European Firms Taking Advantage of IP-Based ServicesBy Adam Eisner, theWHIR.com
October 11, 2001 — (WEB HOST INDUSTRY REVIEW) – More European companies are turning to IP services to save costs and increase productivity, according to a new research report commissioned by Netscalibur, a UK-based Internet services firm. According to the report, conducted by independent research firm Ovum, mid-sized businesses in the UK, Germany and Italy saved Î27bn (£16.7bn) last year by moving their communication infrastructure and other related functions from costly internal, private networks to the public Internet. The report also said this trend would continue well in to next year, with IP service and related application use among mid-sized European businesses increasing by 17% over the next 12 months. “This research is further evidence of the economic fundamentals at work across European business underpinning the growth in Internet services. Internet applications are delivering enhanced communications while at the same time driving down costs,” said Francesco Caio, CEO of Netscalibur, in a release. “Regardless of what is happening in the capital markets, the real business world is telling us that European companies are continuing to adopt increasingly sophisticated Internet Protocol (IP) technology to cut costs and increase productivity.”For the purposes of the report, mid-sized businesses were defined as companies with between 50 and 999 employees. 800 companies were surveyed in three different sectors: financial services, media/publishing and retail. Netscalibur says the study is the first of its kind to “quantify the levels of Internet-related savings being delivered today to mid-sized (businesses in the UK, Germany and Italy.”Because mid-sized firms tend to have smaller IT departments than larger ones, most of these companies who haven’t already done so are prime targets for outsourcing. In fact, according to Ovum’s research, companies who aren’t making solid use of IP-based services and outsourcing those needs to a third party are often stunting their own growth. “The research shows that IT teams in mid-sized companies spend as much as 50% of their time fire-fighting IT problems and that only 20% of companies believe they have the necessary in-house expertise,” a Netscalibur release says. “With one in three companies saying skills shortages are the main reason for outsourcing IP services, the report concludes there will continue to be a strong growth in the trend towards outsourcing.”The value of outsourcing has been further endorsed by those companies currently outsourcing at least one IP service who have reported a 27% improvement on time spent problem solving – a saving equivalent to the cost of one IT technician a year for the average mid-tier company surveyed.”Examples of IP-based services covered in the report include Web hosting, IP-based VPNs (Virtual Private Networks), customer relationship management (CRM) applications, enterprise e-mail and Instant Messaging – services most Web hosting companies are able to provide, and all of which are becoming an integral part of many firms, regardless of whether or not the company relies on the Internet for revenues.”Our analysis shows that companies who are already using IP services are enjoying considerable financial savings as well as additional indirect savings from reduced levels of problems and management overhead,” Ovum’s report states.While some companies might remain skeptical because the report was funded by a firm directly involved with outsourcing, many other companies and research firms have come forward in recent months to point out the merits of outsourcing and porting business functions to the Internet. Research firm Jupiter Media Metrix, for example, recently confirmed the merits of outsourcing – particularly when it comes to Web hosting and related services. ”Companies that continue to host their own sites will gain little competitive advantage and spend more money on staffing and technology than those that outsource these functions,” said David Taylor, research director at Jupiter Media Metrix. “There is 30 to 40 per cent cost savings to be realized by outsourcing hosting – and too many companies are overlooking this. Those that act and act now will be saving millions in the long run.” The eventual winners of the outsourcing game, the report says, will be those who can adjust to varying economic conditions while providing services that can scale with the customer. “The industry is in transition with, businesses demanding increasing levels of service as they wake up to the opportunities of IP services,” the report says. “Winning providers will be the ones who deliver excellent customer service, have the right level and type of skills [and] are flexible in meeting changing requirements as their customers businesses develop.”
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