.