Viatel Warns Resellers: Margins At Risk As Bandwidth Requirements Surge

Viatel is warning resellers that their ability to make margin could be compromised if they do not plan for their future bandwidth requirements. With the cost of network bandwidth decreasing, combined with the heightened requirements for Hosted Application Services (SaaS, VoIP), extra pressure is being placed on networks, and consequently on resellers to deliver this bandwidth. With many resellers already increasing their margins by delivering services over the Wide Area Network (WAN) such as SaaS, hosted CRM / ERP and VoIP applications, the effective delivery of managed services, and consequently revenue, depends on network connectivity.

“Over the last ten years, the Internet has become an increasingly important medium for both resellers and end-users; companies can double their size and profit without doubling their overheads, and resellers can increase margins by routing a variety of communication technologies over an IP network. The upshot of this is that the network has become the cornerstone of the voice and data reseller environment,” said Neil Watson, channel director, Viatel. “With only about 4% of datacentre space in London currently vacant, the city is reaching a critical point for supply and demand in the network. It’s the responsibility of the reseller to prepare for this and ensure that they can weather the changes by selecting a suitable partner to provide the necessary capacity to their customers, and thus secure their position in the future market.”

The increase in popularity for hosted software services is occurring at such a rapid rate, that data centre space is quickly being acquired; reducing the already limited supply. According to analyst firm Gartner, the market for on-demand hosted software services will grow by 21 per cent to £2.5bn by next year. The study also showed that sales of SaaS will grow to £5.7bn by 2011. The statistics predict a huge increase in bandwidth usage, exacerbating the limited data centre space problem, and this is unlikely to improve because of the limited construction space in London for new datacentres.

“Resellers can prevent the bandwidth bottleneck by strategically planning for the future,” concluded Watson. “Resellers need to future-proof their data needs and should be looking at buying datacentre space ‘off plan’. This will ensure that they are ahead of the market and will be ready to provide Hosted Application Services, otherwise they risk being left behind and unable to provide managed services, something which many resellers have built their businesses around.”