By Art Reisman
CTO – http://www.netequalizer.com
Bandwidth providers are organized to sell bandwidth. In the face of bandwidth congestion, their fall back position is always to sell more bandwidth, never to slow consumption. Would a crack dealer send their clients to a treatment program?
For example, I have had hundreds of encounters with people at bandwidth resellers; all of our exchanges have been courteous and upbeat, and yet a vendor relationship rarely develops. Whether they are executives, account managers, or front-line technicians, the only time they call us is as a last resort to save an account, and for several good reasons.
1) It is much easier, conceptually, to sell a bandwidth upgrade rather than a piece of equipment.
2) Bandwidth contracts bring recurring revenue.
3) Providers can lock in a bandwidth contract, investors like contracts that guarantee revenue.
4) There is very little overhead to maintain a leased bandwidth line once up and running.
5) And as I eluded to before, would a crack dealer send a client to rehab?
6) Commercial bandwidth infrastructure costs have come down in the last several years.
7) Bandwidth upgrades are very often the most viable and easiest path to relieve a congested Internet connection.
Bandwidth optimization companies exist because at some point customers realize they cannot outrun their consumption. Believe it or not, the limiting factor to Internet access speed is not always the pure cost of raw bandwidth, enterprise infrastructure can be the limiting factor. Switches, routers, cabling, access points and back-hauls all have a price tag to upgrade, and sometimes it is easier to scale back on frivolous consumption.
The ROI of optimization is something your provider may not want you know.
The next time you consider a bandwidth upgrade at the bequest of your provider, you might want to look into some simple ways to optimize your consumption. You may not be able to fully arrest your increased demand with an optimizer, but realistically you can slow growth rate from a typical unchecked 20 percent a year to a more manageable 5 percent a year. With an optimization solution in place, your doubling time for bandwidth demand can easily reduce down from about 3.5 years to 15 years, which translates to huge cost savings.
Note: Companies such as level 3 offer optimization solutions, but with all do respect, I doubt those business units are exciting stock holders with revenue. My guess is they are a break even proposition; however I’d be glad to eat crow if I am wrong, I am purely speculating. Sometimes companies are able to sell adjunct services at a nice profit.
Related NY times op-ed on bandwidth addiction
Is the Reseller Channel for Network Equipment Declining?March 7, 2013 — netequalizer
Back in 2008, TMCnet posed an interesting question about traditional PBX vendors. Has VOIP outgrown traditional business service channels? And that got me wondering, what is going on in the traditional network equipment channel? Is it starting to erode in favor of direct sales?
We are seeing a split in buying patterns.
1) Companies that do not have an in house staff generally make their equipment purchases based on the advice of their Network Consultants, VARs or local reseller.
The line between Network Consultants and VARs has always been a bit muddy. Most network consultants tend to dabble in reselling. Hence this relationship behaves like the traditional channel where consultants and VARs represent specific manufactures, and mark up equipment to make margins. Customers benefit because the true cost of the consulting, to design and deploy their networks, is subsidized by the margins the VARs make on their equipment sales.
2) On the other hand, companies and institutions with in house IT staffs are starting to get away from the traditional equipment reseller. They are more likely to do their research on line, and are more than willing to buy outside of a traditional channel. This creates a strange double edged sword for OEMs, as they are heavily dependent on the relationships of their channel partners to move equipment. For the same reason that those factory outlet stores are located outside of town, OEMs do not want to shoot themselves in the foot by selling direct and competing with their resellers.
Even though there is some degradation in the traditional channel, I don’t think we will see its demise any time soon for a couple of reasons.
1) Network solutions remain labor intensive, and expertise will always be at a minimum. Even with cloud based computing there is still a good bit of infrastructure required at the enterprise and this bodes well for the VARs and reseller who offer their expertise while acting as the conduit to move equipment with mark-up from the OEMs
2) Network equipment itself resists becoming a commodity. Yes home routers and such have gone that route, but with advanced features such as bandwidth optimization and security driving the market , network equipment remains complex enough to justify the value added channel.
What are you seeing?
Related Article: Us channel sales flat for third straight year.