The Economics Of Networking

White Paper

The Economics of Networking
Abstract:
A third-party business consulting firm analyzed the total cost of ownership (TCO) of Cisco enterprise customer networks, and contrasted that TCO to “good enough” networks from other networking vendors. Key findings: 1. 2. 3. 4. 5. TCO is a better metric than CapEx to assess network cost because it considers the full impact on IT spend,including CapEx, services, labor, bandwidth, and energy. The Cisco Borderless Network Architecture can deliver up to 13% better TCO than a “good enough” network, offering compelling value for the strategic Cisco investment. Even if architectural benefits are discounted in the analysis, Cisco is at most a 7% TCO premium over other vendors due to IT labor savings and extended product lifecycles from Ciscosolutions. The single biggest benefit of Cisco’s architectural approach is labor savings. Labor constitutes 50% of TCO and Cisco delivers 5%-10% labor savings driven by unified wired and wireless and embedded security. A quality network delivers business benefits beyond TCO, including improved network uptime, higher user productivity, and a lower threat of security breaches.

Executive SummaryTechnology is changing the face of business more quickly with each passing day. Business and technology decision makers are challenged to balance IT resources, business requirements, and user desires. IT is mandated to deliver end-user solutions that increase agility and improve employee productivity without driving up costs. But it is increasingly hard for IT to say “yes” to their users andstakeholders without sacrificing security or ease of operations. How can IT say “yes” without diminishing security or increasing labor costs? The answer lies in a network architecture that drives efficiency through intelligence and automation. Unlike “good enough” networks, which provide only basic connectivity, a strategic next-generation network architecture delivers superior value and lower totalcost of ownership. Every day, Cisco customers are using architectural investments to do just that. CIOs, CFOs, and IT all agree on one thing: Cost matters. But purchase price is only one component of overall total cost of ownership. In June 2011, Cisco commissioned a third-party business consulting firm to analyze the true total cost of ownership of the network, comparing the quantitative costs ofacquisition, support, labor, bandwidth, energy, and product longevity, as well as qualitative business benefits such as network uptime, user productivity, and security. The quantitative results alone show that a network built on Cisco’s architectural approach can yield up to a 13% better TCO, building a powerful business case for why your choice of networking gear does matter.

© 2011 Ciscoand/or its affiliates. All rights reserved. This document is Cisco Public Information.

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Overview
The right network can be a powerful engine for growth and competitive differentiation, if you can manage the underlying complexity. In today’s business environment, that challenge is multi-dimensional. It spans users, devices, applications, and locations far beyond the corporate walls.New applications and usage models threaten to overwhelm IT:
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Video: Video will quadruple all IP traffic by 20141 Cloud and virtualization: 70% of organizations will use enterprise cloud technology by 20122 IT support for mobile consumer devices: Over 7 billion new wireless devices will come online by 20143

In the past, IP was the unifying technology that brought multiple disparatenetworks together. Organizations streamlined their business and IT operations by consolidating many networks onto a single IP network. The effort required changes that weren’t easy, but delivered significant results and savings. Today, the network must evolve to intelligently support a new wave of business objectives and user demands. It is hard for IT to say “yes” today without sacrificing security...