Cover for the latest telecoms crisis

Virtual networks could offer a useful risk-reduction strategy in the wake of recent provider bankruptcies.

Virtual networks could offer a useful risk-reduction strategy in the wake of recent provider bankruptcies.

The long-term financial problems of network carriers are causing many boards to ask about the future of their enterprise networks, writes Ross Bentley.

Indeed, the signs are that the problems experienced by KPNQwest and WorldCom could spread to other providers working under the same over-ambitious business models and massive debt burdens.

But what are the options for firms that may be re-evaluating how they buy network capacity?

Allen Timpany, chief executive of Vanco, a virtual network operator, says user companies have three choices.

"Option one is to maintain the status quo or change carrier," he says. "But by remaining with their existing supplier or changing to another carrier, corporations could find themselves underwriting considerable ongoing financial and business risks.

"After all, despite major cost-cutting programmes, unprecedented redundancies and intensive restructuring, network carriers are still facing a time of enormous uncertainty.

"The recent problems of multiple, high-profile organisations suggest there are inherent flaws in the way all these companies do business."

In addition, Timpany says that if a truly global network is to be achieved it will be through multiple transmission providers.

The second option, he says, is for companies to do the legwork themselves. "To offset the risks it is possible to sign contracts with multiple carriers, providing back-up networks from different providers," he says. "However, the administrative burdens of doing this are considerable and there is no guarantee of service quality or reliability. The onus will also be on you to manage the traffic through a complex web of tier-one and tier-two providers.

"This would necessitate building a team of people with specialist technical design skills, traffic management knowledge and contract negotiation expertise," he says.

Option three, according to Timpany, is to sign up to a virtual network operator. This is where Timpany has to declare a vested interest - but what are the arguments in favour of this choice?

"Rather than build their own infrastructure, the virtual network operator assembles the best package of network components from multiple network carriers in line with the customer's own requirements," he says.

"Often that would mean back-up services from a different carrier to the primary in-country supplier to increase disaster recovery effectiveness."

Timpany says virtual network operators offer their customers flexibility by utilising short-term contracts for transmission from different providers, by providing the end-user with long-term stability and continuity of service.

"Even if conditions worsen, customers have an extra level of insulation from problems provided by an international team of network planners and engineers, anticipating many risk scenarios and delivering solutions to unexpected problems," he says.

Finally, Timpany claims that the virtual network operator takes a proactive approach to service delivery. This is because these companies stand or fall by the service they offer, so they are always trying to deliver a higher value solution.

"They review service quality on a continuous basis to ensure customers are always getting the best deal. And, unlike individual carriers which leapfrog each other with technology developments, the virtual network operator is committed to keeping customers on the cusp of technology," he says.

Read more on IT risk management