Whos Minding the Store?

New converged gateways give companies control of costs

With more than 800 outlets, 11,000 vendors, 190,000 employees and millions of customers, minding the stores can be a big job for The Home Depot.

To improve its ability to track the massive flow of voice and data between stores and corporate headquarters in Atlanta, Home Depot recently adopted AT&Ts Integrated Network Connection Service, designed to give the enterprise more control over its communications.

"We can manage voice, video and data as we want," said Dave Ellis, vice president of information systems at Home Depot. "The secret of the payback value is that you get to buy more bandwidth at a lower price."

Before buying the new system, Home Depot sent most of its data streams over the network at night, when less bandwidth was needed for voice, Ellis said. Now, through the Internet Protocol (IP) gateway, the data and voice streams can share the network 24 hours per day, making special orders, inventory, job and credit applications more timely.

Like Home Depot, other companies are shifting their communications systems from the traditional T1 (1.5 megabits per second) and Integrated Services Digital Network lines to the new converged networks under development by all the major carriers, as they increasingly rely on IP technology.

Tower Automotive, a Chicago company that makes car parts, used AT&Ts Managed Router Solution to handle its Internet, voice, fax and data traffic. Using services such as the Managed Router means any changes in applications or services need only be made at the customers premises.

As a trial customer, Tower provided a test case for AT&Ts new network and saved $20,000 to $50,000 in long-distance charges during the three-month trial.

"We found that we saved a lot of money, and the technology was very sound and workable," said Mark Huang, wide area network project manager at Tower.

Reliability is the key concern for companies migrating to the new IP gateways. The sometimes-spasmodic flow of packets over IP networks, which work fine for data, is a major hassle for voice or video communications. The rapid improvement in voice-over-IP (VoIP) is a key driver in the integrated networks, but the real sweetener, according to a study by Frost & Sullivan, is the ability to offer enhanced services such as videoconferencing at the same time.

The major carriers and their equipment vendors said the new systems are ready for prime time.

"Were ready to take orders to put voice and data on these platforms," said Joe Aibinder, product director at AT&Ts VoIP business. "If you are currently a frame [relay] customer, we will run both voice and data on that frame service and it will work potentially around the world."

Tower was a perfect proving ground because of its cumbersome networks, which were patched together through a series of acquisitions.

"The major objective was to prove we could implement voice-over-IP between the U.S. and Mexico," Huang said. The system succeeded, he added.

Like AT&T, the other major carriers are scrambling to capture the lucrative business market with networking and data services that give customers one-stop shopping capability. Industry analyst CIMI predicted that IP-based services would grow from 25 percent of all data services today, to 87 percent by 2010.

By taking care of all the needs of a business, Sprint, WorldCom and the regional Bells may pull in less revenue from their switched networks, but can keep customers from shopping at rival carriers.

Earlier this year, WorldCom launched its IP Communication service, which allows businesses to shift their voice traffic to IP networks. The service, due this spring, is designed to operate over customers existing infrastructure, as is AT&Ts. Through its new PBX Extension equipment, WorldCom can give the enterprise centralized control of its network, allowing it to extend IP services to teleworkers, retail outlets and satellite offices at any time.

Companies such as Bechtel Group and The LTC Group use WorldComs IP-based virtual private network services to transact business among remote offices and between trading partners in Europe and the U.S.

With its Internet backbone unit, UUnet, and recently acquired Intermedia Communications, WorldCom is betting the farm on high-speed data and converged services. At the same time, both WorldCom and AT&T are splitting off the consumer services that will continue to rely largely on the traditional circuit-switched networks.

"WorldCom is in a position to capture a significant portion of IP service market share," said Todd Miller, an analyst at The Yankee Group.

AT&T can also take advantage of a backup system, in the form of its switched network, in the event its IP network falters, Aibinder said. While offering a converged IP network is certain to save customers money, AT&T is willingly giving up the higher revenue per customer as services evolve, he said.

"Theres a saying that if you dont eat your own, somebody else will," Aibinder said. "You have to practice some degree of cannibalization."