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  • 3 May 2016 14:35

How new network technology helps Australia’s traditional retailers to invest

SD-WAN allows organisations to replace their MPLS networks with far less expensive Internet links

By Rob Kingma, CEO, ICT Networks

While Internet-based competition has created serious issues for traditional retailers, the Internet is now benefiting established retailers by becoming a conduit for substantially reducing their store networking costs while offering increased flexibility, reliability and freeing up cash to invest in new customer service.

Lower communications costs are helping traditional retailers to shrink the advantage gained by digital retailers whose go-to-market strategies have significantly lower operational expenses. These on-line traders have eliminated costs such as store rental, store staffing and store connectivity from headquarters.

In response, conventional retailers are developing strategies that leverage their store and staffing investment to provide 'value added' in-store experiences that digital retailers are unable to match. Their tactics include introducing upgraded customer loyalty schemes and customer knowledge programs, better demonstration facilities, improved customer tracking, and increased investment in online customer service and sales training.

Compounding the issues of raising the capital expenditure to invest in these strategies, established retailers are finding that their new IT-based solutions are increasing the volumes of data being sent to and from each of their stores, inevitably resulting in higher monthly costs.

The answer lies in new technology – the software-defined wide area network, or SD-WAN. This allows organisations to replace their present networks, which run on a technology called multi-protocol label-switching (MPLS), with the far less expensive Internet links. The cost advantages can be as high as 60 per cent.

SD-WAN is the latest iteration of secure and private networking, which began with dedicated bandwidth via copper cable through telephone exchanges. In the early 2000s these ‘pipes’ were replaced by frame relay technology. In turn, frame relay was replaced by MPLS, which like each of the interactions before, delivered greater flexibility, more bandwidth and lower costs. Now SD-WAN is becoming the next stage of the evolutionary process, offering retailers a spectrum of technical and monetary benefits while freeing up valuable operating expenses to invest in initiatives required to assure growth.

The traditional retailers are working to create a compelling in-store experience, a key area where Internet sales organisations are unable to compete. Free Wi-Fi and the tracking of customers as they move through the store are both projects that can benefit from inexpensive and flexible Internet-based networks, rather than MPLS networks. Using the Internet via SD-WAN, a store that wishes to demonstrate 4K television to a customer can simply download the demo from the Internet without utilising limited and expensive bandwidth to head office.

Loyalty plans are a trend at present, as stores reward good customers. As these initiatives became globalised we expect a trend to their becoming cloud-based solutions, with data on customers stored in remote data centres. At present, most traditional retailers are using expensive MPLS bandwidth to reach their data centres. Many retailers lack the network capacity to operate computer equipment in all their stores, and are unable to administer their the networks centrally. By switching to SD-WAN, low cost Internet communications can enable all their branches to run software-as-a-service (SaaS) solutions cost-effectively from a central location. The Year of SD-WAN

So how are Australian retailers and other organisations responding to the emergence of SD-WAN technology? At ICT Networks, we see 2016 as the year of proof-of-concept. Organisations are looking to add branch or store locations incrementally by taking advantage of a localised SD-WAN solution initially and slowly, over time, migrating to full SD-WAN coverage.

Most have long term contracts in place with telecoms providers for their existing links, so we are unlikely to see full coverage of the new technology for two or three years. Australia’s retailers can use the intervening time to proof SD-WAN and make sure it works optimally for their organisation. When the time comes to retire their MPLS links, they will have a deep knowledge of the new technology and be well placed to appreciate the differences in cost and flexibility. They can switch over safely in the knowledge that it delivers the goods.

Initially we expect to see smaller retailers going 100 per cent with SD-WAN, while larger organisations with more applications in their data centres will use a hybrid MPLS/SD-WAN setup. In this architecture they would use the reduced bandwidth of MPLS only to exchange secure information between a store and the in-house applications at head office.

Some are already leveraging SD-WAN to bring their idle Internet links to life, adding broadband Internet as part of a hybrid MPLS-Internet network, or even ditching MPLS and implementing dual broadband connections to the branch.

The proven SD-WAN capabilities, including Dynamic Path Control and zero touch provisioning, make dual Internet connectivity simple to deploy and manage, and deliver to retailers a more cost-effective means of achieving 99.99 per cent service availability.

Offerings from leading vendors such as Silver Peak are already linking users securely to their applications via the most cost-effective source of connectivity available. The flexibility of SD-WAN allows retailers to augment or replace MPLS with any form of connectivity, including broadband, DSL, LTE and more. Its visibility and control allows network administrators to see and control all applications, and encrypt all WAN traffic with AES-256. An SD-WAN-enabled architecture resolves the issues of high cost and complex MPLS; shows clearly what cloud applications are consuming a network; and puts an end to users complaining about poor application performance over distance.

Most retailers are looking for ways to slash branch connectivity costs, which represent a considerable expense. Typically they face with the challenge of needing to connect a large number of stores or branch sites securely and robustly.

ICT Networks are specialists in delivering network solutions, management and support services. Our staff are experts in using cutting edge technology, such as SD-WAN, to help retailers slash their connectivity costs by up to 60 per cent. Contact ICT Networks for more information or to arrange a trial.

Retailers looking for ways to slash branch connectivity costs typically faced the challenge of needing to connect a large number of stores or branch sites securely and robustly.

ICT Networks specialise in delivering network solutions, management and support services. Their staff are experts in using technology such as SD-WAN to help retailers slash their connectivity costs by up to 60 per cent. For more information or to arrange a trial, use the contact details below.

Contact ICT Networks

Amanda Dark, 02 9078 7700

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