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Home > Networking News > Lifetime warranties on low-end edge switches indicate commoditization |
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When a piece of hardware becomes a commodity, vendors have only a few ways of competing with one another. First and foremost is total cost of ownership (TCO). That's especially true for cash-strapped network managers who believe switches with high-end functionality belong only in the data center while what they want in the wiring closet is simple connectivity, support and low maintenance costs. This is why HP ProCurve won so much traction in the industry by offering an unlimited lifetime warranty on all of its products, from the core to the edge. Network managers might not believe ProCurve has the best switches on the market, but they will do the job on the edge, and the lifetime warranty means very little budget will get burned in keeping the switches up and running over a lifetime of three, four or even eight years. Extreme is offering its limited lifetime warranty on the lower-end Summit X150, X250e, X350 and X450e switches, along with its Reach NXT port extender product. The warranty includes Express Advanced Hardware Replacement, a software warranty and technical support. The term of the warranty extends to each product's end-of-support date, as yet unannounced.
This new warranty strategy aligns Extreme with what Cisco and Nortel are doing with their lower-end switches, but it doesn't quite match up to ProCurve's offer -- a warranty that stays in place for as long as a company owns the hardware. Still, it puts Extreme on firmer ground among its competitors, especially Juniper and Brocade, which haven't yet moved toward lifetime warranties. "These are all for the low-end wiring closet switches. Those switches are pretty much commoditized now. They are mostly using merchant silicon, and they have very similar feature sets. Pricing is not changing very much, so they need to differentiate somehow," said William Terrill, analyst with Current Analysis. What's so bad about edge switch commoditization? Network managers have varied philosophies about just how commoditized they want their edge switches to be. In fact, some enterprises want to get smarter switches out to the edge, with advanced security and management features. However, there are plenty who are happy to spend as little as possible on the edge. "For people who aren't necessarily running mission-critical applications at the edge, where they will lose $1 million a minute if the network goes down, support costs can play very significantly into the TCO of a network," said Abner Germanow, research director at IDC. "And so, depending on the market you're serving and the need for providing very competitive acquisition costs and long-term budgeting, support services are a huge part of that equation." The need for heavy-duty application support and rich feature sets is focused mostly in the data center and extends outward in concentric circles. The further away switches get from the data center core, the more tolerance many companies have for downtime, Germanow added. Despite growing interest in intelligent edge switches, in a tight economy, decisions about the wiring closet are often driven by shrinking budgets. "With all the budget stresses people are facing today, many are taking a harder look at what they are spending on," Germanow said. "That savings on support costs can free up money to do other things. The offset can be spent on a couple of spare switches that can be kept under someone's desk or in a locked closet waiting to be deployed." Will you risk voice and video reliability for better TCO? IDC is now researching this new wave of shifts in warranty policies, attempting to determine just how many organizations see lower TCO as a priority over switches that are built to handle advanced mission-critical applications like video conferencing or network access control, Germanow said. "The question in all of this is, as networks continue to become more important, how fast does this segment of customers for whom a lifetime warranty is good enough grow," he said. "We don't know, and we're looking to find that out. It's a hard thing to size. You have two competing macro-trends. Do you bet on voice and video moving faster than the reliability of the infrastructure, or will infrastructure become increasingly reliable [more quickly] than heavy-duty adoption of multiple kinds of mission-critical video." Ultimately, the market is likely to support dual scenarios, where one group of customers is going for longer switch life and lower TCO, while another is willing to invest more. "Even the stackable switches with swappable fans and power supplies, though [they are] components that are most likely to wear out, are becoming modular in nature," Germanow said. "As you look at the horizon for how long this equipment is going to live in the wiring closet, a decade ago it was three to five years. Now people are looking at five to eight years. It might get to the point where people are looking at a 10-year horizon going into wiring closets. And the wiring closet switch market is huge. You're looking globally at a market of about $12.8 billion in 2008 for fixed, managed and unmanaged switches. In a market that is almost $13 billion, there's plenty of room for very low-end gear and very high-end gear." Will the commoditization trend bleed into high-end switches? Lifetime warranties on low-end switches are one thing, but ProCurve still has the edge in offering lifetime warranties across product portfolios, including the core, the edge and the wireless LAN. Will vendors like Cisco or Extreme ever expand their warranties that broadly? "I think it's going to take a while," Terrill said. "But eventually it's going to happen. A lot of the midrange switches, some of the modular ones, are not going to get that lifetime warranty because there's too much variation in what you plug in and pull out of the box, and that can affect operations. But those switches that have longer lives, chassis switches where you keep a chassis and swap modules in or out for four or five years, you might see it there." Let us know what you think about the story; email: Shamus McGillicuddy, News Editor
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