Friday, December 23, 2011

Brocade’s network hardware price model: Pay-as-you-go

Shamus McGillicuddy, News Director.Published: 1 Sep 2011

Why should you buy your switches and routers when you can rent them month-to-month? Brocade is offering that option as of this week with its new Brocade Network Subscription, a pay-as-you-go network hardware price model.

IT cost reduction has always been an issue for enterprises, particularly with network hardware prices. Cisco Systems’ customers joke about a “Cisco tax” because the company charges premium prices for its equipment; meanwhile, vendors like HP Networking and Juniper Networks win over deals by offering lower list prices on their switches and routers.

Attempting to drive down costs, many organizations turn to leasing network infrastructure rather than buying it. But this only shifts costs from capital to operational, and lease agreements bind a customer for a minimum number of years, charging a penalty if the enterprise backs out of the deal early.

Brocade’s new network hardware price model, announced at VMworld this week, is a month-to-month “rental” of network infrastructure, which won't necessarily bring down costs, but will enable IT shops to try on new technology for size with the ability to return or exchange without penalty—and that could mean overall savings if companies are able to avoid overbuying or investing in technology that doesn't work for them.

The program, available immediately, covers all of Brocade’s IP/Ethernet products and includes Essential Support from Brocade Global Services. Brocade hasn’t published the actual subscription rates for the program, but it is offering free quotes on its website. The company will also continue to offer its original network hardware price scheme alongside Brocade Network Subscription.

Pay-as-you-go networks could make enterprises early adopters

Aaron Mahler, director of network services at Sweet Briar College in Virginia, is less than halfway into five-year leases from both Juniper and Meraki for the college’s network infrastructure. While Mahler usually leaves network hardware price analysis to his financial officers, the flexibility of a pay-as-you go model intrigues him because it introduces the potential to try new technology.

“If there are no penalties [for canceling a hardware subscription], that would make us much more nimble in terms of scaling with the network we have. If a big shift in technology happens, it would be nice to be able to make that change within the term of our lease. As long as our finance folks look at the numbers and say it makes sense from a total cost perspective, then I would definitely be interested in it.”

Being nimble is especially important at a time when so many new networking technologies are pending. So, for example, as all of the major networking vendors hammer out their data center roadmaps, network managers can use the pay-as-you-go approach to wait out a plan from their preferred vendor, said Andre Kindness, senior analyst with Forrester Research.

“If Juniper had this for their products, customers would feel comfortable with bringing [Juniper’s] EX8200 [into their data centers] and then switch to QFabric down the line. They wouldn’t be as scared to invest. It’s lower risk.”

Pay-as-you-go models also allow organizations to back out of technology that doesn't pan out, mitigating the risks in trying new architectures, according to Mike Spanbauer, principal analyst with Current Analysis. That's helpful considering vendors are currently knee-deep in choosing sides among competing pre-standard technologies like Transparent Interconnection of Lots of Links (TRILL) and Shortest Path Bridging (SPB).

Brocade has rolled out its new VCS data center network fabric, based loosely on TRILL, and its new line of VDX data center switches. With no capital investment and no penalty for backing out, users are much more likely to try the new technology.

“There’s no commitment to a single path necessarily because you can return [the hardware] if it doesn’t work out for you. Once it’s installed you definitely have migration challenges to get off that equipment, but you’d have that challenge with any solution. In this case you don’t have to worry about capital depreciation issues that limited you to only making changes every three years or so,” said Spanbauer.

Economic environment demands new network hardware price models

Beyond enabling technical innovation, pay-as-you-go models may help companies drive down costs.

Whether pay-as-you-go networks are cheaper than those bought with a traditional capital budget will probably depend on how long an enterprise keeps the rented network in place and how well it plans for growth. Most enterprises build a network with a lifecycle of five to seven years with excess capacity to account for growth over that time. A company that builds a pay-as-you-go network can install and pay for only the capacity that is needed, and add more ports when growth is required.

Some vendors have introduced pricing schemes for application delivery controllers and WAN optimization appliances that allow customers to pay a fee for a temporary burst in capacity when needed, said Kindness. Meraki, a provider of wireless LAN infrastructure, also introduced a pay-as-you-go model to its network hardware price scheme earlier this year.

“When pharmaceutical manufacturers buy chemical, they’ll bring in two truckloads of the chemical. But if they only use one truckload, they can send the other one back,” said Kindness. The same need is growing in IT infrastructure spending, he said.

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