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“Recalculating”… Service Providers Improve TCO with Programmable Networks

- May 18, 2017 - 2 Comments

Written by Ola Mabadeje, Marketing Manager

“Recalculating”… “Recalculating”… was all I heard when I eventually turned on the GPS navigator with the latest navigation software. I had been stuck in traffic and then decided to take some backroads to my destination. I had initially tried to travel to my destination using the legacy navigation system that came with my car. Not updating to the latest mapping software had cost me valuable time and money.

Navigation technology today finds the best route in real time, even when an accident happens on the original path, as I experienced that day. My legacy navigation system increased my ETA by over 50%, cost me extra fuel, and added wear and tear on my car.

How does that scenario relate to service provider networks? Legacy network equipment with out-of-date software can carries unnecessary costs to maintain. One customer analysis shows that they spend $3.80 more per subscriber each month running on older infrastructure than they would with a programmable network. In addition, older generation networks do not make it easy to respond quickly to new market demands. This results in missed opportunities and more is spent to capture what is left of the opportunity.

The fast pace of change in today’s market makes it costly to keep up with customer demands and competitive pressures when you are using old network infrastructure to deliver services.

We have worked with many of our service provider customers to analyze their network infrastructures and costs with an eye toward the benefits of programmability. With a programmable network you can quickly respond to changes in the market and keep up with traffic demands. You can do this better and with significantly lower capital and operational expenses than you can with an older generation network.  Also, older networks lack scale and new functionality.

With a three-pronged approach, service providers can capture significant positive business outcomes like boosting cash flow and saving costs.

  1. Product migration
  2. Solution with professional services bundling
  3. Migration financing

With IP traffic growing at 30% annually on average, older generation infrastructure continues to be strained. Keeping up with this traffic demand might be costing service providers more than they know. We have performed some detailed financial analysis and have seen that some service providers are leaving a lot of money on the table.

As a case study we looked at one service provider with the following profile:

  • Hundreds of thousands of residential subscribers (broadband + video)
  • Thousands of enterprise L2 & L3 VPN customer circuits
  • Over 30% annual traffic growth
  • More than 100 legacy edge routers

A thorough 5-year business case shows the significant benefits of migrating to a programmable network. Taking advantage of all 3 components above, the highlights of the customer’s business case are quite good:

If the service provider only takes advantage of #1 (product migration) only, the results are good enough to consider migration. A product only approach resulted in an overall TCO drop of 36% and ROI of 55%. However, a solution approach which includes other software platforms like NSO and WAE as well as Cisco Advanced Services boosted CAPEX savings by 60% and also boosted OpEx savings by 37%. This architectural approach of combining #1 and #2 resulted in an ROI of 80% versus 55% of taking the product only approach.

  • 67% drop in average TCO/Gbps
  • 30% drop in equipment capital equipment
  • 62% drop in network planning and operations costs
  • 56% drop in power, cooling, and space costs

Lastly, financing your migration with Cisco Capital (#3 above) will give a further boost to your business outcomes. Cisco Capital’s Easy Pay and its other options increased ROI and grew cash flow. Upfront capital investment can drop below 1/3 the purchase price when you take advantage of the payment deferral and flexible consumption model options.

  • Return on investment (ROI) greater than 200%
  • 53% boost in cash flow

In summary, you can get significant financial benefits when you migrate away from older network infrastructure. Service providers can enjoy several other cost-related benefits that I did not cover. You can improve time to market. You can address larger markets because you will be able to offer new services and grow your ecosystem. We have quantified many of these opportunities.  They can offer even greater impact on your bottom line.  Learn more about programmable networks.

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2 Comments

  1. This is good perspective. Service providers are increasingly under pressure to adopt a more flexible and responsive approach to providing services with more predictable OPEX.

    Keep up the good write , sir !

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