Two Big Business Trends Driving Network Modernization

January 29th, 2016

If your business is growing, chances are you’re outgrowing your corporate network.

We’re seeing networks being upgraded at an accelerated pace. Two business factors are driving this trend: organic business growth and mergers and acquisitions.

CEOs are busy expanding their businesses through M&A activity, new employee hires and the development of new lines of business. To support this growth, companies are deploying new, bandwidth-intensive applications such as big data analytics.

A survey of more than 1,400 CEOs conducted recently by PwC consultancy, showed that nearly half said they expect to increase their organization’s’ total headcount over the next 12 months. Extra staff puts new pressure on networks for greater bandwidth, more devices and increased security.

Many cash-laden companies are growing through M&A activity. These deals are on the increase. Last year, some $4.7 trillion worth of global M&A deals were signed, the biggest year ever, according to audit, tax and advisory firm KPMG.

This year we could see even more. In a recent audit of “deal executives” — corporate officers who either are planning a merger, acquisition or divestiture in the next 12 months, or have completed one or more deals in the last three years — KPMG found that over 90 percent plan to initiate an acquisition in the next 12 months. That’s up from 83 percent who planned acquisitions a year ago.

Budget and other resources for new networks are available, too. Although total IT budgets are expected to rise in the aggregate by only 2 percent this year, much more is being put aside for network infrastructure. That’s according to a recent survey of North American IT execs conducted by Computer Economics, a research and advisory firm. Of those surveyed, nearly a quarter said they plan to spend more on network infrastructure this year.

The biggest networking areas targeted for spending? The top three are WLANs, switching and routing, and videoconferencing, according to an annual CIO survey conducted by investment bank Piper Jaffray.  When the firm last asked the CIOs which of their technology areas are most in need of a refresh, networking was cited by more than a third.

HOP Energy Takes The Leap

Sounds good in the abstract, but let’s look at a concrete example. HOP Energy is a White Plains, N.Y.-based supplier of heating oil to six northeastern United States. Over the last 16 years, HOP Energy has grown by acquiring nearly 50 other companies. That’s a lot of M&A! Unfortunately, all that growth was too much for HOP Energy’s network.

The network provided by a major communications carrier just couldn’t keep pace with HOP Energy’s expansion. Downtime on the network was excessive, spurring nearly 20 employee help-desk calls a day. Application performance was insufficient; for example, if a single circuit at just one HOP Energy location had a problem, it would impact all critical business applications across the entire company. And when there was an issue, getting tech support from the carrier was a “nightmare,” according to director of network operations Kristopher Masilamani.

So HOP Energy switched to Masergy’s network service. In so doing, it gained visibility, thanks to Masergy’s Web-based portal, which shows the network-operations team where bottlenecks are forming before they become serious problems. HOP Energy also gained a customized design.

The company is enjoying significant cost savings, too. Director Masilamani says the Masergy network service is so reliable, employee help-desk calls have dropped off dramatically. The new, low volume of calls, in turn, allowed HOP Energy to renegotiate its help-desk support contract. The cost savings? An impressive 60 percent.

New Networks Drive Business Opportunities

There’s another reason why modern, networks are so urgently needed: the rise of new bandwidth-hungry communications services and features. These include videoconferencing, mobile services, big data and analytics.

That’s part of what drove PRGX Global, an Atlanta, Ga.-based provider of accounts payable recovery audit services, to modernize its network. The company brought in Masergy to manage its network and provide new capabilities.

These new services helped PRGX launch a big data analytics service for its recovery audit business. The service accelerates audits, moving them closer, or even prior, to payment dates. Jason James, the company’s VP of global IT infrastructure, says “it’s been extremely impactful to the business.”

Ray Watson

Ray Watson is VP of Innovation at Masergy. He brings over 17 years of expertise in IT strategy, application solution design and next-generation network architectures. Ray has enabled numerous global enterprises in transforming their IT infrastructures to guarantee business outcomes. Ray is an industry thought leader in IT transformation and is a frequent speaker on topics such as hybrid networking, SDN, NFV, cloud connectivity and advanced security. Prior to joining Masergy, Ray worked at Airband Communications and Broadwing Communications. He holds a B.S. from Purdue University.