• 08/25/2016
    8:00 AM
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Pay-As-You-Go Enterprise Networking

Companies now have alternatives to big capital outlays for networking equipment.

Most enterprises treat networking equipment as a capital expense. They purchase it, along with some maintenance and support, and depreciate it over several years until it’s time for an upgrade. The majority of the expenses in the first year are capital expenses and the rest are OpEx for support. There are some methods for leasing equipment that enables payments spread out time, but traditionally, enterprise networking equipment has been purchased like cars, through up-front payments.

Today, networking along with the rest of IT, is transitioning to a consumption-based model like cloud computing or SaaS. Thus, there are some changes under way to alter the traditional methods of purchasing networking equipment. One is a standardization of leasing arrangements, and the other one is turning network solutions into a service via the cloud.

Simplifying payment

Leasing has been available for networking equipment, as it has been for other capital equipment; major networking equipment makers such as Cisco have offered these forms of financing. However, it requires contract negotiations, so it’s often not convenient for small organizations or companies that purchase via resellers. As an alternative, Brocade offers its Brocade Networking Subscription that turns these one-time payments into recurring payments and the arrangements are standardized SKUs that can be packaged and sold through distribution channels, making them accessible to many sizes of organizations that want to turn these expenses into OpEx.

Brocade's subscription service also allows a customer to mix certain non-competitive third-party products such as servers, firewalls and security software. Moreover, the service accounts for small details such as “title to assets” in case of bankruptcy. If you are a managed service provider (MSP), these options are interesting since it enables the ability scale or upgrade, and to track the revenue more closely.

You can argue that this type of arrangement doesn’t really affect the true price of a product. However, if financial constraints prevent you from purchasing the equipment you need, then this can provide necessary financing flexibility.

Virtual appliances

Another interesting development is the conversion of functions traditionally delivered as hardware appliances into software. After all, a good deal of what’s inside a router or a load balancer (ADC) is software.  This is particularly important for cloud environments where there are virtual machines or containers. These environments often are highly elastic, scaling up and down based on workload needs.

Networking services such as firewalls or load balancers may be delivered as a set of virtual networking appliances that are spun up on public clouds or on-premises along with the workloads. Thus these network services are starting to resemble cloud services; they're elastic, change their deployment count to meet workload demands, and often purchased as needed instead of provisioned ahead of time.


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(Image: jarmoluk/Pixabay)

While some of these virtual appliances are designed for the cloud, on-premises appliances are evolving to run on the cloud. For example, F5 Networks offers “F5-as-a-Service,” for its Silverline suite.  Designed as a cloud-based application security solution, it may evolve to offer additional networking solutions outside of security. Meanwhile, F5's Big-IP virtual appliances for load balancing, traditionally deployed on-premises, are being qualified to run on the cloud.

Hybrid cloud

Networking vendors also are addressing the needs of the hybrid cloud environment, where customers may want to shift network services back and forth between a public cloud and an on-premises private cloud.  If applications move fluidly between the public cloud and on-premises, but associated network appliances are glued to their original deployment location, it doesn’t make sense. Purchasing redundant licenses – one for the public cloud and another for on-premises is a waste.                                           

Thanks to some new accounting rules (No. 2015-05), subscription costs for cloud-based software services now may be treated interchangeably with similar services provided on premises and purchased as a license, but only if there isn’t a penalty from switching from one mode to another. Therefore, make one purchase and you can deploy in multiple methods and switch back and forth.

If a particular ADC offered on a cloud provider also can be implemented on-premises and you choose to deploy it on-premises, then you don’t need to purchase a different license. This is not too different from using Microsoft Office 365 on your PC and in the cloud. Hybrid cloud computing is still its early phases, but we can clearly see deployments where it this can occur, so discuss this with your vendor if these flexible licenses are available.

Most vendors shy away from providing precise accounting guidelines, but your firm’s finance department can assist in interpreting what this means for your accounting budgets.


Some SD-WAN providers are looking at treating WAN solutions not as a piece of hardware and software that's sold to be deployed alongside a customer purchased telecom subscription but as a bundled WAN service, where telecom services are bundled with the WAN hardware purchased via a monthly subscription. Thus, one bill covers the hardware, software and the telecom service. 

One also can go ala carte and get an SD-WAN software and hardware subscription and telecom service separately as traditionally done. The latter may be necessary if there are long-term telecom contracts that need to be paid until the term is completed.

Pay as you go is a convenient method for many users. People pay for Netflix by the month and fewer people buy DVDs. Why not pay as you go for networking?

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