Modern cloud-based networks: the key to high-level commercial performance?

Here’s a proposition to consider: among the ranks of large enterprises, commercial success increasingly relies on digital transformation. In turn, digital transformation relies on modernized enterprise networks that deliver flexibility, performance and availability from the edge to the cloud. Intuitively, this hypothesis makes a lot of sense.

In many enterprises, it’s also increasingly becoming the subject of painstaking debate. After two years of quick-fix digitalization on top of pre-COVID-era network technologies, the limits of the status quo are becoming evident. All too often, legacy networks limit the potential for digital transformation. In many organizations, it’s way past time to address the fundamentals.

If this debate sounds familiar to you, it’s worth looking at the 2022-23 Global Network Report from NTT, a new piece of research that offers an intriguing view of how enterprises around the world are managing their networks.

Among other things, NTT’s survey suggests a strong correlation between a willingness to invest in modernizing networks and high levels of commercial performance. At the other end of the spectrum, NTT’s survey confirms many enterprise networks suffer from long-term underinvestment and increasing levels of technical debt. The distance between these two different approaches feels substantial.

NTT’s report – based on responses from over 1,300 network specialists and IT and business decision-makers worldwide – defines high levels of commercial performance using straightforward criteria. To qualify as a “top-performer”, organizations in the survey needed to have generated year-on-year revenue growth of over 10%. They also needed to have generated operating margins of over 15% in the last financial year.

In network terms, what do these organizations look like? It’s here that a willingness to invest in modern network technologies starts to look like an indispensable ingredient for high performance in commercial terms.

Nine out of 10 top-performing organizations are increasing network investment to support digital transformation. Many are spending over 2% of their annual revenues – a significant sum – on their networks, deploying technologies designed to enable rapid transformation, provide greater availability and flexibility, and support not just today’s requirements, but tomorrow’s requirements as well.

NTT

Eight out of 10 high-performing organizations say their network strategy is aligned with their business goals. In practice, this involves a clear understanding that the quality of the network directly affects their ability to address the most pressing business and digital transformation challenges. (By contrast, only 42% of underperformers share this sentiment.)

The underperformers in NTT’s survey are a mirror image of these overachieving organizations. Most CIOs and CTOs at these companies agree that networks play a vital role in delivering revenue growth. They also recognize business demands for increased speed, agility and innovation can only be satisfied by new operating models. And yet these organizations typically suffer from delayed upgrades, high levels of technical debt and poor visibility across the network.

The older the network is, the greater the chance of negative impacts on service delivery, customer satisfaction and the employee experience. Some 69% of the CIOs and CTOs surveyed by NTT say technical debt continues to accumulate. Asked to identify the risks generated by underinvestment, respondents most frequently pointed to classic effects of technical debt: inflated IT operational costs and limited availability of new services required for digital transformation.

For these enterprises, networks threaten to become a cross between a millstone and a minefield (slowing down progress and continually threatening to blow up in the face of network professionals).

In this hybrid and hyperconnected world where organizations need to deliver great employee and customer experiences, the network provides the fabric of the digital organization. NTT’s intelligent and secure Network as a Service enables a complete edge-to-cloud strategy, delivering a wide array of benefits: increased agility, reduced risk, greater flexibility, scalability, automation, predictability and control.

Given today’s high-performance hybrid environment, Matthew Allen, Vice President, Service Offer Management – Networking at NTT, suspects that the status quo is time-limited for underperforming enterprises.

“You can start to transform your business on the networks you have. However, as this business transformation drives a distribution of applications and business functions across many, diverse locations (SaaS, PaaS, IaaS, private cloud, etc.), a legacy network solution will not be able to keep pace with this change – it will become increasingly difficult for distributed applications and workloads to communicate effectively and securely, at the speed the business requires.”

NTT’s survey suggests organizations that delay network modernization run the risk of ending up in an unsustainable position – technical debt will continue to accumulate, downtime will occur as networks fail, and the increased operational complexity of stitching together and maintaining networks to support distributed workloads will eventually cause something to slip. Certainly, the commercial implications look unpleasant.

On this basis alone, it’s worth looking at NTT’s survey. It’s also worth asking yourself about your organization’s network strategy. Does it look like the strategy of a top-performing organization or an underperforming one? NTT’s analysis suggests that the difference between the two is more important than we might imagine. To learn more, read the 2022–23 Global Network Report from NTT – you can view the key findings infographic or download the complete report with access to the full data set.