Flip the cost of network infrastructure from CAPEX to OPEX with Network on Demand

Network on Demand is an alternative Network as a Service (NaaS) model that adjusts to the constantly changing needs of end-users: It’s network infrastructure on your terms and within your budget.

High-performance IT and network infrastructure is essential for any company, but tailoring that infrastructure to exactly meet demand is an almost impossible task for IT departments. This means that networks are often too big and therefore too expensive.

This is especially true in organisations such as hotels, schools, universities and events facilities, where networks are either not used to full capacity, or not used at all for parts of the year. In organisations such as these, a usage-based provisioning and billing model can prove beneficial.

The Traditional “CAPEX” Spending Model

Many users still resort to a capital expenditure or “CAPEX” model when implementing network technology such as a WLAN, switches and routers. CAPEX means that the user buys and implements the network components themselves or has them implemented by a qualified systems integrator.

To be on the safe side, IT departments usually create bigger networks than they actually need at the time of procurement in order to have reserves available for new recruits or to cater for any subsequent demand for additional resources. The downside is that this capital is then tied up in infrastructure components that are not being fully utilised.

The “on-demand” principle for network infrastructure

One solution to this problem is to adopt a “pay-per-use” approach to the provisioning of network components where network services are provided on a pay-as-you-go basis, i.e. the company pays only for actual usage of the network components rather than paying for all the hardware up-front. Cloud services have been provided using this model for a long time now, so why shouldn’t this apply to on-premise networking infrastructure too?

Alcatel-Lucent Enterprise’s answer to this question is called “Network on Demand” (NoD). Here, network infrastructure is provided on a pay-as-you-go basis, meaning the company pays only for actual usage of the network components. This applies both to the number of network ports used, and the periods of usage. Using sophisticated management tools, ALE can track the usage of network components as far down as individual network ports. Billing is on a per-day basis corresponding to actual usage.

Cost of purchase versus cost of usage

You probably know the financial advantages and disadvantages of operational expenditure for businesses. Companies that avoid using working capital keep the value of their business high. Organisations like schools and governments can spread costs over time – instead of busting the budget all at once.

Your customers are looking into new ways of financing IT. The trend is growing to not own but finance and outsource their LAN and Wi-Fi Infrastructure. Global market intelligence leaders International Data Corporation (IDC) predicts by 2020, 80% of IT infrastructure is bought on a pay-as-you go basis.

Pay-Per-Use versus Leasing

Even leasing models, where a user hires network equipment at a fixed monthly or annual rate, are too inflexible and are an issue in terms of costs. A survey conducted by IDC showed that the total cost of operating a “Network on Demand” was between 7 and 23 percent lower than with a leasing model. Replacing a CAPEX model by Network on Demand can produce cost savings of as much as 10-28 percent.

IDC’s research also revealed other benefits from adopting the NoD approach. Scaling network components to actual requirements and the option of delegating network management to the provider of the NoD service helped to reduce the workload on a company’s network administrators

by between 14 and 35 percent. This is an important aspect given the current lack of qualified technicians in IT, and it means that in-house experts can invest the time saved in other tasks.

State-of-the-art technology permanently available

Another positive side effect of Network on Demand model is that users always have the latest technology at their disposal.

For example, the IEEE 802.11n WLAN standard was superseded by the IEEE 802.11ac specification after just 2-3 years. Whereas IEEE 802.11ac supports data transfer rates of several gigabits per second, 802.11n could only manage 600 Mb/s.

So, a company that purchased WLAN components based on the IEEE 802.11n standard would be stuck with them until the end of their lease contract, or be using them until the end of the amortisation period in order to reduce its tax burden. But in a Network on Demand contract, users can stipulate that the network should always be kept up-to-date with state-of-the-art components.

Who stands to benefit from NoD?

Network on Demand is an option for a wide range of users. These not only include private companies but also public sector entities such as schools, universities and hospitals. Generally, Network on Demand is primarily suited to those sectors in which network usage is subject to substantial fluctuation, for instance due to seasonal factors such as term holidays or times of the year when demand for a company’s products is particularly high.

Flexible working

Network on demand can be beneficial to companies for which flexibility is important. When a new branch office is opened, for example, Network on Demand can be used to set up a state-of the-art network infrastructure that can be expanded on demand as and when new employees are hired. If usage falls, ports can be deactivated, and no further costs are incurred.

Meeting the demands of the mobile workforce

Network on Demand is also the perfect solution to the trend toward flexible working hour and workplace models. For companies with a mobile workforce, ports can be switched off on days that employees are on the road or working from home. Similarly, NoD could also be beneficial to providers of business centres or serviced offices who wish to reduce network costs and gear the IT infrastructure to current demand.

More flexibility for HealthCare

A similar situation emerges in the healthcare sector. Many hospitals are under tight budgets and a pay-per-use model allows the operators of these facilities to customise the network systems based on occupancy and demand. This not only saves money, but also ensures that hospitals are equipped with the latest network components rather than aging systems that cannot be replaced for reasons of cost.

It is also the case that clinics are making increasing use of patient terminals whereby patients are provided with Internet access, TV & radio programs, and multimedia applications via IP networks. A NoD concept enables the clinic to tailor its network precisely to current occupancy levels and avoid superfluous outlay on purchasing, operating and maintaining oversized network resources.

Flexible networks offer strategic benefits to end users and resellers

ALE Network on Demand is a service for deploying selected Alcatel-Lucent Enterprise LAN and Wi-Fi equipment under a subscription-based pricing model. You can integrate this service into your existing managed services offering by providing the desired operations and maintenance services, or alternatively, Sol can provide these for you.

Options available:

  • Universal Network on Demand. Consumption-based operational expenditure as a managed service. Matching monthly expenditures with actual use of the network infrastructure.
  • Flex Network on Demand. Equipment-based operational expenditure as a managed service. Matching monthly expenditures with the actual size of the network infrastructure.

Benefits to the End-User

  • Cost savings of up to 23% over leasing and up to 28% over CAPEX
  • Able to spread out the cost of IT expenditure
  • State-of-the-art technology available immediately
  • Customise network resources to current demand
  • Pay for what you need now, not what you may need in the future

Benefits to the Reseller:

  • Eliminate the need to tie your money up-front in equipment investment.
  • Long term predictable revenue with subscription-based services.
  • Enrich your managed service offerings by adding Network on Demand to your existing managed services like unified communication, storage, office applications, security.
  • Simple sales process with online configuration, quotation, pricing and ordering tool.

Further Reading: ALE Network On Demand Brochure

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