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Changing Cisco Pricing by Unbundling Hardware and Software

 
 
www.BradReese.Com
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      08-02-2006
Changing Cisco pricing by unbundling hardware and software:

http://www.bradreese.com/index.htm#UNBUNDLING

"I don't hear our customers say we want our networks cheaper," Cisco's
Lloyd says.

"I'm hearing our customers say we want the product to be rock solid, to
be told how to deploy it, to be upgradable, and for it to work the
minute we turn it on."

Software is the key to making that happen, and Cisco thinks it can no
longer give away a major ingredient of its success.

If "the network is the platform," as Cisco executives are fond of
saying, then software is what makes the platform work and software is
what differentiates Cisco's platform from those offered by competitors.


Chambers is determined to make sure Cisco gets paid for that software.

----------------------------------------------------------------

Carl Weddle, director of IT at trailer-parts maker Quality Trailer
Products, sees benefits.

He would no longer have to buy Cisco security products for parts of his
network that already are locked down, and he could leverage an already
purchased license to add used Cisco boxes to his network without having
to buy hardware-software bundles.

"I would love that," he says.

----------------------------------------------------------------

Very interested in hearing the thoughts of comp.dcom.sys.cisco readers
regarding this article.

Sincerely and gratefully yours,

Brad Reese
BradReese.Com - Cisco Power Supply Headquarters
http://www.bradreese.com/cisco-power...-inventory.htm
1293 Hendersonville Road, Suite 17
Asheville, North Carolina USA 28803
USA & Canada: 877-549-2680
International: 828-277-7272
Fax: 775-254-3558
AIM: R2MGrant
BradReese.Com - Cisco Jobs
http://www.bradreese.com/hot-jobs.htm

 
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stephen
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      08-02-2006
"www.BradReese.Com" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed) ps.com...
> Changing Cisco pricing by unbundling hardware and software:
>
> http://www.bradreese.com/index.htm#UNBUNDLING
>
> "I don't hear our customers say we want our networks cheaper," Cisco's
> Lloyd says.


obviously doesnt go to the same customer meetings that i do then.
>
> "I'm hearing our customers say we want the product to be rock solid, to
> be told how to deploy it, to be upgradable, and for it to work the
> minute we turn it on."


ironically - the biggest gripes from the inhouse service developers are:
"software bugs, cant find an image that balances features against stability,
continual change to next version"

>
> Software is the key to making that happen, and Cisco thinks it can no
> longer give away a major ingredient of its success.
>
> If "the network is the platform," as Cisco executives are fond of
> saying, then software is what makes the platform work and software is
> what differentiates Cisco's platform from those offered by competitors.
>
>
> Chambers is determined to make sure Cisco gets paid for that software.
>

they already do - see the price hike to go to the enterprise plus flavours
of 12.2, or advanced security on the 12.3 releases - this can up the price
of a low to mid range router by 30%.

try buying a 2nd hand router and see what Cisco want to charge for you to
have a valid licence on it..... nowhere near "free"

> ----------------------------------------------------------------
>
> Carl Weddle, director of IT at trailer-parts maker Quality Trailer
> Products, sees benefits.
>
> He would no longer have to buy Cisco security products for parts of his
> network that already are locked down, and he could leverage an already
> purchased license to add used Cisco boxes to his network without having
> to buy hardware-software bundles.
>
> "I would love that," he says.
>
> ----------------------------------------------------------------
>
> Very interested in hearing the thoughts of comp.dcom.sys.cisco readers
> regarding this article.


the article reads like the kind of wishful thinking that sometimes happens
when a company decides that the grass is greener on the other side of the
fence. Or that they should be the "next M$oft"

i suspect they havent looked at the costs and risks of licence enforcement
if IOS would run on 3rd party hardware.

now if they put this much effort into <insert your favorite cisco gripe
here>...
>
> Sincerely and gratefully yours,
>
> Brad Reese
> BradReese.Com - Cisco Power Supply Headquarters
> http://www.bradreese.com/cisco-power...-inventory.htm
> 1293 Hendersonville Road, Suite 17
> Asheville, North Carolina USA 28803
> USA & Canada: 877-549-2680
> International: 828-277-7272
> Fax: 775-254-3558
> AIM: R2MGrant
> BradReese.Com - Cisco Jobs
> http://www.bradreese.com/hot-jobs.htm
>

--
Regards

http://www.velocityreviews.com/forums/(E-Mail Removed) - replace xyz with ntl


 
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anybody43@hotmail.com
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      08-02-2006

stephen wrote:

> "www.BradReese.Com" <(E-Mail Removed)> wrote in message
> news:(E-Mail Removed) ps.com...
> > Changing Cisco pricing by unbundling hardware and software:


IIRC that was the way it was say 8 years ago.

You bought the router and then selected your software.

Beginning with the low end routers and then switches
basic software became bundled.

That clearly makes some sense since you can't actually
use the stuff without the software and it would seem to remove
some redundant items from the pricelist. Fancy software
gets priced at its marginal cost vs the basic bundled software.

Announcement make no sense to me but then I didn't
read it all

 
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www.BradReese.Com
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      08-02-2006
Stephen and Anybod,

Page 2 Cisco states,

http://www.informationweek.com/indus...o=2&queryText=

The company within several years plans to sell much of its software
separately from the hardware and related maintenance fees.

"We've seen with advanced technologies that a lot of the value comes
from the software and not the particular hardware it runs on," says
Cliff Meltzer, a senior VP who heads Cisco's Software Business Strategy
Council.

"Letting customers pay for what they need, when they need it, is
clearly the right approach."

Cisco understands the significance of the change.

"Our next frontier is to develop sort of a systems approach," says Rob
Lloyd, Cisco's senior VP in charge of U.S. and Canadian operations.

"We used to price in a classic network way. It's now a systems
approach, more like a traditional software approach."

Some software will be available for a one-time fee; some will be sold
as subscriptions on a quarterly or annual basis, not unlike the
software-as-a-service strategies from full-time software companies.

And Cisco plans to make it easier to buy software, Meltzer says, by
letting customers download and try the products using a one-click
online program and an automated key specific to each customer.

"Customers can give us a better sense of what is of value to them in
the product," Chambers says.

"Here is what security is worth to me, here is what the ability to add
new capabilities such as switching or wireless is worth, here is the
value that new application software brings to my architecture."

http://www.informationweek.com/indus...o=2&queryText=

Brad Reese
http://www.BradReese.Com

 
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stephen
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      08-02-2006
"www.BradReese.Com" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed) oups.com...
> Stephen and Anybod,
>
> Page 2 Cisco states,
>
>

http://www.informationweek.com/indus...o=2&queryText=
>
> The company within several years plans to sell much of its software
> separately from the hardware and related maintenance fees.
>
> "We've seen with advanced technologies that a lot of the value comes
> from the software and not the particular hardware it runs on," says
> Cliff Meltzer, a senior VP who heads Cisco's Software Business Strategy
> Council.
>
> "Letting customers pay for what they need, when they need it, is
> clearly the right approach."
>
> Cisco understands the significance of the change.
>
> "Our next frontier is to develop sort of a systems approach," says Rob
> Lloyd, Cisco's senior VP in charge of U.S. and Canadian operations.
>
> "We used to price in a classic network way. It's now a systems
> approach, more like a traditional software approach."
>
> Some software will be available for a one-time fee; some will be sold
> as subscriptions on a quarterly or annual basis, not unlike the
> software-as-a-service strategies from full-time software companies.


we already have yearly fees to Cisco for "software support" - this is the
concept that if you dont stoke your software carefully, then bits fall off
and it degrades over time.

1 advantage is that it makes support vs cost a tradeoff - i can choose
whether the support is worth the fee.

Again Cisco support is worth the maint. fees - but i dont see that anything
that i am effectively renting should also get support fees as well.

So this looks like a change to the licencing to "you buy this, so you have
it until you decide to stop using it and the underlying hardware" right now,
to "you rent this, so it stops working when you decide not to do that
anymore".
>
> And Cisco plans to make it easier to buy software, Meltzer says, by
> letting customers download and try the products using a one-click
> online program and an automated key specific to each customer.



or much more likely - a key specific to the box you put it on. Which is
great until you have a fault or do an upgrade and find you cannot transfer
the licence to the replacement......

frankly one of the few nice things about the current cisco software model is
not having to manage per unit keys in a big network,
>
> "Customers can give us a better sense of what is of value to them in
> the product," Chambers says.
>
> "Here is what security is worth to me, here is what the ability to add
> new capabilities such as switching or wireless is worth, here is the
> value that new application software brings to my architecture."
>
>

http://www.informationweek.com/indus...o=2&queryText=

i still have a very cynical attitude to this.

i havent read anything in the article that makes it sound like something
that helps me, only things that potentially make life more difficult.
>
> Brad Reese
> http://www.BradReese.Com
>

--
Regards

(E-Mail Removed) - replace xyz with ntl


 
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www.BradReese.Com
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      08-02-2006
Stephen,

Cisco also states on Page 3,

http://www.informationweek.com/indus...o=3&queryText=

Cisco estimates it will take three to five years to complete the move
to software licensing and acknowledges that the potential for customer
confusion is high.

Cisco must explain the new pricing, make pricing methods consistent
across products, determine what becomes a line item and what stays in a
bundle, and hash out the financial implications for customers and
itself, Lloyd says.

If software licensing introduces unnecessary complexity, customers
could end up paying more than they do today or it could persuade them
to give a competitor a try.

Or it could make customers even more dependent on the vendor.

Cisco already knows customers will need its help: what releases to run,
what's included in particular licenses, the need for buyers to track
licensing for compliance purposes.

Some prices are sure to increase.

Chambers hinted at as much at the user conference.

"Do we charge as much as we should or as much as we could? Probably
not," he said.

"All the major software companies in the world charge major amounts for
upgrades, and customers don't even blink."

However, Cisco also could cut prices on hardware as software is
decoupled, so a smart shopper may find ways to hold the line on costs.

Cisco is taking a big risk, one that could open the door to
competitors.

It's also a risk that can't be quickly corrected by acquiring a company
with a successful product, a standard Cisco tactic when it makes a bad
decision on the direction of technology.

In the next few years, customers will get a menu of hardware and
software, including operating systems, from which to choose, Forrester
Research's Rob Whiteley predicts.

In that environment, it's possible that customers will decide to run
third-party software and leave Cisco's software out of the equation as
much as possible.

Page 4 states,

http://www.informationweek.com/indus...o=4&queryText=

Some customers don't see the appeal in an unbundled Cisco.

Indiana Farm Bureau Insurance has 130 field offices, all of which have
older Cisco routers with standard software, making them easy to manage.


Network services manager Cook has no interest in buying software
licenses, which he says would just complicate matters.

There are potholes in the road to unbundling.

Licensing models can become complex and difficult; just ask Microsoft
customers.

And Cisco can't afford to become complacent or arrogant, something that
happens on occasion, some customers say.

When Saint Luke's Hospital System, a 10-hospital chain around Kansas
City with 5,400 network users, implemented VoIP three years ago, it
chose Nortel Networks after a competitive bidding process.

Cisco wasn't happy--and made its feelings known.

"The implied comments were, 'I guess we're going to reconsider how much
we're going to provide support'" for Saint Luke's remaining Cisco
equipment, CIO John Wade says.

"Why would you threaten us because we're changing part of our own
systems?

The answer was, 'Because we're Cisco.' To me, they're leveraging that
very dominant position to the exclusion of your own business
objectives."

Brad Reese
Cisco Repair
http://www.bradreese.com/cisco-big-iron-repair.htm

 
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