T at the speed of light -- Optical Networking Is Poised To
Change BusinessNetworks-And Their IT Departments-Forever
Sat Feb 05 01:37:00 EST 2000
Feb. 04, 2000 (InformationWeek - CMP via COMTEX) -- Optical networking may sound like some far-out technology, the effects of which won't be seen for years.
Though it's true that it will be some time before human brains are directly linked to optical networks or goggles replace televisions and computer screens, as some industry experts foresee, optical networking is poised to profoundly
affect business processes and company information systems-to the same degree the Internet has, some analysts predict-within the next few years.
Optical networks transmit voice, data, and video traffic over fiber cables usinglight streams. By delivering huge amounts of bandwidth and virtually eliminating network delays, optical networks promise to radically improve the performance, price, and flexibility of network services.
What's predicted? Fundamental changes in the way people work together will result from quick service setup coupled with lower network delays and distance-independent pricing. Instead of buying and maintaining software and running it on PCs, companies will shift to inexpensive thin-client hardware and either run applications on their own central site servers or outsource the task to application service providers. Video will go into much more widespread use-and E-commerce usage will skyrocket. "Big bandwidth is clearly one of the
fundamental enablers for E-commerce," says Daniel Sholler, a senior program director at Meta Group. "One reason E-commerce companies are getting sky-high valuations on Wall Street is because people expect the pipes that carry E-commerce information to get a lot faster."
Some companies already are charging ahead with plans to reengineer their businesses on the basis of these developments. "This kind of revolution will result in big changes in our business," says Roger Gullqvist, CIO and executive VP of Swedbank in Stockholm, Sweden's largest retail bank. Starting in April, Gullqvist plans to use high-bandwidth circuits from carriers with optical
networks to roll out video applications in its branch offices.
That will help the bank transform branches into financial advice centers so they can survive the undermining of their traditional business by Internet banking developments. "We have to do it," Gullqvist says. "If we don't, we'll go out of business."
In countries such as Finland, Sweden, and the United Kingdom, fiber is plentiful and prices for telecom services are higher, giving alternative carriers more scope for undercutting the former monopoly operators. Some next-generation optical services will go live in the United States. this summer, although most won't be widely available until 2002, says Deb Mielke, an analyst at Treillage Network Strategies. Still, that doesn't leave a lot of time for CIOs and IT managers to prepare, considering that the changes could be momentous for theircompanies and their careers.
The best place to start is by understanding why optical networking technology is coming to a boil right now, how it will be used in carrier networks, and what
benefits it will bring in terms of price, performance, and flexibility. It's also important to look at how long it will take for these new services to arrive by reviewing vendor rollout plans and identifying carriers planning to offer
services. Coverage will be patchy and focused in cities for the foreseeable future, making it impossible for most businesses to move all of their information systems onto a new footing at once.
Sooner or later, though, the impact of these developments will be seen everywhere, Mielke says. "The future of the services market is all about optical
access."
Optical networking already exists in pockets in carrier networks, with synchronous optical network (Sonet) and dense wave division multiplexing
devices. But the real changes will occur once next-generation optical networking devices become reality.
There are two fundamental reasons optical networking is growing so quickly.
First, the technology has advanced greatly, partly because of standardization, which has driven down the cost of key components such as Sonet chipsets to $750
today from $20,000 four years ago.
Second, the Telecommunications Reform Act of 1996 has created competition by opening local access markets to new service providers. As they deploy the latest
optical technologies, incumbents are being forced to upgrade their networks to keep pace. The projected demand has led to a blossoming of optical startups and an expansion of optical product portfolios by established vendors.
Until now, the main focus for optical networking has been long-distance backbones, because that's where the savings are. Nortel Networks Corp. recently
unveiled optical products that will carry 6.4 terabytes per second on a single fiber strand, more than 2,000 times the 2.5 Gbps of systems now in long-haul networks. Though many carriers have rolled out super-fast fiber backbones, users
haven't seen major price reductions because other costs, such as providing access lines and billing customers, have gone up rather than down. Plus, local competition is still in its infancy.
But that's where things could be about to change. Vendors are intent on translating their successes in the long-distance market to the local market. New
competitive local exchange carriers plan to bring fiber all the way into the basement of buildings, where they'll install optical multiservice provisioning platforms that can provide a variety of services to customers. "This is
ultimately the way that high-speed links to businesses will be done-it's just a matter of time," says Jim Lawrence, director of convergence strategies at Stratecast Partners.
Vendors agree, judging by the mad scramble to carve out a share of the potential market. About 12 vendors are developing multiservice provisioning platforms.
Some are startups such as Alidian Networks, Chromatis Networks, and Mayan Networks. Bigger vendors also are getting into the game by spending huge sums to snap up these fledglings. Redback Networks Inc. bought Siara Networks for $4.3 billion. And Cisco Systems recently spent $6.9 billion for 300-employee Cerent Corp. In fact, Cisco has dished out nearly $10 billion for seven optical
networking companies-and says it's not done yet. "We plan to make multiple acquisitions to ensure that we have the right portfolio of products," says Graeme Fraser, VP and general manager of Cisco's optical internetworking business unit.
This new optical gear is different from the conventional Sonet equipment that has been around since the '80s. That Sonet gear was designed to carry voice; the
new optical products are designed to carry all types of traffic. That reduces the need for asynchronous transfer mode or routers to be installed in networks,
allowing carriers to deliver faster services, more quickly, and for less money.
Services based on multiservice provisioning platforms should give customers three benefits: better price/performance, low latency, and flexibility.
Most service providers haven't decided on prices, but the prospect of incredible deals is indicated by Swedish startup carrier Bredbandsbolaget AB. It's already
run trials of a service that offers TV, telephony, and game and software rental over the same wiring. Commercial services are scheduled to start next month. The carrier runs fiber into basements of buildings, with dedicated 10/100 Mbps Ethernet connections to apartments. Users pay $25 a month, less than the cost of their phone lines, for the connection and Internet access. "It's very much a loss leader," says Bredbandsbolaget CEO Peter Ekelund. But he expects to profit on the services and information offered over the links.
It's unclear whether businesses can expect such bargain rates. Gullqvist told carriers bidding for his project that he expects them to use optical technology
to double the bandwidth they provide every 18 months-without raising prices.
Gullqvist plans to connect branch offices at 34 Mbps, rather than the 64-Kbps lines used today. "In the past, we've struggled to develop applications to
minimize the use of the wide area network," he says. The increased bandwidth will let Swedbank use video to promote sales, train staff, and provide access to experts for advice on pensions, life insurance, and investments.
Low latencies also are key to Gullqvist's strategy, because they will let him centralize interactive applications. Users in branches will access them via Java clients. "It's a dream for me," he says. It will eliminate monthly software upgrades to the bank's PCs, which cost $50 million a year. Instead of branch staff having software on their own PCs, they'll access it on a central server.
This means the bank only has to upgrade software on the central server-not on thousands of PCs in branch offices.
The third big benefit, flexibility, stems from service-provisioning software.
Vendors of multiservice provisioning platforms are working on features that will let carriers allocate capacity from a console in minutes. That's a major
consideration for businesses that want to order new lines or make changes to their service agreements. With traditional optical networking equipment, bandwidth is nailed down in fixed circuits. It can take days to go through every
node and change circuits in each device.
Bear in mind that this new carrier gear also incorporates switching and routing functions-meaning that there's no need for additional technology to provide frame relay, virtual private networks, or telephony.
Service providers also plan to use the optical equipment in their ASP strategies. It's a logical move. ASPs such as Corio, EDS, and Portera Systems
are making inroads, but their success is limited by the amount of bandwidth available.
By massively increasing that bandwidth and virtually eliminating network delays, optical networking could galvanize the ASP market, analysts and users say.
Optical networks should open ASP services to a whole new market: big business. "ASPs have found that running the current generation of business applications over the wide area network is problematic," says Meta Group's Sholler. But
boosting bandwidth will let ASPs offer quality-of-service guarantees. "Bigger companies demand quality of service. When they get it, they'll dive in," he says.
ASPs agree. "There's no doubt that we need more bandwidth. The public network infrastructure poses a challenge, especially in the metro area, which is a huge
choke point," says Amit Jasuja, Corio's senior director of system engineering.
"Businesses will feel happier when they click on an app and it launches in three or four seconds."
Eliminating bandwidth constraints also will let ASPs offer a wider variety of applications. "As more bandwidth becomes available, it enables new applications
like ad hoc conferencing and multimedia," says Marco Boerrief, VP and general manager of Webtop and applications software at Sun Microsystems.
Some companies already are reaping the benefits of ASP services running over optical networks. Westburne Inc., a wholesale distribution company in Montreal, is outsourcing a customer management application to ASP FutureLink Corp. The app runs on a remote server and is accessed over a dedicated optical link. "It's
very painless, and it works," says Jim Lysyk, industrial sales manager at Westburne Electric Alberta, a division of Westburne Inc.
Lysyk says his company has saved about 10% on its IT costs by outsourcing the
application, but the real benefit has been in allowing him and his staff to
focus on their core business. "This is definitely the way to go."
Other users say they're looking forward to the day when optical networks let
them outsource apps, but complain that they may still have to wait awhile.
"Outsourcing applications to an external supplier would make my workload a lot
easier, but it will take a long time before Sony starts doing this," says Andrew
Wilson, project manager at Sony United Kingdom Ltd. in Weybridge, England.
Nevertheless, some say it's inevitable that the ASP model will overtake business
networks, due in large part to optical networking. Optical networks will get to
the point where they make the location of the application from the user
"genuinely irrelevant," says James O'Donnell, vice provost of IS and computing
at the University of Pennsylvania in Philadelphia.
This trend also could turn the PC software market on its head, threatening
Microsoft's hegemony. So far, Microsoft has been slow in aggressively developing
software solutions for thin-client computing, choosing to support the technology
via its investment in Citrix Systems Inc. "It will be hard for Microsoft to tear
themselves away from Windows to get ASP applications right," predicts Larry
Peterson, a professor of computer science at Princeton University. "They've had
trouble doing this before." Still, don't count Microsoft out. "Nobody's gotten
rich betting against Bill Gates yet," O'Donnell says.
Clearly, optical metro services have serious potential, whether they're used to
deliver big bandwidth, VPNs, or even applications. That means businesses need to
know two things: when these services will appear and who will offer them. The
answers depend largely on where the business is located.
"Services are at least a year away from being solidly available, and even then
they'll only be offered within the 30 metro main markets where there's a
critical mass of businesses that need a lot of bandwidth," says Maribel Lopez, a
senior analyst at Forrester Research.
So who will deliver these services? The pioneers are a new category of small
startup providers, typically focusing on offering services within and between
buildings. These companies include Allied Riser Communications, Broadband
Office, and Urban Media Communications, all of which say they will offer
services based on next-generation optical provisioning platforms by July.
Businesses will be able to use these outfits as one-stop shops for all their
voice and data needs, as well as value-added services such as VPNs. Most of
these startups also plan to act as ASPs.
In the meantime, there's a turf war going on between these upstarts and other
providers to sign affiliation deals with building owners. There is about 15
billion square feet of office space in the United States; about 1.5 billion has
been snatched up in affiliation deals, Urban Media estimates.
Still, optical metro service won't become widely available to businesses until
larger competitive local exchange carriers and regional Bell operating companies
join in, and that won't start happening until next year. "The regional Bell
operating companies will wait until they see that people are eating their lunch
before they finally make a move," Mielke says.
Then there are cable-TV operators, which could turn out to be the sleeping
giants. "They're fiber-rich, and that gives them a huge opportunity to build out
their distribution networks from their head-ends," says Tom Randstrom, product
marketing manager for Cisco's optical transport business unit.
These rollout schedules may be frustratingly slow to IT managers looking to
benefit from optical metro service now, but they can take comfort from one
thing: The larger service providers will get into the game-eventually. "We have
no choice," says Ben Peek, a senior fellow at GST Telecommunications Inc.
At this point, IT managers would be forgiven for asking: If metro optical
networking is so hot, why isn't it happening right now?
There are a couple of reasons for the delays. First, the equipment itself is new
(read "incomplete and possibly bug-ridden"). Cisco says 200 customers have its
equipment installed. But its current product is a low-cost, easy-to-install
Sonet box that doesn't support the ATM and IP capabilities that will enable true
multiservice provisioning. As for the others, many of their products are still
in the labs (or on whiteboards). It will take time to work out the kinks.
Once that happens, plenty of providers will be ready to buy. "I just wish that
Siara and its competitors were in beta now so I could deploy the technology
today," says Sean Doherty, president and CEO of Urban Media. He may be keen to
dive in, but some of the incumbents will hold off because it means tossing their
old equipment.
Even if the equipment were available, another hurdle is lack of fiber, or the
shortage of fiber between metro optical rings already installed and the fiber
backbones within enterprise office buildings. "It's a quintessential problem:
You've got fiber running under the street, and you've got fiber in the building,
but the pipe between them is made of copper and it's turtle-slow," says Drew
Lanza, senior VP of marketing at Mayan Networks. Laying new fiber to connect the
two can cost as much as $300,000 per building, GST says. Most service providers
aren't going to spend that much until they're sure the equipment works.
Sweden is far ahead in rolling out optical access services because of the
widespread availability of low-cost fiber. Many city councils laid their own
fiber and offer it cheaply to service providers to drive down telecom costs and
encourage economic development.
Even so, Swedbank's Gullqvist isn't happy. Only 50 to 60 of his 1, 000-plus
branch offices will be within range of the initial rollouts of optical
networking technology being planned by startup carriers. Gullqvist is dividing
Swedbank's contract into two parts-one covering areas where optical access
services are available and one where Sweden's incumbent carrier, Telia AB, is
the sole provider. Telia will be under pressure to match the optical offerings
or lose Swedbank's business.
Though it's possible to get a relatively clear idea of what the effects of
optical networking will be in the next three years, it's less clear beyond that.
If industry experts are to be believed, dramatic changes are on the way.
Some of these experts foresee a time when networks become so fast that bandwidth
and latency effectively cease to be impediments to the flow of information.
"Network transparency will enable a totally new business model," says O'Donnell,
who predicts that businesses connected to fiber could feel the first effects of
transparent networking within five years.
What he's describing is nothing less than the infrastructure of a true digital
economy. The combination of on-demand service provisioning, high bandwidth, and
low latencies could enable workgroups of experts from around the world to be
created and dismantled for temporary projects, which might last for a matter of
days. The location of staff in these workgroups becomes unimportant as they
interact in virtual office space-the new factories of the digital economy. The
ability to do this could have far-reaching consequences, possibly rendering
obsolete the whole idea of big companies with private networks and corporate
information systems.
If that sounds far-fetched, consider this: Call centers already are becoming
location-independent. "When India is zero distance away in terms of data, there
are a lot of things you can do, like hiring the experts you need without knowing
or caring where in the world they're located," O'Donnell says.
One thing is obvious, says Peter Tierney, president and CEO of Millennium
Optical Networks Inc.: "We're only scratching the surface of optical
networking's potential."
Stephen Saunders and Peter Heywood are editors at Light Reading (www.
lightreading.com), which provides analysis of optical networking.
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