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Staying Ahead of the New Network Explosion

Joe McKendrick August 2007

From collaboration to customer service, companies are turning to networks of applications and individuals to accomplish tasks, increase competitiveness and improve productivity. As a result, pressure is on enterprise networks to constantly keep increasing capacity, intelligence, speed and performance-both inside and outside the firewall.

The typical insurance carrier is increasingly becoming a networked organization, albeit at a slower rate than other industries.

"The average insurance company is about five years behind in networking technology," observes Chad Hersh, senior analyst with the insurance practice of Boston-based Celent LLC. "Insurers are scrambling to keep up."

The pressure is on to support a range of new initiatives, such as customer and agent e-business channels, Web services, service-oriented architecture, collaborative computing and mobile computing, which require robust networks with higher bandwidth thresholds. Add to this a plethora of multimedia files, which individually run into the multi-megabytes in size-that are choking current systems. For carriers, growing volumes of digital photos, workflow documents and customer data are taxing current systems.

The industry may have not been ready for this onslaught of network bandwidth and networking requirements, Hersh points out. For example, insurance companies were not on the dot-com bandwagon at the beginning of the decade, and therefore did not build out their capacity as companies in other industries did. However, new types of applications are changing this need, resulting in an explosion of networking needs across the insurance industry.

"A carrier's network may be unprepared for that new imaging workflow system that passes thousands of huge images back and forth a day, or these rich Web clients running on every desktop for every conceivable transaction," says Hersh.

As a result of this explosion of new activity, capacity management has become a front-burner issue for many insurance companies, particularly those that have been through mergers or other changes in their business lines, relates Greg Beat, senior consultant for Compass, a Naperville, Ill., IT services firm. "We have seen many insurance companies with significant levels of excess infrastructure capacity-for example, 50% utilization of LAN ports, which is excessive," he points out. "This situation leads to higher costs for maintenance and support."

Pressure to keep a lid on network costs is another factor, Beat continues. "The pressure to reduce costs is being driven by the need to manage excess infrastructure capacity." For networks, he calculates, "hardware and software constitute at least 60% of the total costs. The remaining 40% comprise services or personnel providing operational support." As a result of these cost pressures, he adds, he has seen some insurers actually reduce personnel and maintenance of the infrastructure.

Yet, network growth will only keep accelerating. IBM, Armonk, N.Y., estimates that, by 2010, the amount of digital information is expected to double every 11 hours. One industry study recently estimated that over the past three years, Fortune 1,000 companies have, on average, seen their total data environments grow from 190 TBs to one petabyte (one million gigabytes), and data at midsize companies has grown from an average of 2TB to 100TB, according to TheInfoPro Inc., Redwood City, Calif. Another new study conducted by IDC, Framingham, Mass. for Hopkinton, Mass.-based EMC Corp., put the total "digital universe" at 161 billion gigabytes (161 exabytes) - the equivalent of 12 stacks of books, each extending more than 93 million miles from the earth to the sun. This is predicted to grow at a rate of 57% a year to 988 exabytes by 2010.

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