Even though the recession is said to be waning, businesses have not let up on cost-saving efforts, and aren’t expected to do so for a while. At the same time, CIOs are being pushed to revolutionize IT without overspending or risking network performance. These colliding circumstances are leading to one increasingly popular way to cut expenses: outsourcing extranet needs to service providers.
Extranets are private networks that often rely on telecom networks to share a company’s information with suppliers, vendors, partners or customers. And there are two ways to run them – on a do-it-yourself basis, or by outsourcing to a communications operator. And one option is preferable to the other, according to a new Yankee Group study.
Operating an extranet from within a company is pricey. Consider the pricing on capital equipment, operations and recurring charges paid to service providers. Yankee Group, in its September report, “Managed Extranet Services Boost Performance and Lower Cost,” found that capex alone eats up 30 percent of the overall cost. Opex makes up another 47 percent, while recurring charges round out the remaining 23 percent.
But the costs drop dramatically when a third party hosts the extranet, Yankee Group found. The monthly recurring charges cover everything from provisioning to ongoing costs for routers maintenance and operational support. As an example, the study – commissioned by BT Radianz, the managed network services arm of BT – found that the DIY option costs $361,944 in one year alone. However, when choosing managed extranet services, the total cost of ownership only adds up to $176,960 in that same year.
Yankee Group calculated the comparison by creating an imaginary New York-based financial services firm connected to eight different financial application services at speeds ranging from 128kbps to 1.54mbps. The DIY model used dual leased lines as the access method, since financial application providers tend to run on different networks.
