In two years, the frame relay data network may be as extinct as no-doc mortgages. By 2010, Forrester Research says most large banks, insurers and brokerages will have transitioned to multi-protocol label switching (MPLS), a data/voice communications protocol that will be the foundation of an IP-based infrastructure banks need for next-generation network applications.
The takeover of MPLS technologies will also spell the end of another banking IT staple: the in-house management of increasingly complex local-area/wide-area networks, according to Forrester in its annual survey of U.S. and European IT decision-makers. Forrester senior analyst Brownlee Thomas says finance and insurance verticals will instead be universally buying managed telecom and network services for WAN/LAN integration because of operational demands, cost savings and “future-proofing” the infrastructure environment.
In-house teams are simply unable and unwilling to take on the massive tasks required to install and bridge these networks effectively as they expand geographically and host utilities like VoIP, telepresence videoconferencing and mobile-device rollouts to field sales teams. Managed services across MPLS networks are also crucial for business continuity, and are better suited for the advanced ERP platforms as central planning and organization becomes required for business-application delivery.
Financial services firms are one of the most advanced verticals in MPLS migration, says Thomas. And whether doing it through a carrier or through systems integrators like EDS, CSC, HP or IBM—usually it’s a multi-sourcing arrangement—many financials are shifting their position on the network lifeline. As one bank network executive told Forrester: “We could do it ourselves, but we don’t want to.”
Banks that used to weigh managed services only on a cost-benefits basis now send out RFPs describing efficiency goals and application rollout plans to be met over MPLS. And MPLS technology is quickly transforming from a wish list to a “me-too” staple for organizations pursuing unified communications. In a 2007 survey, Forrester found that 56 percent of technology decision-makers had either “fully or partially deployed” their site-to-site MPLS plans, more than double the 23 percent that had plans in the works in 2005.
With nearly all firms on track now for MPLS, the differentiators will be the performance of network services, not just their presence, says David Dowse, EDS’s director of global network services. “We do invoice processing and invoice reconciliation and the [telecom expense management] service is closely tied with our inventory provisioning,” he says. “In addition, we also look at overall performance of the carrier and delivery of services.”
Even small and regional banks are growing attached to managed services. Jay McLaughlin, svp and director of IT for $1.4 billion CNL Bancshares of Orlando, FL, tried to build out site-to-site VPNs for CNLBank's 19-branch operation through frame-relay architecture. After looking down the road, though, he saw a host of redundant equipment and servers without the central management capabilities over an MPLS-based LAN. An MPLS migration allowed CNLBank to roll out VoIP services from Avaya, and serves as a transformational centerpiece for backup recovery, central server management and physical security controls for location access and endpoints.
“It requires a centralized database and a centralized application suite in the ERP system that our branches are hitting all at the same time,” says McLaughlin.