Pay-As-You-Go Networking

March 1, 2010 at 2:46 pm Leave a comment

“I will gladly pay you Tuesday for a hamburger today.”
– Wimpy, from “Popeye”
____________________________________________

For months this blog has covered the superiority of software-based networking.  Key themes have been the radicalization of both economics and flexibility for networking — in short, the infrastructure attributes required for cloud computing.

Now there’s one more twist of the wrist Vyatta enables:  The radicalization of the pricing model for service providers.

It’s simple, really.  The way SPs buy their customer-enabling network infrastructure is at complete odds with their business model.  They have to pay a large sum up front to their proprietary equipment vendor, but can only charge their customers a tiny fraction of that each month.  And that assumes the gear is in use; after all, their customers come and go.  So in the end, SPs are stuck making large cash payouts that can take a year or more to recover in monthly service revenues. It’s a square-peg-round-hole situation.

Software-based networking allows us to shatter that limited model and replace it with a far better one.  The new Vyatta Service Provider Licensing agreement (VSPL) allows SPs to match their infrastructure costs with their customer revenues by:

  • Breaking down annual costs into small monthly ones,
  • Paying only for the systems in use over the past month, and
  • Enjoying economies of scale as their networks grow.

This is pay-as-you-go networking, and it’s perfect for the SP’s business model.  After all, an SP provides the customer with a utility; their power plant should have a cost model to match.

Imagine this scenario:  Over the course of six months an SP adds 100 new customers and therefore needs 3 new routers, 80 new firewalls and 20 new VPNs.  Over that same six months, 10 existing customers churned and that revenue stream stopped.  Plus, 25 existing customers grew their infrastructure so their network scale-out grew, requiring 10 firewalls and 8 VPNs to be replaced with larger units.  So for six months the SP is a) buying a lot of new infrastructure, b) physically shifting around some existing infrastructure, and c) shelving some units that were outgrown.  That’s an ugly combo and it hits the SP’s bottom line right away.

Now consider how that scenario is addressed with Vyatta.  New virtual routers/firewalls/VPNs are spun up with hardly any CapEx; unused ones are simply deleted; and existing ones are scaled up by allocating more hardware resource via virtualization.  And the cost?  Small and time-based, and calculated AFTER the SP’s customer billing cycle.

Yes, Vyatta has introduced a technical revolution.  But for SPs, whose network is their business, the fact that we can change the commercial attributes of networking is the real revolution.

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