Beaming Aboard the Enterprise

The idea that fiber-optic cable can help us communicate better and faster has been largely public knowledge ever since Sprint started running its “pin drop” ads in the mid 1980s.Since then, though, fiber-optic technology has kept a fairly low profile in the public’s eye — perhaps until now. Technology-minded consultants, if they haven’t already done so, might want to take a closer look at these strands of streaming laser beams. Scott Bender, a Bain & Company partner, says that the reason is a meeting of physics and economics. First, the physics: When you try to stuff data down copper wire at speeds in excess of one gigabit per second (GBPS), the wire starts to act like a giant antenna, creating enough radio frequency interference to corrupt the transmission. The appetite for more data at higher speeds, however, knows no such physical barriers. Bender estimates that GBPS traffic will almost double over the next two years, and optics is the key to satisfying this demand. This kind of growth means that there is plenty of action for consultants of all stripes. For Bain, it is primarily in helping the companies that make optical networking equipment figure out the best way to profit from it.“We have a fiber-optics practice here,” says Bender. “We have about five major clients and approximately 25 consultants.”Bender can’t reveal his client list, but says it consists of the usual suspects in networking hardware: the Lucents, Nortels, Ciscos of the world, along with some of the component manufacturers that serve these giants. “We help them prioritize products and determine which markets to go after,” he explains. “There has been a lot of consolidation in this space, so we also help them with post-merger and acquisition integration.”Strategy is particularly important for these clients, Bender continues, because the entire market is about to change. “Historically, optical networking equipment has been so expensive that only the major telecommunications carriers could afford it,” says Bender. “But the price performance ratio on this equipment is about to hit a steep downward slope.”This means, he continues, that equipment previously too expensive for even the largest of firms will soon start to show up in corporate data centers. The manufacturers that are quickest to market with the right stuff stand to do very well.But there are downside risks as well. “Last year, one of our clients wanted to expand more into the metro space with multiplexer devices,” explains Bender. Multiplexers enable you to shoot more data down fiber cables by splitting the light into different-color wavelengths. The client needed to make a quick decision on whether to build, buy, or partner. “The technology in question was an optical chip,” says Bender. “The chip is about the size of a thumbnail and will handle 40 channels. These chips are now commodity items, but that wasn’t obvious at the time.”So Bender did what strategy consultants are paid to do: He read the writing on the wall and advised the client to partner with a company that was already making an optical chip. “Our client was able to avoid entering into a highly competitive space and stay focused on their core competency, which, in this case, enabled them to package the chips into a color multiplexer.” Dark FiberWave-division multiplexers like these aren’t worth very much without the fiber cable to carry all those beams of colored light. The distribution of fiber is anything but balanced: Fiber to the home is almost nonexistent, while in some metropolitan areas there is an abundance of clear fiber waiting to be filled with colored light.This so-called “dark fiber” could mean more opportunity for consultants with the right combination of business savvy and technical skills. “The reason there is so much excess capacity in many metro areas,” says Doug White, managing director in the network solutions division of KPMG Consulting, “is that the cost of laying fiber is not in the fiber itself, but in the ripping up of streets to get it in the ground. So, when companies like Level 3 and others went into cities to lay fiber, they would lay lots of it.”And often, in order to get the right of way to lay it, these fiber companies traded some of the capacity to the appropriate entity — usually a local government, utility, school district, or transit authority. “Governments in particular are now trying to figure out what to do with all this excess fiber,” says White.“We are in the early stages of helping some local governments envision what they want to be,” he continues. “Many want to leverage the capacity they have to extend broadband services to areas that the commercial sector doesn’t serve.” And it isn’t just a matter of flicking a switch, for the simple reason that most governments don’t want to be in the phone business. “They would rather not light the fiber themselves,” White adds.Solutions here will almost certainly involve some creative partnerships between the public and private sectors. “The precedents for this have not been set yet,” says White.In one ongoing project, KPMG is helping a county in the Great Northwest to prepare for an optical revolution. “The electric power company that serves Grant County, Washington, is in the process of laying fiber over hundreds of square miles to 44,000 endpoints — serving every place there is an electrical meter,” White reports.It is almost unheard of for any region to have fiber covering that last mile to every residence and place of business, but that’s precisely what is happening here. “It means,” White continues, “that you will be able to get a better Internet connection there than I have outside of Chicago.”And, perhaps more important, the cheap electric power of the Northwest, combined with this broadband access, will be a powerful lure to companies looking for new places to put their data centers. “Our main role is to help the people in Grant County  get ready for this,” says White. “This is clearly not a traditional business model for anyone in the area.”Optical EnablerOwen Perillo, partner in e-commerce delivery at Accenture, leads the firm’s global network technology practice. He says that the taming of light does open new business opportunities.“The first-generation optical networks were all about using fiber to overcome some of the barriers inherent in copper wire,” says Perillo. “But that was just the pipe in the middle. Now the focus has shifted to the boxes on the end, the networking devices.”The reason for the shift, he explains, is that most of these devices must translate light into electricity, and are, therefore, bottlenecks. “New devices, such as optical switches, are removing some of these bottlenecks. These will be key components in the next generation of optical networks.”Perillo says that Accenture has about 1,000 consultants in the network technology practice. Approximately 50 of these are optical experts. “Initially, most of our optical consulting work was centered on helping major carriers such as Sprint and AT&T design their next-generation optical networks,” he says. But these clients face a challenge that goes beyond the building of sophisticated optical networks, namely, what to do with them. “Carriers are still trying to figure out how to make money from this technology,” says Perillo. “So one of the things we do is help them package content and services that leverage the advanced capabilities of these networks.”Mitch Mitchell, vice president at A.T. Kearney in Dallas, says that he just finished a project which helped a communications carrier do just this. “We helped them design and develop a new business,” says Mitchell. “They are no longer just a carrier. Now they are also storing data and managing information for their large enterprise clients.”Perillo says that the rapid development in optical technology has created anxiety for some enterprise clients. “Media and entertainment companies see this as a disruptive technology,” he explains. “The movie industry, for example, is concerned about things like video-on-demand that optics can facilitate. We work with them through our digital content services group.”Tiny Mirrors and Frozen LightVendors such as Lucent are preparing for the transition from hybrid networks to those that are fired totally by light. “In the not-so-distant future, the world’s most powerful broadband networks will be all-optical,” says Eric Spurrier, vice president of marketing for Lucent’s Optical Networking Group. “Traffic will not need to be converted into electrons along the way (as is currently done), thereby making the transmission more efficient. All-optical switching is the cornerstone of Lucent’s vision for an all-optical network.”In mid-May, Lucent closed a deal with carrier Global Crossing that could move the world closer to this goal. Global Crossing plans to purchase Lucent’s LambdaRouter, a high-capacity all-optical switch. The devices will be deployed in the United States and Europe.Bain’s Bender says that this deal is particularly significant because the industry was skeptical of the technology inside the new box. “It uses lots of tiny mirrors,” says Bender. “Many had written it off as unworkable, but the sale to Global Crossing certainly indicates otherwise.”And he says that we can expect to see more action on this front. “Someone will figure out how to make optical switching work,” continues Bender. “Lots of money is being poured into this.”Lucent may be on to a solution, but there is another, even tougher, optics problem that Bender says will take at least five years to crack. “The next big thing will be optical packet switching,” Bender explains. “This is very hard. In order to switch packets, you need a way to store them. With electronic packets you just store them in a silicon buffer. But to do this in a purely optical mode, you would need to freeze light.”This, Bender says, would be the Holy Grail in optical communications technology.It is the kind of thing, according to Kearney’s Mitchell, that will create a brave new world for those consultants who are ready. “We are going to see end-to-end movement of huge amounts of data at speeds that few have anticipated. Manufacturers, carriers, and enterprises are all going to need help as they travel down this new light-powered highway.”