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Striking the Right Balance: Innovation v. Equipment Spending

June 4, 2010 - 1 Comment

According to industry studies, capital equipment costs account for between 10 and 15% of the annual network budget for most organizations. While operating costs far exceed capital expenses in the budget, it is still very important to get the most from every dollar used to purchase new networking systems. This is especially true as business requirements and technology advancements continue to apply pressure to existing network devices and designs.

Your network must keep pace, but your budget is not unlimited. In essence, you must save without sacrifice. How can you continue to innovate, while reining in equipment spending?

Here are the Five Ways (plus a bonus practice) to control network equipment spending, while ensuring your network fully delivers in support of your organization’s goals.

1.  Take full advantage of price-shaping technology advancements. Here, we’re not just talking about the usual price-performance gains associated with faster or higher-density products. We’re also including innovations that serve to reduce the costs of individual devices. EXAMPLE: The recently announced Catalyst 3750-X, 3560-X, and 2970-S switches set a new lower price point for Cisco fixed and stackable switches, while also delivering new enhanced borderless access features (e.g., MACsec, PoE+, FlexStack). Cisco also offers an enhanced Lifetime Limited Warranty for these new products, lowering maintenance costs, while still providing solid hardware and software support. The Catalyst 3750-X also introduced StackPower technology. StackPower allows individual switches within a single stack to share a common power “pool” delivered via a single power supply. In PoE-enabled environments, this power sharing technique not only bolsters energy efficiency, it also saves on having to purchase higher capacity power supplies for individual switches in a stack.

2.  Look for product bundles that match your requirements. While no two networks are alike, there are some common baseline device configurations and service sets that match the needs of many customers. These commonly deployed baseline systems are “bundled” together and offer a discount over assembling and buying the individual components. EXAMPLE: Cisco’s current resilient Catalyst 4500 PoE+ bundles bring together 48 or 96 PoE+ 10/100/1000 ports; SUP6-E or SUP6L-E; and LAN Base IOS Image. These bundles offer discounts from 37% to 44% off unbundled list prices. In addition, these bundles also include discounts of up to 45% on related SMARTnet and Smart Foundation services, as well as discounted options for 10GE and IOS upgrades on Catalyst 4500 switches.

3.  Favor multi-service devices that do the work of many. Integrated services not only offer opportunity to reduce operating costs through lower complexity and avoid equipment upgrades down the road, they also offer immediate savings in equipment spending. Why buy two devices when one will suffice? Integrated security, wireless, IP voice, and WAN optimization services allow one networking device to perform multiple jobs. You buy one device – not two…or three… or more. EXAMPLE: A single Cisco Integrated Services Router delivers multiple services to branch offices. Firewall? Check. WLAN Access Point? Check. Intrusion prevention? Check. WAN optimization? Check. IP telephony? Check. Application server? Check. I’ll stop there.

4.  Make sure you trade-in outdated equipment. Trade-in discounts allow you to reduce your capital outlay when deploying new gear. And these discounts can often times be very flexible. Don’t think that just because you’re buying a Cisco access router, you can only trade in a displaced Cisco access router. That old wiring closet switch just may be worth a discount on that new branch access router. Even an overwhelmed device from a Cisco competitor may be worth a discount on that leading edge Cisco device. EXAMPLE: Cisco’s 802.11n Acceleration Kit offers both trade-in and bundle discounts, while enabling the movement to 802.11n wireless technology. Existing wireless equipment can be traded in for up to 10% credit towards the purchase of Cisco Aironet 1140 Series Access Points (AP). Combining the 1140 Series APs with the Cisco 550 Series Wireless Controller and Cisco Wireless Control System provides for up to 15% more in savings. You should also take note that the majority of trade-in Cisco equipment is redeployed to those organizations in need. Equipment that is not redeployed is recycled. Currently, less than 1% of equipment returned to Cisco ends up in landfills. Your organization gains the financial benefit of trade-in discounts and the rest of us gain the environmental benefits of equipment reuse and recycling. 

5.  Maximize the reuse of existing components and devices.  Just because you’re buying a new switch or router, doesn’t mean that all your past investment is wiped out. Good design practices take into account the reuse of existing components. Interface cards, service modules, supervisors, even whole stackable switches may have a role in your new network. EXAMPLE: The Cisco ASR 1000, while based on a completely new hardware and software architecture, absorbed SPAs that were already in use in customer networks when the ASR 1000 was introduced in early 2009. Even the latest Catalyst 3750-X mentioned above is able to coexist with older Catalyst 3750 switches within a single stack. Here, both the ASR and Catalyst 350X allow you to save on equipment spending while, at that same time, take full advantage of the latest routing and switching advancements.

And the bonus practice… Use software to get the most from existing hardware. Service-rich software such as Cisco IOS plays an ever-expanding role within today’s Borderless Networks. And the more service-rich the software, the greater the potential to heighten business rewards and lower networking costs. Are you using your network software to its full extent? Do you have traffic control features (QoS, DPI…) turned on? How about security features (Firewall, IPS..)? Or automated management (EEM, IPSLA…)? Software features not only help you get more from your existing equipment (avoiding upgrades and replacements), they also may offer an alternative to buying that new hardware appliance you think you need.  

As for controlling the other 85% of the network budget, Cisco networks deliver loads of opportunity for savings on such big-ticket operating expenses as telecom services and support staff. I’ll refer you to just a few sources for more information on this topic – my own Cost “Myth” blog, Yankee’s A Systems Approach to Networking, and IDC’s Control and Manage Your Network.

Refocusing on the 15% now… Are you getting the most out of every dollar spent on networking equipment? How do you control network-related capital expenses? Do you convert capital spending to operating expense through equipment leases? Let me – and other readers — know what works for you.

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  1. The bonus practice is also very valuable in my view, software can replicate some hardware services, as we can see in virtualization.