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Gilbert Held
As organizations rapidly established connections to the Internet it became apparent that in many firms duplicate network connections and the expenses associated with maintaining and operating duplicate networks might be minimized by their integration. Managers at many organizations that certify monthly bills for payment began to ask key questions, such as why do we maintain a private network to interconnect our branch offices and corporate headquarters as well as maintain an Internet connection for each location? The answer to this question is actually more complex than it may appear and involves an examination of the advantages and disadvantages associated with virtual networking. Thus, the information presented in this chapter can be used to tailor a response to the previously asked question that can match the advantages and disadvantages of virtual networking against the specific networking requirements of an organization.
Virtual networking has its origins in the concept of the virtual office during the evolution of the latter occurring in the early 1990s. The virtual office represents a temporary logical grouping of individuals regardless of their location or position in the organization to work on a specific project. Thus, this project concept is also commonly referred to as an organization without boundaries.
The earliest methods used to support the communications requirements of the virtual organization were voice, fax, and electronic mail. By the mid 1990s, a new type of local area network (LAN) known as a virtual LAN was developed in part to support the dynamic assignment of personnel to virtual organizations. A second method of providing communications support for virtual organizations referred to as virtual networking represents the transmission of data between two locations on a mesh structured network that is so large it can be considered to represent a network without boundaries. That network is the Internet and almost all references to virtual networking either implicitly or explicitly reference transmission over the Internet.
The first use of the Internet as a virtual network allowed traveling personnel to access the corporate network via dialing the transmission facility of an Internet Service Provider (ISP). Since many ISPs now offer unlimited dial access for a flat rate of $20 per month, the use of the Internet can be economically rewarding even when compared to the low cost of long distance service. For example, even at 10 cents per minute, an hour of access per day for a traveling corporate employee would result in a communications bill of $6 per day or $132 per month based upon 22 working days in the month. Thus, a flat rate of $20 per month for unlimited Internet access could result in significant savings when the Internet is used as a transmission facility to access a corporate computer connected to that network.
Although virtual networking on an individual basis can provide hundreds of dollars of savings, when used as a mechanism to replace or supplement private networks, the resulting cost savings can rapidly escalate to the point where they are truly appealing. To illustrate how the use of the Internet as a virtual network to interconnect corporate locations can result in significant economic savings, lets examine an example of the use of the Internet. Exhibit 1 illustrates the use of the Internet to connect three geographically separated corporate locations.
In examining Exhibit 1 note that each corporate location is shown connected to the Internet via an Internet Service Provider. Most ISPs have access points in major metropolitan areas and will charge approximately $1000 per month for a T1 line connection. This type of transmission facility was originally developed to support the transmission of 24 digitized voice conversations and is now used with T1 multiplexers and routers to mix digitized voice and data or to simply transmit data onto the 1.544 Mbps operating rate of the circuit. In the example shown in Exhibit 1, we will assume that each corporate location uses a T1 connection to the Internet via an ISP to interconnect their LANs via the Internet.
From an economic perspective we can compare the cost of using the Internet to the cost of connecting the three locations shown in Exhibit 1 via two T1 lines. In doing so, lets first assume each location is 500 miles distant from the next location, resulting in 1000 T1 circuit miles being required to interconnect the three locations.
Although the cost of T1 circuits can vary based upon their total mileage, the use of a multi-year contract, and other factors, a monthly cost of $3 per mile provides a reasonable approximation of the cost to include local loop access fees. Thus, interconnecting the three locations shown in Exhibit 1 via a private network consisting of two leased T1 circuits would cost $3,000 based upon a distance of 500 miles between locations. Note that this cost equals the cost associated with connecting three locations via T1 lines to the Internet based upon the reasonable assumption that each location is in a major metropolitan area.
Exhibit 1. Using the Internet to Interconnect Separate Locations.
Now lets assume that the locations shown in Exhibit 1 represent Seattle, New York City, and Miami. In this example the circuit mileage would increase to approximately 3,500 miles. At a monthly cost of $3 per circuit mile the use of two T1 circuits to interconnect the three locations via a private network would increase to 3500 x 3, or $10,500. Now lets assume each location is interconnected to each other via the Internet. The cost to connect each location would still be $1000 per month since each location represents a major metropolitan area. Thus, the cost associated with using the Internet would remain fixed at $3000 per month, but the potential monthly savings would now become $7500.
Exhibit 2. Comparing Private Network Router Port Requirements and Reliability.
The preceding example illustrates a key concept associated with the use of the Internet as a virtual network for interconnecting geographically separated corporate locations. As the distance between locations increases, the potential savings increases.
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