Network managers' budget projections for wide area networking (Wan) under estimate cost of ownership by around half on average.
WAN costs are the fastest growing portion of total enterprise network expenditure, according to analyst company Gartner Group. Latest research from the organisation claims that actual costs are double those projected by network managers to their senior management.
"All too often, IT management has neglected to factor the true total cost of ownership, forgetting the expense and impact on the bottom line of network backup, non-networking staff and labour costs, and other support costs," said Ken McGee, research fellow at Gartner.
He warns that the failure to correctly estimate the true costs will result in under managed and poorly planned networks that end up hitting a company's profitability.
More importantly, poor financial estimates make it difficult to compare the value of external third party products and services. This will be particularly relevant over the next five years as telecomms companies begin to offer converged network services that include voice, data and video traffic.
Part of the problem appears to be an over concentration on keeping hardware and software costs down, which actually only comprise 13 per cent of the cost of a wide area network, while carrier costs make up 44 per cent, and people and facilities the remainder.
Network managers must also factor in the advent of new technologies: 85 per cent of large enterprises will deploy Intranet technology by the end of next year. Even those introducing a thin client strategy must be prepared to make an initial additional outlay for network infrastructure to get the lower desktop cost of ownership over time.
Gartner's separate IT director research noted that Extranets were now top of the list of priorities.
Finally McGee noted it was important to procure network services through a formal, competitive process which would, on average, reduced costs for those services by one third.
"In any very large network services contract, the most important components are the ones related to the enterprise's volume and term commitment to the provider, pricing and service levels from the provider, and the ability to modify or terminate the contract if needs change or the provider does not meet its expectations," he notes in his research.
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