Plug In For Profits
Corporate networks-transmitting voice, data, and images-have become critical for many multinationals. How they are used can make a big difference in the payoff to your company.
December 1 1993 by Leonardo E. Vannotti
Analysts and executives alike have high hopes for the proposed union of computers and telecommunications. Even President Bill Clinton and Vice President Al Gore are enthusiastic about highspeed highways they say one day will transmit vast amounts of data for business and entertainment purposes, linking television, telecom, computers, consumer electronics, and publishing operations in a sprawling, interactive information industry. As a sign of its commitment to building such a highway, the Clinton Administration authorized $2 billion over five years for research into high-performance computing and networking. This modest sum, it hopes, will encourage investment by private industry in what former Apple Computer CEO John Sculley reckons one day may be a $3.5 trillion integrated market.
Multinational companies, in particular, will benefit from the use of telecommunications. Many of these firms are moving to establish networks that transmit voice, data, and images across an entire corporate infrastructure, or even among a group of companies. These networks can slash the time and cost it takes to bring products to market, improve customer service, and facilitate the deployment of cutting-edge production techniques, including so-called lean, or just-in-time, production.
With an eye on the potential payoff, many global companies have gone beyond the question of whether to network and are mulling the far more complicated question of how to network. The logic is compelling: Increasingly, companies find they must network not to gain an advantage but just to keep up with their competitors.
CHARTING THE WATERS
Corporate networks, which span the entire communications infrastructure of an operation, include private branch exchanges (PBXs), local area networks (LANs), wide area networks (WANs), and cordless communications systems.
Many companies already are geared to WAN communication, i.e., communication is set up between company locations via leased lines using appropriate transmission equipment. The main task of corporate networks in the future will be to ensure consistent, flexible, and cost-efficient broadband management. Typical applications of corporate networks can be found in large, geographically dispersed service enterprises. No one, for example, doubts the strategic importance of a worldwide passenger reservation system for international airline companies.
Corporate networks have become a lifeline, particularly in the financial-services arena. Investments are being made today on a global scale. Hundreds of billions of dollars flow daily from one financial center to another. Information requirements-that is, the need to be present in different markets and the ability to act with as little delay as possible-are growing accordingly. Industrial concerns, too, are moving to integrated communications systems, partly to drastically shorten their time-to-market.
Hand in hand with globalization is the liberalization of markets. “Safe” markets are few, competition burgeons, and the speed of product and technological innovation spells catastrophe for laggards. Quicker rather than perfect solutions are in demand. This applies to the high-tech industry, in particular. A parallel development is the increasing pressure on prices. Customers have become more conscious of costs as ever narrower margins have to be taken into account.
REDUCING TELECOMMUNICATIONS COSTS
However, communications represents significant costs, especially for service companies. In fact, many large, globally active companies spend as much on communications as they do on data processing. In industrial companies, also, costs for communications are rising dramatically, not least because of ingenious logistical concepts.
Here’s the approximate cost breakdown of a typical telecommunications infrastructure: 25 percent for staff and maintenance costs, 20 percent for amortization of equipment and offices, and 55 percent for call charges. Savings in call charges are clearly the most effective cost-reduction measures. These can be achieved by choosing the most suitable network structure (leased lines, dial-up lines) and optimizing the bandwidths. Just as railways constantly adjust their capacities (passenger traffic by day, goods trains by night, extra trains), so, too, can transmission capacity be regulated according to needs and costs. A marked reduction in costs is achieved by selecting the most suitable tools and concentrating traffic: Often the return on communications networks investment can be achieved within only two years.
How can an internationally active industrial concern exploit the advantages of corporate networks? Chrysler is a good example. The Detroit-based company has weathered the fallout of painful structural changes undertaken in past years and is now back in the black. Bob Lutz, Chrysler’s president, considers team orientation the key to success. This means putting the right products in the market at the right time. The aim of reducing the time-to-market for new Chrysler models from five to three years mainly has been achieved through simultaneous engineering. Under this approach, concepts are developed by coordinated teams of development, design, marketing, and sales personnel.
The corporate network installed at the
“Design and build a network that optimally supports the platform teams and that supports all existing and future applications” was the challenge facing potential suppliers of the high-speed network. The objective is to use information technology to ensure that every employee is able to communicate, meeting all customers’ needs in an efficient manner.
“Simultaneous vehicle development allows the platform team and suppliers to work together and exchange information at all times regardless of location,” says Ron Bienkowski, executive engineer at the CTC. The decentralized network offers employees fast access to all the information they require for their tasks-despite the vast number of people connected to the Chrysler communications network.
Some 130 Ascom router/bridges link Chrysler’s functional and departmental subnetworks over a Fiber Distributed Data Interface backbone, so the company’s teams have access to its integrated resources. Each team uses a variety of PCs, workstations, and fileservers. Computer-aided design applications run on centralized mainframes, and simulation applications run on two supercomputers.
The investment by Chrysler paid off. Today, the company is designing new vehicles such as Eagle Vision faster, with fewer engineers, and with a vast improvement in quality. It’s no coincidence that demand for Chrysler cars has increased considerably.
International media concerns also are putting corporate networks to the test. For example, Ascom combined with
Outside the corporate arena, networks are being used by the former East German state of Sachsen-Anhalt. Like the other Lander, Sachsen-Anhalt finds itself in difficult economic, social, and political circumstances, but prospects for a rapid turnaround are hamstrung by a tattered infrastructure. Thus, government leaders have pinned their hopes for regional vitality on a national network for the exchange of government data, including distributed data bases. The first phase of the project, with nine main locations, primarily is being used by the police. For security reasons, all nodes are connected by at least two links.
Sachsen-Anhalt’s approach to using networks is similar to that of many corporations. Application-specific networks can be implemented at reasonable cost, then upgraded and extended at a later stage.
THE GREAT EQUALIZER
It’s obvious what corporate networks mean to Ascom and other players in the networking and systems integration business. In the medium term worldwide, annual double-digit growth is expected in the networking market. Especially strong activity is expected in the interconnection of local area networks themselves. Over the past three years, the sales of internetworking products-including bridges and routers-have exploded, rising from an insignificant level to approximately $700 million.
But networks-as part of a broader information highway-also are likely to change our lives on an individual basis. Visionaries say the time is fast approaching when people, in the comfort of their living rooms, will be able to play online video games, shop via interactive television, or plug into the Library of Congress with a personal computer and pore over text and moving, color images on the subject of their choice.
Within this vision of the future, corporations and individuals alike will have access to vast stores of information. Microsoft founder Bill Gates calls this the democratization of communications. Businesses that act quickly and correctly in this new environment may gain a significant competitive advantage. Others may find themselves overtaken by technological progress.
Leonardo E. Vannotti is president of the Corporate Management Committee of Ascom Holding Ltd., a $2.2 billion global telecommunications company based in