Click here to close now.

Welcome!

Cloud Security Authors: Elizabeth White, Liz McMillan, Pat Romanski, Lori MacVittie, John Wetherill

Related Topics: SDN Journal, JAVA IoT, Linux Containers, Containers Expo Blog, CloudExpo® Blog, Cloud Security

SDN Journal: Blog Feed Post

Networking: CapEx, OpEx, and… In-App Purchases?

The fact that the ’S’ in SDN stands for software is reason enough for people to look beyond the chassis

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.]

The post Networking: CapEx, OpEx, and… In-App Purchases? appeared first on Plexxi.

Read the original blog entry...

More Stories By Michael Bushong

The best marketing efforts leverage deep technology understanding with a highly-approachable means of communicating. Plexxi's Vice President of Marketing Michael Bushong has acquired these skills having spent 12 years at Juniper Networks where he led product management, product strategy and product marketing organizations for Juniper's flagship operating system, Junos. Michael spent the last several years at Juniper leading their SDN efforts across both service provider and enterprise markets. Prior to Juniper, Michael spent time at database supplier Sybase, and ASIC design tool companies Synopsis and Magma Design Automation. Michael's undergraduate work at the University of California Berkeley in advanced fluid mechanics and heat transfer lend new meaning to the marketing phrase "This isn't rocket science."

@ThingsExpo Stories
Grow your business with enterprise wearable apps using SAP Platforms and Google Glass. SAP and Google just launched the SAP and Google Glass Challenge, an opportunity for you to innovate and develop the best Enterprise Wearable App using SAP Platforms and Google Glass and gain valuable market exposure. In his session at @ThingsExpo, Brian McPhail, Senior Director of Business Development, ISVs & Digital Commerce at SAP, outlined the timeline of the SAP Google Glass Challenge and the opportunity for developers, start-ups, and companies of all sizes to engage with SAP today.
Cultural, regulatory, environmental, political and economic (CREPE) conditions over the past decade are creating cross-industry solution spaces that require processes and technologies from both the Internet of Things (IoT), and Data Management and Analytics (DMA). These solution spaces are evolving into Sensor Analytics Ecosystems (SAE) that represent significant new opportunities for organizations of all types. Public Utilities throughout the world, providing electricity, natural gas and water, are pursuing SmartGrid initiatives that represent one of the more mature examples of SAE. We have s...
The Internet of Things will put IT to its ultimate test by creating infinite new opportunities to digitize products and services, generate and analyze new data to improve customer satisfaction, and discover new ways to gain a competitive advantage across nearly every industry. In order to help corporate business units to capitalize on the rapidly evolving IoT opportunities, IT must stand up to a new set of challenges. In his session at @ThingsExpo, Jeff Kaplan, Managing Director of THINKstrategies, will examine why IT must finally fulfill its role in support of its SBUs or face a new round of...
The true value of the Internet of Things (IoT) lies not just in the data, but through the services that protect the data, perform the analysis and present findings in a usable way. With many IoT elements rooted in traditional IT components, Big Data and IoT isn’t just a play for enterprise. In fact, the IoT presents SMBs with the prospect of launching entirely new activities and exploring innovative areas. CompTIA research identifies several areas where IoT is expected to have the greatest impact.
Can call centers hang up the phones for good? Intuitive Solutions did. WebRTC enabled this contact center provider to eliminate antiquated telephony and desktop phone infrastructure with a pure web-based solution, allowing them to expand beyond brick-and-mortar confines to a home-based agent model. It also ensured scalability and better service for customers, including MUY! Companies, one of the country's largest franchise restaurant companies with 232 Pizza Hut locations. This is one example of WebRTC adoption today, but the potential is limitless when powered by IoT.
One of the biggest challenges when developing connected devices is identifying user value and delivering it through successful user experiences. In his session at Internet of @ThingsExpo, Mike Kuniavsky, Principal Scientist, Innovation Services at PARC, described an IoT-specific approach to user experience design that combines approaches from interaction design, industrial design and service design to create experiences that go beyond simple connected gadgets to create lasting, multi-device experiences grounded in people's real needs and desires.
The Internet of Things will greatly expand the opportunities for data collection and new business models driven off of that data. In her session at @ThingsExpo, Esmeralda Swartz, CMO of MetraTech, discussed how for this to be effective you not only need to have infrastructure and operational models capable of utilizing this new phenomenon, but increasingly service providers will need to convince a skeptical public to participate. Get ready to show them the money!
SYS-CON Events announced today that MetraTech, now part of Ericsson, has been named “Silver 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, NY. Ericsson is the driving force behind the Networked Society- a world leader in communications infrastructure, software and services. Some 40% of the world’s mobile traffic runs through networks Ericsson has supplied, serving more than 2.5 billion subscribers.
The Internet of Things is not only adding billions of sensors and billions of terabytes to the Internet. It is also forcing a fundamental change in the way we envision Information Technology. For the first time, more data is being created by devices at the edge of the Internet rather than from centralized systems. What does this mean for today's IT professional? In this Power Panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, panelists will addresses this very serious issue of profound change in the industry.
SYS-CON Events announced today that BMC 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. BMC delivers software solutions that help IT transform digital enterprises for the ultimate competitive business advantage. BMC has worked with thousands of leading companies to create and deliver powerful IT management services. From mainframe to cloud to mobile, BMC pairs high-speed digital innovation with robust IT industrialization – allowing customers to provide amazing user experiences with optimized IT per...
The Internet of Things is not new. Historically, smart businesses have used its basic concept of leveraging data to drive better decision making and have capitalized on those insights to realize additional revenue opportunities. So, what has changed to make the Internet of Things one of the hottest topics in tech? In his session at @ThingsExpo, Chris Gray, Director, Embedded and Internet of Things, discussed the underlying factors that are driving the economics of intelligent systems. Discover how hardware commoditization, the ubiquitous nature of connectivity, and the emergence of Big Data a...
SYS-CON Events announced today that O'Reilly Media has been named “Media 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. O'Reilly Media spreads the knowledge of innovators through its books, online services, magazines, and conferences. Since 1978, O'Reilly Media has been a chronicler and catalyst of cutting-edge development, homing in on the technology trends that really matter and spurring their adoption by amplifying "faint signals" from the alpha geeks who are creating the future. An active participa...
The world is at a tipping point where the technology, the device and global adoption are converging to such a point that we will see an explosion of a world where smartphone devices not only allow us to talk to each other, but allow for communication between everything – serving as a central hub from which we control our world – MediaTek is at the heart of both driving this and allowing the markets to drive this reality forward themselves. The next wave of consumer gadgets is here – smart, connected, and small. If your ambitions are big, so are ours. In his session at @ThingsExpo, Jack Hu, D...
The 4th International Internet of @ThingsExpo, co-located with the 17th International Cloud Expo - to be held November 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA - announces that its Call for Papers is open. The Internet of Things (IoT) is the biggest idea since the creation of the Worldwide Web more than 20 years ago.
SYS-CON Events announced today that DragonGlass, an enterprise search platform, 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. After eleven years of designing and building custom applications, OpenCrowd has launched DragonGlass, a cloud-based platform that enables the development of search-based applications. These are a new breed of applications that utilize a search index as their backbone for data retrieval. They can easily adapt to new data sets and provide access to both structured and unstruc...
We’re entering a new era of computing technology that many are calling the Internet of Things (IoT). Machine to machine, machine to infrastructure, machine to environment, the Internet of Everything, the Internet of Intelligent Things, intelligent systems – call it what you want, but it’s happening, and its potential is huge. IoT is comprised of smart machines interacting and communicating with other machines, objects, environments and infrastructures. As a result, huge volumes of data are being generated, and that data is being processed into useful actions that can “command and control” thi...
As the Internet of Things unfolds, mobile and wearable devices are blurring the line between physical and digital, integrating ever more closely with our interests, our routines, our daily lives. Contextual computing and smart, sensor-equipped spaces bring the potential to walk through a world that recognizes us and responds accordingly. We become continuous transmitters and receivers of data. In his session at @ThingsExpo, Andrew Bolwell, Director of Innovation for HP's Printing and Personal Systems Group, discussed how key attributes of mobile technology – touch input, sensors, social, and ...
All major researchers estimate there will be tens of billions devices - computers, smartphones, tablets, and sensors - connected to the Internet by 2020. This number will continue to grow at a rapid pace for the next several decades. With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo, June 9-11, 2015, at the Javits Center in New York City. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be
WebRTC defines no default signaling protocol, causing fragmentation between WebRTC silos. SIP and XMPP provide possibilities, but come with considerable complexity and are not designed for use in a web environment. In his session at @ThingsExpo, Matthew Hodgson, technical co-founder of the Matrix.org, discussed how Matrix is a new non-profit Open Source Project that defines both a new HTTP-based standard for VoIP & IM signaling and provides reference implementations.
Buzzword alert: Microservices and IoT at a DevOps conference? What could possibly go wrong? In this Power Panel at DevOps Summit, moderated by Jason Bloomberg, the leading expert on architecting agility for the enterprise and president of Intellyx, panelists will peel away the buzz and discuss the important architectural principles behind implementing IoT solutions for the enterprise. As remote IoT devices and sensors become increasingly intelligent, they become part of our distributed cloud environment, and we must architect and code accordingly. At the very least, you'll have no problem fil...