WHITE PAPER Capitalizing on SMB Demand for Advanced Voice

WHITE P APER
Capitalizing on SMB Demand for Ad vanced Voice and Data
Services Through Multiservice Business Gateways
Sponsored by: LSI Corporation
Abner Germanow
Raymond Boggs
Leslie Rosenberg
Daniel Corsetti
Global Headquarters: 5 Speen Street Framingham, MA 01701 USA
P.508.872.8200
F.508.935.4015
www.idc.com
February 2008
IN THIS WHITE P APER
Small and midsize businesses (SMBs) — firms with fewer than 1,000 employees —
as well as branch offices of larger businesses and enterprises increasingly desire
advanced voice and data communications capabilities. Unfortunately, the growth of
applications running over the network has produced a level of complexity at the WAN
gateway that eventually inhibits the ability to add new services. The WAN gateway is
becoming clogged with a conga line of firewalls, routers, antispam devices, IP voice
gateways, bandwidth optimizers, and WLAN controllers, all connected one after the
other. This architecture of adding a new appliance at the WAN gateway for each new
service offered presents multiple constraints and challenges for customers and the
entire supply chain, including network equipment vendors, telecom service operators,
and channel players. This white paper examines the potential role of multiservice
business gateways (MSBGs) — that is, devices that combine each of these functions
into a single box — in providing SMBs and branch offices with effective and efficient
access to coordinated voice and data resources.
SITUATION OVERVIEW
The Changing SMB Networking Environment
SMBs face a challenging technology environment. More often than not, SMBs find
themselves competing against larger companies and enterprises to attract and retain
an increasingly demanding set of customers, and they often have technology needs
similar to those of their larger brethren. This is driving SMBs to adopt technology
solutions that keep costs low and yet take advantage of a multitude of new
information and communications services available across the Internet. The growth of
LAN use in the SMB market has been striking in the past three years. The availability
of low-priced servers and network operating systems has brought the technology to
new levels of affordability. Even more important in driving adoption has been the
growing interest in sharing high-speed Internet access and gaining access to
advanced capabilities. The trend has been worldwide, enhancing the productivity of
firms of all sizes, but especially smaller firms in which network resources were not
previously available (see Figure 1).
FIGURE 1
Share of SMBs with Server-Based LANs
29.2
<5
36.7
(Number of employees)
5–9
52.8
10–19
64.8
20–49
75.7
50–99
100–249
78.2
250–499
82
500–999
79.3
0
20
40
60
(% of total)
80
100
Source: IDC, 2007
From a technology perspective, routers have traditionally been the primary network
device used to connect a LAN to a larger network. In large enterprise environments,
the ability to support a wide variety of legacy and TCP/IP protocols still renders the
router a critical device in managing traffic between branch offices and headquarters
datacenters. In the SMB market, point-to-point or even mesh WANs are of little value
— what's needed is connectivity to the Internet. This shift from a desire to connect
offices together (with Internet connections as a secondary goal) to demanding a
secure and low-cost way of providing Internet connectivity is changing the perception
of value at the WAN gateway.
2
#210555
©2008 IDC
Focus on Advanced Networking Taxes SMBs' IT Capabilities
Even as SMBs are increasingly interested in adopting advanced voice and data
communications, this focus has challenged SMBs' technology management
capabilities as well as the ability of service providers to provide the kind of support for
which customers are looking. Constraints include:
! Limited financial resources. While SMBs may spend as much as 5–10% of
their annual revenues on information technology, for a firm with less than
$1 million in annual revenue, this may equate to only $50,000. Considering that
this must pay for all hardware, software, and IT services for the firm, setting IT
priorities and adhering strictly to a relatively austere budget is the norm.
! Limited internal IT expertise. The majority of businesses with fewer than 50
employees do not have full-time IT staff in place (see Figure 2). This means that
the evaluation and implementation of advanced communications solutions will be
the responsibility of people whose primary job functions may not be IT related at
all. In fact, smaller firms may not even have part-time IT staff but rather may
simply rely on channel partners or others who are not always fully knowledgeable
about state-of-the-art solutions.
! Products that miss. A scaled-down version of a large enterprise product or a
beefed-up consumer product often forces SMBs to compromise on some aspect
of performance, functionality (often security), future proofing, or cost.
! Limited space. SMBs do not always have dedicated space to house computing
equipment. In many firms, it is not uncommon to find a network server operating
underneath a desk in the reception area.
! Power and cooling concerns. Hand in hand with limited space for IT equipment
is the limited ability of most SMBs to provide the optimal environment required for
their networking infrastructure. Lacking a formal datacenter, most SMBs do not
have the proper thermal environment to house their networking equipment.
©2008 IDC
#210555
3
FIGURE 2
Share of SMBs with Full-Time IT Staff
(Number of employees)
<10
4.2
10–19
11.2
20–49
28.8
50–99
55.5
100–249
74.8
250–499
84.6
500–999
93.3
0
20
40
60
(% of total)
80
100
Source: IDC, 2007
The lack of IT resources means that service providers and channel partners have the
added responsibilities of not only selling advanced technology but also providing the
education necessary before the sale and provisioning and support assistance once a
buying decision is made.
Challenges in Advanced Network Connectivity
for Branch Offices
Branch Offices Are Treated as Second-Class IT Citizens
Branch offices of large companies and enterprises are strategic locations. As the
places where customers conduct face-to-face interactions with the business, they
represent the "front line" for the organization, and enabling the employee talent in the
branch offices to better solve customers' problems is a critical business imperative.
Unfortunately, from an IT perspective, branch offices are too often treated as secondclass citizens. Many have limited or no on-premise IT support, and they must rely on
remote corporate support or a local VAR or partner for their technology needs. Even
when branches do have onsite IT staff, not all IT branch office staff configure
appliances in exactly the same way, and the more branch offices that are added to
the mix, the more challenging it is to maintain a consistent set of network interfaces
across all branches. In these scenarios, enterprises need a common platform across
a portfolio of devices that can support different-sized sites.
4
#210555
©2008 IDC
The Use of Command and Control Network Architectures
The solution to the challenge of managing networks adopted by most enterprises is to
deploy command and control infrastructures in which all network traffic is routed to a
central datacenter before it goes anywhere else. While this approach has the
advantage that the enterprise has centralized control over the traffic for items such as
prioritization and security, it introduces a heavy network load, especially when it
comes to Internet traffic in which the enterprise must pay for that traffic twice — once
on its way to the datacenter and once as it goes back to the branch. Further, as the
demand for direct Internet connections to access software as a service (SaaS)
applications and other Web-based applications grows, a command and control
architecture becomes less viable.
Dual Homing Can Provide Performance and Control But Requires a
Conga Line of Appliances
One of the greatest challenges for enterprise network administrators is providing
branch offices with the appropriate balance of performance versus control. Typically,
solutions that provide greater control such as the command and control architecture
also lead to greater cost. One alternative is dual homing, in which branch offices can
access both the corporate datacenter and the Internet. But if the enterprise is looking
to deploy world-class Internet connections, dual homing requires the purchase of a
whole series of network and security appliances, including routers, firewalls, intrusion
detection devices, antispam, IP voice, VPN, and wireless LAN controllers at every site.
It can be expensive to deploy such a "conga line" of network gateway appliances, and
it can also be challenging to deploy such appliances while ensuring interoperability
and not degrading overall network performance.
Role of Multiservice Business Gateways in
Meeting Customer Needs
Collapsing Key Network Gateway Functionality into a Single Box
Network technology vendors today are working to meet these needs through footprint
reduction: placing all critical network functions on a single box. The result is the
multiservice business gateway (MSBG), a device that combines functionality such as
routing, firewall, intrusion detection, antispam, IP voice, and management functions in
a single box.
Reducing the footprint to a single box provides SMBs and branch offices with an
affordable, effective solution to their complex networking needs. It requires less
physical space in the business' server room/data closet and has fewer power and
cooling needs compared with multiple devices, a must for SMBs and branch offices
that simply lack the power and cooling capabilities of larger businesses.
©2008 IDC
#210555
5
Simplifying Deployment and Management for SMBs and Branch Offices
By combining all networking functionality in a single box, MSBGs not only make it
more affordable for SMBs and branch offices to purchase the hardware necessary to
deploy world-class Internet connectivity but also, more importantly, simplify
deployment and management of these services for SMBs and branch offices.
An SMB or a branch office may get its telephony from one service provider,
WAN/LAN and wireless connectivity from another provider, and managed services
from a third provider. The purchasing process on the equipment side can be equally
complex, with computing devices from one vendor, security from a second vendor,
and storage from a third vendor. Getting all of these services and devices to work
together as effectively and efficiently as possible can be quite challenging, not only
from a hardware and delivery standpoint but also, more importantly, from an
operational and management standpoint. By bringing together all gateway
functionality in a single managed platform, SMBs and branch offices can reduce this
complexity considerably.
Enabling Service Providers to Scale Their Offerings
Not every SMB or branch office will require all functionality provided on an MSBG
from day one. Constrained by limited budgets, many may start with basic services
(e.g., routing, firewall, and antispam), but as their business needs grow over time,
they may choose to add additional services (e.g., wireless LAN, intrusion detection,
and IP voice).
By starting with an MSBG, the SMB's or branch office's service provider can quickly
and easily update the gateway to enable the new service offerings using a
management console. Because it doesn't require changing out existing equipment,
upgrading service offerings becomes easier and less costly to SMBs and branch
offices. And service providers benefit by expanding their service offerings to SMBs
and branch offices, opening new areas of revenue opportunity and increasing
customer stickiness.
IDC Outlook
Over the past five years, the $4.7 billion global market for enterprise routers and the
$1.3 billion market for unified threat management (UTM) devices have grown in
excess of 10% to 15% a year. Yet growth has been uneven. Recent trends in routers
priced between $150 and $1,500 and UTM devices indicate a strong consolidation of
multiple applications in the WAN gateway. In some cases, routers have even ceded
the role of the WAN gateway device to UTM devices that deliver security with goodenough routing capabilities. Meanwhile, the subscription update business model of
UTM devices provides a very different set of revenue streams from traditional "set
and forget" network devices. Cisco's Integrated Services Router (ISR) and the
growing plethora of UTM devices serving as the only WAN gateway device clearly
illustrate the demand for multiple services consolidated at the gateway. To date, the
focus of Cisco's ISR and UTM products has been on hardware consolidation.
Hardware consolidation provided significant cost savings, but this focus is now
beginning to move to management consolidation as well as to finding ways for
services running simultaneously on a WAN gateway to work together.
6
#210555
©2008 IDC
The mix of services demanded by SMBs and branch offices will continue to evolve. In
addition, the business models connected to the hardware at the WAN gateway will
continue to be a source of innovation as security demands grow and the ability to
provide hybrid premise-based or cloud-based services becomes a viable option for
service providers.
IDC believes that the market for MSBGs will continue to grow in the years to come
because of the technology's compelling value proposition to SMBs and branch offices
as a cost-effective method for small sites to obtain world-class Internet connectivity.
Further, by opening the market to smaller organizations with a foot-in-the-door
solution that can be expanded over time, over the same hardware device, MSBGs will
enjoy strong support in the service provider channel as well.
THE LSI MULTISERVICE BUSINESS
G ATEW AY OFFERING
Critical Network Functionality in a Single
Box
LSI has released a new technology platform designed to enable network equipment
providers (NEPs) and other device manufacturers to build MSBGs that integrate all
critical networking functionality in a single box (see Figure 3). LSI-enabled MSBGs
can provide:
! Routing
! VPN/IP Sec
! Firewall
! IDS/IPS
! Service-aware QoS
! Voice (FXS/FXO + SIP server)
! Application processing
! Physical security/surveillance
! Management
Additional available modules include a WAN module, an advanced security module, a
media gateway module, and a SIP server module.
©2008 IDC
#210555
7
FIGURE 3
LSI-Enabled MSBG Solutions Combine the Functionality of
Multiple Units in a Single Box
Router
Antispam
Appliance
DSL/Cable
Modem Gateway
Firewall
IPBX
Multiservice
Business Gateway
Intrusion Detection
Device
VPN Device
WLAN Controller
Source: IDC, LSI, 2007
NEPs Speed Time to Market, Protect Proprietary Intellectual Property
NEPs and other device manufacturers can use LSI technology to deliver flexible,
service-aware gateway products that deliver high performance at a price point
designed for the small business. The solutions are designed by LSI and built in
conjunction with hardware and software partners that bring proven track records of
delivering carrier-grade, high-availability networking products.
By leveraging LSI field-proven technology, NEPs and other OEMs can leapfrog the
competition and get new products to market more quickly, at a fraction of the cost
required to develop comparable technology internally. In addition, LSI products have
been architected to enable OEMs to add their own "secret sauce" to differentiate their
offerings and maintain competitive advantage.
Enabling Service-Aware Solutions That Grow with the Business
LSI-enabled business gateway solutions are designed with the service provider in mind.
Adopting service-aware solutions based on LSI's business gateway technology can
improve customer stickiness and enable service upsell as the SMB/branch office's
needs change. The service provider can start by providing basic data connectivity, then
8
#210555
©2008 IDC
grow the service, adding service features such as wireless LAN, VoIP, and advanced
security features as the SMB/branch office's needs grow — all via a management
console and without requiring changes or upgrades to the hardware.
Spanning the Needs of Businesses of All Sizes
Not all business locations are created equal, and different locations will need to scale
their Internet gateways more than others. To address these different needs, LSI
MSBG technology can be used as the basis for a range of solutions targeted to the
needs of business locations of all sizes, from enterprises to small businesses and
branch offices. With a common architecture used throughout all LSI technology,
LSI-based solutions provide a common platform to support new services across the
organization, regardless of the size of each location.
Designed to Support Real-Time Solutions
LSI has designed its MSBG technology to provide low latency and thus to support the
growing need for real-time applications. One example of a real-time application that
could be supported by an LSI-based MSBG would be the deployment of IP video
security cameras at multiple branch office or warehouse locations. MSBGs at each
location could serve as Internet gateways capable of handling the real-time
requirements of the video connection.
MSBG CHANNEL OPPORTUNITIES
Each SMB and branch office is unique and so are the channels that serve them. Each
channel delivery partner provides an experience that best suits the end customer,
whether that customer requires the scale that can be provided by a large organization,
high touch, or self-service.
MSBGs provide channel partners with the opportunity to move from technology
enablement to technology empowerment due to the increased functionality of the
features included in MSBGs. IDC sees MSBGs as a platform for resellers looking to
have continued communication, networking, and security conversations with their
SMB and branch office customers.
IDC has identified three channels that possess the requisite technical skills and
customer relationships to effectively serve the SMB with MSBG solutions. These
channels include:
! Service providers, primarily the larger national or multinational telephone carriers
such as ATT, Verizon, and BT
! VARs or value-added resellers, organizations that resell, specify, and
recommend IT solutions
! Interconnect/telephony partners, organizations that primarily sell connectivity
solutions including telephony and IP services
©2008 IDC
#210555
9
Service Provider
Today's service providers and branded carriers are making headway in the SMB/branch
office market. This channel maintains a large installed base of SMB customers and
delivers a breadth of product offerings that is offered cost-effectively and with an
established customer service mechanism. Additionally, the service provider
provides significant brand awareness with advertising and education campaigns
targeted toward SMBs to increase the adoption of services supported by MSBG
products. End users, especially those who are existing customers of service
providers and carriers, may already feel comfortable with this type of partner, having
previously purchased a variety of connectivity solutions from them. Moving further
up the technology stack in their relationship with these service providers can be a
natural migration.
Because the MSBG appliance offers an "all-in-one" network gateway solution, the
service provider can effectively sell this technology to its large installed base of SMB
or branch office customers. Service providers will need to appropriately craft their
value proposition and go-to-market strategy for the MSBG appliance with messages
such as ease of use, increased technology functionality, reliability, and growth
enablement opportunity. This should all be wrapped within the customer service value
proposition already delivered by service providers.
For those service provider customers that require a higher touch or more technology
consultation, some service provider organizations may also maintain their own
reseller channels or business partners. This form of partnering allows service provider
customers to receive the high touch that a service provider alone cannot deliver. If a
service provider is selling MSBG through reseller channels, it must educate and train
these channel partners on the benefits and support requirements of this technology.
VAR
VARs have long been known as "the" trusted advisor to the SMB community, and
they often serve as the primary "go-to" IT resource for branch offices that don't have
in-house IT staff. The MSBG introduces a welcomed conversation for many VARs
with technology-reluctant end customers who require handholding. It enables VARs to
engage in a continued technology and communication strategy discussion with their
customers and allows them to continue to grow their service opportunities with
conversations that increase in complexity, such as starting with basic data
connectivity, then moving to security, voice, and wireless solutions. Once the MSBG
is in place, having these continued conversations with customers will come naturally.
While the service providers may make a bigger initial splash in this marketplace due
to sheer volumes, IDC believes that over time, the VARs will own this marketplace
due to the consultative nature of their business.
10
#210555
©2008 IDC
Interconnect/Telephony Reseller
This is an interesting subset of the VAR community. Traditionally focused on PBX and
key systems, these organizations are a largely untapped resource for many
technology vendors. With long relationships with their end customers and extremely
strong back-end processes, many of these organizations are a natural fit to extend
their offerings into the IP world. While technology and sales skills training will be
required, there are inherent benefits for tapping into this universe of resellers.
Direct
IDC believes the direct channel is best suited for selling to the enterprise or SMB
organizations that are self-reliant and relatively sophisticated with their technology
decision-making process. Vendors that sell direct and that can clearly communicate
the ease-of-use and cost benefits for MSBG appliances, and that have the support of
requisite large marketing budgets, will be able to capture a large portion of the SMB
opportunity.
CHALLENGES/OPPORTUNITIES
As LSI expands its offerings of MSBGs, a number of opportunities and challenges will
arise for both LSI and its partners. Challenges include:
! Taking on other major players. A number of companies have introduced new
routing platforms and WAN gateway products in recent years, and none has yet
been successful in knocking off the market leaders. If LSI is to make significant
inroads in this area, it will have to clearly demonstrate how its MSBG products
offer superior functionality over competitive offerings, for both partners and end
customers.
! Need to be best in class in many areas. Because the MSBG brings together a
variety of network gateway technologies in a single box, it must be competitive
and compatible with the best-in-class offerings in each area. In other words, it
must provide routing functionality comparable to that of the best dedicated
routers on the market, intrusion detection comparable to that of the best intrusion
detection devices, and so forth.
! Interoperability. Offering functionality across such a wide range of gateway
functions means the MSBG also must be compatible with a wide range of
products, standards, and technologies. Any given dedicated-function gateway
device already has a sizable test matrix of technologies and standards with which
it needs to be compatible; introducing many such functions into a single box
expands that test matrix significantly.
! Performance. Each new service introduced into the gateway box adds the
potential to introduce latency and other levels of complexity into the mix. The
challenge is to define an architecture that allows each service to be turned on
without impacting the performance of everything else that's running on the box.
©2008 IDC
#210555
11
On the opportunities side, one of the key opportunities for LSI's business partners is
to expand their core offerings into the SMB and branch office market. Previous
generations of gateway products were primarily geared to the enterprise and larger
business environments, and partly as a result, many service providers focused their
more sophisticated service offerings on these larger customers. The LSI MSBG
enables partners to target smaller environments that previously would not have been
able to afford more sophisticated data solutions (and the required hardware), thus
expanding the service providers' market opportunity.
A related opportunity is the ability of service providers to get their foot in the door with
SMBs and branch offices and upsell service opportunities down the line. Service
providers that install an MSBG, even when just setting up basic connectivity, leave
the door open to quickly and easily expanding their offerings and upselling higher
value-added services as the SMB/branch office's needs grow.
CONCLUSION
Overall, IDC believes that MSBGs are in a strong position to make significant inroads
in the SMB and branch office market. MSBGs offer a compelling value proposition,
reducing the cost and complexity for SMBs and branch offices to obtain a world-class
Internet connection and providing service providers with a platform to get their foot in
the door in this segment and to expand their service offerings as the SMB/branch
office's needs grow.
LSI has released technology that enables NEPs and other OEMs to build MSBG
product lines that bring together all core gateway functionality — data, voice, security,
and management — in a single box. LSI's MSBG technology is designed to support
real-time applications and is based on the same architecture as LSI's existing line of
gateway technology solutions, which lets NEPs build out complete product lines with
different-sized gateways while ensuring compatibility across all products. IDC
believes LSI is well-positioned in this area, and its MSBG solutions can serve as the
technology foundation for NEPs and service providers looking to gain traction in the
SMB and branch office market.
Copyright Notice
External Publication of IDC Information and Data — Any IDC information that is to be
used in advertising, press releases, or promotional materials requires prior written
approval from the appropriate IDC Vice President or Country Manager. A draft of the
proposed document should accompany any such request. IDC reserves the right to
deny approval of external usage for any reason.
This document was reprinted by LSI Corporation with permission from IDC.
Copyright 2008 IDC. Reproduction without written permission is completely forbidden.
12
#210555
©2008 IDC