|By Michael Bushong||
|April 24, 2014 11:30 AM EDT||
From a cost perspective, the networking dialogue is dominated by CapEx. Acquisition costs for new networking gear have historically been tied to hardware, and despite the relatively recent rise of bare metal switching, networking hardware remains a high-stakes business. But SDN is changing this dynamic in potentially significant ways.
The first point to clarify when talking about CapEx is that CapEx does not necessarily mean hardware (at least not the way that most people mean). While there is a strict financial definition for CapEx, in the networking industry it has become shorthand for Procurement Costs. Because networking solutions have been predominantly monetized through hardware, we associate procurement costs with hardware, but this is changing.
The fact that the ’S’ in SDN stands for software is reason enough for people to look beyond the chassis. But the reality is that while vendors have monetized the hardware, the value has been increasingly moving to the software side for more than a decade. So long as everyone was selling hardware, it didn’t really matter that much whether the cost was tied to the hardware or the software, so we have been a little bit lazy collectively in determining a deliberate pricing mix.
More recently, however, there have been additional solutions that are offered entirely through software. With virtual networking devices, for example, there is no physical hardware (unless you count the servers and the network that connects the servers). A common sales tactic for these types of solutions is to point out how expensive physical solutions are. Why pay for all that sheet metal when you can get the same functionality in a virtual form factor? Of course, you are not really paying for the sheet metal; your check also pays for the software and all the features that go into that sheet metal. But the argument is pretty compelling.
The point here is that the only thing that really matters is how much you pay for the whole solution. Whether the price is affixed to hardware or software is an accounting detail – important for some people, but not really the most important thing for the majority of buyers. Rather than calling it CapEx, we ought to be referring more broadly to procurement or acquisition costs. All in, Solution A costs X dollars to bring in house, and Solution B costs Y dollars.
This would certainly simplify the conversation some. But even then, it isn’t all about procurement costs anymore either.
Depending on the solution, the procurement costs account for roughly one-third of the total cost of ownership. The remaining two-thirds of the cost is ongoing operating expense (power, cooling, space, management, support, and so on). The models here for most solutions start to get pretty squishy. While we can fairly formulaically determine things like power, space, and support, when it comes to estimating the cost of managing a device, the models are so dependent on uncontrollable things that they border on useless. And even when the models are sound, most companies have not sufficiently instrumented their network operations to really know what they are spending.
But just because it is difficult to model OpEx does not mean that network teams should ignore it.
If there is one thing that the gaming industry has taught us, it is that there are all kinds of creative ways to separate someone from their money. In the early days of video games, 100% of the cost was procurement cost. After you bought the install media, you had paid everything you were ever going to pay. Before long, some of the more popular games figured out that they could lower initial costs (make the barrier to entry lower) and then charge for ongoing use through subscriptions.
As the networking world adjusts the pricing mix – associating more of the cost with the software – we should expect that charge models will mirror what we have seen on the consumer side. It is not a big stretch (and in fact already happening) to see massive up-front hardware costs replaced with more palatable hardware pricing combined with either higher software or potentially support costs. This has the dual benefit of making it easier for customers to select a vendor, and creating annuities for said vendor.
But the evolution of game pricing models did not end with subscriptions.
For anyone who has gotten sucked into the hell that is Candy Crush, you are already well aware of in-app purchases. The initial game is free, but if you want to get a special advantage or unlock a level, you can make an in-app purchase. They have cleverly priced the in-app purchases to feel like you are hardly spending anything. It’s less than a dollar. I should just go ahead and get that spotted donut thingy! Of course, by the time you add up all those just a dollar moments, you end up paying far more than you ever would have up front.
The magic of this type of pricing is that most of this is not really known up front. When you first get Candy Crush, you don’t really think you are going to buy the special extras. And Candy Crush doesn’t tell you that the levels get progressively harder to the point that they are nigh impossible without a little extra help.
Before you write this off as not applicable to networking, consider a few points.
First, despite the huge open source push, there are still a lot of companies pursuing commercial grade versions of the otherwise free software. Sure, you might buy into the open source controller, but if you need the networking version of the spotted donut thing, what do you do? This is essentially the networking equivalent of the in-app purchase. Call it the in-arch purchase. Once you buy into a particular architecture, the switching costs are prohibitively high. If you have to pay more for the commercial software, can you really say no?
Second, some of the tiered pricing models that are taking root make it more difficult to accurately model ongoing license costs. If you are not thinking about how the costs will scale with the number of ports, users, VMs, or whatever, you might find out down the road that your solution is contributing more ongoing costs than anticipated. For example, buying one VM from Amazon might seem easy enough, but what if you need thousands? It doesn’t stay cheap forever.
Maybe the in-arch costs are just extra features or capabilities. Or ongoing support and services. Whatever the source, these types of costs contribute to the ongoing operating expenses. And because the primary purchasing criterion is CapEx (procurement costs), burying some of these costs a little later in the product lifecycle and making them a bit smaller in magnitude (but larger in volume) will be attractive.
The punch line here is that we are on the cusp of a change in monetization strategies. You might think that pricing and costs will be transparent, but has the networking community given us a real reason to believe that to date? If you think so, consider this: why do buyers celebrate 50% discounts? It’s because pricing is ridiculously obfuscated in this industry. Until we all start expecting more, I just don’t know why this would change.
Along those lines, my colleague Bill Koss posted some facts about Plexxi costs. In the interest of transparency, it’s worth taking a look here.
[Today’s fun fact: The wettest spot in the world is located on the island of Kauai. Mt. Waialeale consistently records rainfall at the rate of nearly 500 inches per year. That’s enough so drown 7 6-foot-tall men standing on each other’s heads.]
PubNub on Wednesday released an open source template to allow developers to add Skype-like video chat into their apps. The free template provides a fully functional video chat platform using WebRTC, PubNub and Google Authentication for a global, reliable collaboration solution. “While the WebRTC protocol has created huge excitement as a way to deliver video chat ubiquitously, there’s still a gap between the protocol itself and the ability to deploy a working, globally scaled, collaboration appl...
Apr. 18, 2015 01:00 AM EDT Reads: 7,292
The IoT Bootcamp is coming to Cloud Expo | @ThingsExpo on June 9-10 at the Javits Center in New York. Instructor. Registration is now available at http://iotbootcamp.sys-con.com/ Instructor Janakiram MSV previously taught the famously successful Multi-Cloud Bootcamp at Cloud Expo | @ThingsExpo in November in Santa Clara. Now he is expanding the focus to Janakiram is the founder and CTO of Get Cloud Ready Consulting, a niche Cloud Migration and Cloud Operations firm that recently got acquir...
Apr. 18, 2015 01:00 AM EDT Reads: 818
Today, IT is not just a cost center. IT is an enabler and driver of business. With the emergence of the hybrid cloud paradigm, IT now has increasingly more capabilities to create new strategic opportunities for a business. Hybrid cloud allows an organization to utilize multi-tenant public clouds, dedicated private clouds, bare metal hosting, and the associated support and services for the right use cases through an on-demand, XaaS model. This model of IT creates tremendous opportunities for busi...
Apr. 18, 2015 12:00 AM EDT Reads: 3,795
SYS-CON Events announced today that BroadSoft, the leading global provider of Unified Communications and Collaboration (UCC) services to operators worldwide, has been named “Gold Sponsor” of SYS-CON's WebRTC Summit, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. BroadSoft is the leading provider of software and services that enable mobile, fixed-line and cable service providers to offer Unified Communications over their Internet Protocol networks. The Compa...
Apr. 17, 2015 09:45 PM EDT Reads: 2,093
SYS-CON Events announced today that GENBAND, a leading developer of real time communications software solutions, has been named “Silver Sponsor” of SYS-CON's WebRTC Summit, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. The GENBAND team will be on hand to demonstrate their newest product, Kandy. Kandy is a communications Platform-as-a-Service (PaaS) that enables companies to seamlessly integrate more human communications into their Web and mobile applicatio...
Apr. 17, 2015 08:45 PM EDT Reads: 2,156
SOASTA, the leader in performance analytics, today reported record growth of the CloudTest community, exceeding 30,000 registered users of the CloudTest platform in Q1 2015. SOASTA also announced widespread adoption of its Web and mobile testing solutions, with more than 1,600 customers completing more than 285,000 tests using CloudTest during the quarter. This rapid growth shows that DevOps-driven digital businesses are embracing a more continuous approach to testing, and CloudTest is meeting t...
Apr. 17, 2015 07:30 PM EDT Reads: 932
ProfitBricks has launched its new DevOps Central and REST API, along with support for three multi-cloud libraries and a Python SDK. This, combined with its already existing SOAP API and its new RESTful API, moves ProfitBricks into a position to better serve the DevOps community and provide the ability to automate cloud infrastructure in a multi-cloud world. Following this momentum, ProfitBricks has also introduced several libraries that enable developers to use their favorite language to code ...
Apr. 17, 2015 06:00 PM EDT Reads: 1,213
While DevOps most critically and famously fosters collaboration, communication, and integration through cultural change, culture is more of an output than an input. In order to actively drive cultural evolution, organizations must make substantial organizational and process changes, and adopt new technologies, to encourage a DevOps culture. Moderated by Andi Mann, panelists will discuss how to balance these three pillars of DevOps, where to focus attention (and resources), where organizations m...
Apr. 17, 2015 05:00 PM EDT Reads: 1,593
SYS-CON Events announced today that kintone has been named “Bronze Sponsor” of SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY, and the 17th International Cloud Expo®, which will take place on November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. kintone promotes cloud-based workgroup productivity, transparency and profitability with a seamless collaboration space, build your own business applic...
Apr. 17, 2015 04:45 PM EDT Reads: 1,444
SYS-CON Events announced today that Stratoscale, the new data center operating system, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. Based in Herzeliya, Israel, Stratoscale is redefining the data center, developing a hardware-agnostic, software platform hyper-converging compute, storage and networking across the rack or data center. The self-optimizing platform automatically distributes all physical...
Apr. 17, 2015 04:45 PM EDT Reads: 1,529
of cloud, colocation, managed services and disaster recovery solutions, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. TierPoint, LLC, is a leading national provider of information technology and data center services, including cloud, colocation, disaster recovery and managed IT services, with corporate headquarters in St. Louis, MO. TierPoint was formed through the strategic combination of some of t...
Apr. 17, 2015 04:00 PM EDT Reads: 1,263
How do you securely enable access to your applications in AWS without exposing any attack surfaces? The answer is usually very complicated because application environments morph over time in response to growing requirements from your employee base, your partners and your customers. In his session at 16th Cloud Expo, Haseeb Budhani, CEO and Co-founder of Soha, will share five common approaches that DevOps teams follow to secure access to applications deployed in AWS, Azure, etc., and the frict...
Apr. 17, 2015 04:00 PM EDT Reads: 1,318
SYS-CON Events announced today that Soha will exhibit at SYS-CON's DevOps Summit New York, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. Soha delivers enterprise-grade application security, on any device, as agile as the cloud. This turnkey, cloud-based service enables customers to solve secure application access and delivery challenges that traditional or virtualized network solutions cannot solve because they are too expensive, inflexible and operational...
Apr. 17, 2015 03:45 PM EDT Reads: 1,383
SYS-CON Events announced today that Vicom Computer Services, Inc., a provider of technology and service solutions, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. They are located at booth #427. Vicom Computer Services, Inc. is a progressive leader in the technology industry for over 30 years. Headquartered in the NY Metropolitan area. Vicom provides products and services based on today’s requirements...
Apr. 17, 2015 02:00 PM EDT Reads: 1,292
SYS-CON Events announced today that Ciqada will exhibit at SYS-CON's @ThingsExpo, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. Ciqada™ makes it easy to connect your products to the Internet. By integrating key components - hardware, servers, dashboards, and mobile apps - into an easy-to-use, configurable system, your products can quickly and securely join the internet of things. With remote monitoring, control, and alert messaging capability, you will mee...
Apr. 17, 2015 01:00 PM EDT Reads: 1,447
What exactly is a cognitive application? In her session at 16th Cloud Expo, Ashley Hathaway, Product Manager at IBM Watson, will look at the services being offered by the IBM Watson Developer Cloud and what that means for developers and Big Data. She'll explore how IBM Watson and its partnerships will continue to grow and help define what it means to be a cognitive service, as well as take a look at the offerings on Bluemix. She will also check out how Watson and the Alchemy API team up to off...
Apr. 17, 2015 12:00 PM EDT Reads: 1,367
The 17th International Cloud Expo has announced that its Call for Papers is open. 17th International Cloud Expo, to be held November 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA, brings together Cloud Computing, APM, APIs, Microservices, Security, Big Data, Internet of Things, DevOps and WebRTC to one location. With cloud computing driving a higher percentage of enterprise IT budgets every year, it becomes increasingly important to plant your flag in this fast-expanding bu...
Apr. 17, 2015 12:00 PM EDT Reads: 2,039
With IoT exploding, massive data will transform businesses with opportunities to monetize almost anything that can be measured. In this C-Level Roundtable Discussion at @ThingsExpo, Brendan O’Brien, Aria Systems Co-founder and Chief Evangelist, will lead an expert panel of consultants, thought leaders and practitioners who will look at these new monetization trends, discuss the implications, and detail lessons learned from their collective experience. Finally, the panel will point the way forw...
Apr. 17, 2015 11:15 AM EDT Reads: 1,350
SYS-CON Events announced today that Column Technologies, a global technology solutions company, will exhibit at SYS-CON's DevOps Summit 2015 New York, which will take place June 9-11, 2015, at the Javits Center in New York City, NY. Established in 1998, Column Technologies is a leader in application performance and infrastructure management for commercial and federal markets. The company is headquartered in the United States, with a diverse and talented team of more than 350 employees around th...
Apr. 17, 2015 10:00 AM EDT Reads: 1,454
SYS-CON Events announced today that ProfitBricks, the provider of painless cloud infrastructure, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY., and the 17th International Cloud Expo®, which will take place on November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. ProfitBricks is the IaaS provider that offers a painless cloud experience for all IT users, with no learning curve. ...
Apr. 17, 2015 09:45 AM EDT Reads: 1,378