[Am-info] Bracing for an Internet disaster

[Fred A. Miller]

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http://zdnet.com.com/2100-1105-945050.html

Bracing for an Internet disaster
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By Rachel Konrad=20
Special to ZDNet News
July 19, 2002, 4:00 AM PT

=20
Like many companies near seismic faults in Silicon Valley, eBay has
emergency plans in case an earthquake destroys critical Internet
connections. But these days another kind of tremor is a more imminent dan=
ger.=20
The costly disruption or slowdown of service because of financially
strapped telecommunication providers is the latest major concern for
companies.=20

"We talk about natural or financial disasters and don't necessarily
distinguish between the two," eBay spokesman Kevin Pursglove said. "If th=
e
service ain't there, it ain't there. That's the bottom line. It doesn't
matter why or how it happened. We just need contingency plans to take car=
e
of customers."=20

=20

To prepare for the deluge, eBay beefed up its co-location facilities,
spread out important applications such as e-mail on different servers, an=
d
found backup providers for Web hosting and other critical jobs.=20

It isn't the only company to equate telecommunication providers' crises
with capricious acts of nature. Companies around the world are developing
co-location facilities, interviewing backup vendors, bolstering wireless
capabilities and adding emergency clauses to business contracts in wake o=
f
the accounting troubles gripping WorldCom.=20

WorldCom is $32 billion in debt and hovering near bankruptcy after
announcing it had improperly booked $3.8 billion of operating expenses ov=
er
the past five quarters. Now the Justice Department and the Securities and
Exchange Commission are conducting investigations on the Clinton,
Miss.-based company, whose assets include MCI, the No. 2 long-distance
provider, and UUNet, a unit that carries the bulk of the Internet's traff=
ic.=20

Even short of bankruptcy, which would dwarf Enron's and become the larges=
t
corporate failure ever, major changes to WorldCom's business could result
in service disruptions--especially if no buyer steps forward for WorldCom=
's
assets, analysts said. Although experts doubt that WorldCom, the No. 2 U.=
S.
long-distance carrier, would shut down its network with a flip of a switc=
h,
they are warning customers to prepare backup plans.=20

"Although we do not expect any immediate cessation of WorldCom services,
its financial straits along with the pending layoff of 28 percent of its
work force will result in diminished service levels," according to a rece=
nt
report from research firm Meta Group. "User organizations stuck with
WorldCom agreements will struggle through the sell-off and dissolution
period, experiencing problems including move, add, change and circuit
installation delays, as well as unresolved trouble tickets."=20

WorldCom's woes cap more than a year of high-profile struggles among
telecommunications providers. Bermuda-based Global Crossing, which filed
for Chapter 11 bankruptcy protection in January, is being investigated fo=
r
allegedly creating network-swapping agreements with some of its peers,
improperly booking swaps as revenue and shredding related documents. Qwes=
t
Communications International began selling some assets in May, and in Jun=
e
the board of directors forced out CEO Joseph Nacchio. Federal securities
regulators are investigating both companies.=20

Few players in the global telecommunication sector seem to be immune from
negative earnings restatements and discoveries of accounting
irregularities, and Wall Street is increasingly scrutinizing powerhouses
such as Verizon Communications and SBC Communications. Michael Powell,
chairman of the Federal Communications Commission, said this week that th=
e
industry was in a state of "utter crisis" and that he was bracing for mor=
e
bad news.=20

The disgracing of vaunted names in the sector and talk of a broader
meltdown has prompted a sense of imminent disaster at companies that rely
on Internet, phone or wireless connections for revenue and employee
productivity. The prospect of a telecommunications collapse now ranks as
the most likely disaster to assail Corporate America, and executives have
adopted a bunker mentality.=20

"Viewing the financial disasters as acts of God--it may seem extreme, but
it's actually a very appropriate analogy and makes perfect sense to me,"
said Tom Jenkins, a telecommunications analyst and vice president at
TeleChoice in Tulsa, Okla. "We know that the small providers are in
trouble, but how much better off are the Sprints, Qwests and AT&Ts? It's
not a matter of switching from one to the other; it's a matter of
protecting yourself from everyone. You can't predict anything anymore."=20

Storm brewing in Europe
Executives' fears have escalated since May, when the pace of disintegrati=
on
in the telecommunications sector picked up--particularly in Europe. Some
experts say the continent's connectivity woes should serve as advanced
warning for what could happen in the United States.=20

The situation appears dire for KPNQwest, a joint venture between Dutch
national carrier KPN and Denver-based Qwest. Bankruptcy court trustees ha=
ve
until the end of the day Friday to find a buyer for Europe's largest
fiber-optic network, which carries one-quarter of the region's Internet
protocol data, or the remaining pieces of the network may be shut down.=20

KPNQwest declared bankruptcy in May, after its founders announced they
would not invest more money into the joint venture. The network, which on=
ce
spanned 18 countries from Finland to Portugal, has seen its market
capitalization sink from $42 billion to about $4 million.=20

Court-appointed bankruptcy trustees want to sell the network in one chunk
to maximize proceeds. But most potential bidders, including U.S. telecom
giant AT&T, have backed out. It's unclear what will happen to the
assets--or to Internet connectivity in Europe if the network is turned of=
f.=20

Mid-week, a bulletin appeared on the KPNQwest site saying, "During this
week you can already expect outages to happen that we cannot solve any
more. At the end of this week we expect that larger parts of the network
will be down."=20

Even though most have created elaborate backup plans in case of slowdowns
or disruptions, European companies and divisions of foreign companies tha=
t
rely on KPNQwest are approaching a state of panic, according to Vincent
Rais, founder of European telecommunications consulting firm Rais
Associates. According to documents filed with regulators and published on
its Web site, KPNQwest international customers include Nokia, Dell
Computer, Cable & Wireless Service's Exodus, Terra Lycos and National
Semiconductor.=20

Executives in North America and Asia are also monitoring the situation fo=
r
clues to what might happen in case of a similar outage of UUNet's Interne=
t
protocol services.=20

Eric Paulak of Gartner Research said in a recent research note that
WorldCom customers' fate is "not as dire--yet" as the fate of KPNQwest
customers, but WorldCom's plans to cut 17,000 workers will dent customer
service and reliability of the network. Paulak issued bullet points for a=
ll
WorldCom customers that don't already have extensive contingency plans:=20

* Don't sign contracts for long-term WorldCom services until its financia=
l
situation is clearer.=20

* Sign six-month extensions for expiring contracts.=20

* Duplicate and investigate alternative hosts for Web sites hosted by
WorldCom or Digex.=20

* Evaluate how a second Internet service provider (ISP) might be used for
Internet access and develop a virtual private network.=20

* Where there is no alternative ISP, order back-up dial-up ISDN (integrat=
ed
services digital network) services for key locations.=20

Many companies have redundant systems or contracts with multiple
providers--despite the cost--just to protect against this sort of problem=
=2E
Internet service provider EarthLink, for example, buys network access fro=
m
WorldCom, Sprint and Level 3 Communications.=20

A spokesman for Palo Alto, Calif.-based Hewlett-Packard said the computer
giant wouldn't need to offer customers excuses--even though WorldCom
supplies some voice and data services. The company's recent merger with
Compaq Computer gave it two independent networks that offer some redundan=
cy
should one fail. It has also mapped out plans to redirect voice and data
traffic to alternative service providers in case of a sudden WorldCom
collapse.=20

"Certainly we've been monitoring the WorldCom situation, as everyone woul=
d
expect," spokesman Arch Currid said. "We are prepared in the event that
WorldCom discontinues its services."=20

Janis L. Gogan, assistant professor of computer information systems at
Bentley College in Waltham, Mass., said companies must extend existing
contingency plans to incorporate potential telecommunications troubles.
Gogan, who also teaches e-commerce strategy at Harvard University, said
most Internet-dependent companies bolstered emergency planning to prepare
for the Y2K bug and again after the Sept. 11 terrorist attacks.=20

She said it would be unrealistic for e-commerce companies--particularly
cash-strapped dot-coms--to have 100 percent redundancy to avoid any loss =
of
service in case of an outage. She recommended that companies assess how
much money would be lost during an outage--then determine how much they c=
an
afford to leave to chance.=20

E-commerce companies, which perform transactions and customer service
online, lose anywhere from $1 million per hour to $1 million per minute
when the power goes off, according to analyst estimates. In one
high-profile outage, Seattle-based retailer Amazon.com suffered a series =
of
disruptions during the Thanksgiving weekend in 2000. Investment firm Thom=
as
Weisel Partners estimated that the one 20-minute outage deleted 20,000
product orders and $500,000 in revenue.=20

"Ask yourself, what are the consequences of being down for one hour, one
day, one week?" Gogan said. "There really aren't many large companies in
this country that would be OK if they were without Internet access for a
week. But if you'd have a dramatic loss of revenue or productivity if
access was down for one hour, you need a more elaborate plan."=20

"Get creative" with contingencies
Gogan also recommended reviewing the disaster plans for companies or
divisions based in India and adopting them for use in the United States a=
nd
Europe. Offices in India have relatively comprehensive emergency planning=
,
she said, in part because of the higher incidence of weather storms and t=
he
country's less reliable power grid.=20

"If you don't already have a contingency plan, you should find one
immediately," Gogan said. "It might help to get creative in where you loo=
k
or how you pull it together."=20

Brian Turley, president of business continuity consulting firm Strohl
Systems, recommended companies tap at least two alternatives to any
telecommunications vendor they have or are considering.=20

"Establish relationships with those alternative companies and literally l=
et
them know that, if anything happens, you'll come calling," Turley said fr=
om
his office in King of Prussia, Pa.=20

"Clients' sole concern is that their vendor has promised them service and
it's not provided anymore. They don't want to hear, 'Hey, it's not my
fault.'"=20
=20
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- --=20
Never forget: At Microsoft, the engineering department are the=20
Ferengi... The marketing and legal departments are the Borg!
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