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Why TCO is the Only True Way to Measure Network Costs

Cost always plays a big part in purchase decisions. It’s certainly a factor as I consider buying  a new car. As you’re well aware, purchasing a new car isn’t just about the initial cost. In my case, I’m considering reliability, speed (not that I need to go that fast carpooling my kids to school), mileage, and looks to a certain extent. (I just can’t bring myself to drive a minivan.) But what does buying a car have to do with your customers, or IT spending for that matter?

To put it simply, customers often cite initial cost as a big factor in their network decision-making, too. But if they are looking only at CapEx when purchasing new equipment, it’s the same thing as only looking at the initial cost of a car: They’re not seeing the entire picture.

Total cost of ownership, or TCO, is a better metric to assess network cost, because it considers the full impact on IT spend, including CapEx, services, labor, bandwidth, and energy consumption. And TCO is not just a measure of the initial expense, but of how much equipment will cost over its lifetime.

In June 2011, Cisco commissioned a third-party business consulting firm to analyze the true TCO of the network, comparing the quantitative costs of acquisition, support, labor, bandwidth, energy, and product longevity. The firm also assessed qualitative business benefits like network uptime, user productivity, and security.

The quantitative results alone show that a network built on Cisco’s architectural approach can yield up to a 13% better TCO, building a powerful business case for you to take to your customers about why the choice of networking gear matters.

Here are some facts drawn from the findings, which support Cisco’s firm belief that a strategic next-generation Cisco network architecture delivers superior value and lower TCO: Read More »

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Cisco UCS Servers and Blade Server Evolution, part 1

Arguably the place to begin a Cisco UCS blade server journey would be with “Why Blade Servers”.  ‘Blades’ are cool.  There was “Blade Runner” (a cult classic) and the Wesley Snipes “Blade” movies, several TV series with ‘blade’ in the name, on and on; but for data centers and servers?  Why blades?  Where is the Blade Server TCO & ROI benefit that drives business decisions and therefore innovation and how do blade servers / chassis get there?

Before:

Blade servers have been around since about year 2000 and arguably came about as a way to make data center footprints smaller and reduce power consumption (reduced TCO).  Nothing new here for blade enthusiasts.  Rack servers were taking up more and more space and power in data centers.  The concept of blades was brilliant, insightful and simple. Take as many common rack delivered functionalities (services) as possible, and package them together for delivery to a fixed group of servers.  The easy targets for this were server power, cooling, and I/O (well, some I/O functions).  To look at it another way, a blade chassis takes a data center rack with servers, I/O cables and switches, then shrinks them into a ‘building block unit’.  Once you have the ‘unit’, put a single sheet metal wrapper around everything and voila, a blade chassis.  Overly simplistic I know, but a close enough visual.  If you want a step-by-step evolution, Sean McGee (a colleague of mine here at Cisco) did a darn good overview The “Mini-Rack” Approach To Blade Server Design.

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HP’s Trojan Horse

Our neighbors in Palo Alto have been making a lot of noise about the difference in price between Hewlett-Packard and Cisco networking equipment. They’d like customers to believe they can offer similar capabilities to Cisco but at much lower prices—“Cisco for less,” if you will.

Most folks understand that the first part of that claim isn’t true. They’re not Cisco. To start with, when a company spends just 2% of revenues on R&D (as HP does), it isn’t capable of generating the type of innovation that a company spending 13% can (as Cisco does). We explained how Cisco innovation delivers differentiated capabilities when we debunked the myth of the ‘Good Enough’ network.

But some customers still ask me about the price difference—the “for less” part.  After all, everyone is looking to cut costs, right?

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The Myth of Network Acquisition Cost

Did you know that when building an enterprise IT network about 20% of a typical budget is spent acquiring hardware, while a whopping 80% goes toward operating costs?

In this week’s installation of the Myths of the Good-Enough Network series, Mike Rau delves into one of the common mistakes customers make when building an enterprise IT network; simply focusing on acquisition costs.  Mike points out that only looking at acquisition and maintenance costs ignores the increased productivity and the reduction in downtime that next-generation networks can provide. You may have initially saved by choosing the “good-enough” network; however those savings can quickly evaporate with an increase in operating costs.

When purchasing a phone you wouldn’t only consider the out-the-door cost, you would take into account the carrier’s network, services, and technical support when making your decision. Why not do the same with your enterprise IT network?

Sound logical?  Head over to Silicon Angle to read the full article and find out why a tactical “good enough” network can quickly become the more expensive option.

And don’t miss the previous myths:

Seven Myths of the Good Enough Network
Myth #1: Single-Purpose Network
Myth #2: Security as a Bolt-on Myth
Myth #3: Basic QoS Myth
Myth #4: Just Look for Standards
Myth #5: Basic Warranty

Check back next week for our coverage of the final networking myth.

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The Network Dating Game and the Acquisition Myth

When your customers are shopping around for the right network, it’s a bit like being on “The Dating Game.” For those who aren’t familiar with the TV show, it first aired in the 1960s and featured an eligible bachelor or bachelorette hidden behind a wall. Said bachelor or bachelorette got to interview three candidates to find out which one would be most appropriate and worthy of a date. The candidates could not see each other so had to rely on the person’s answers to determine the best fit.

Customers looking for the right network may feel like the eligible bachelorette or bachelor on “The Networking Game.” Is contestant number one trustworthy and able to meet both current and future needs? Does contestant two offer security and flexibility? What about three: is that one stable? Can one network meet really meet all of those needs?

There are quite a few variables to consider when customers are shopping for a network, especially when 20% of a typical enterprise IT network budget is spent acquiring hardware while a whopping 80% goes toward operating costs.

Yet some industry pundits and vendors look only at acquisition and maintenance costs when calculating TCO, ignoring functionality that may improve productivity or business opportunities that are lost when the network goes down. That’s a bit like choosing a date based on a single factor, like a voice, rather than looking at the entire package.

We continue our coverage of the “Good Enough Network” myth series with myth #6: Acquisition Cost. Read More »

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