Recently, a partner inquired about using Bonded Internet™ to satisfy a fail-over mandate for a 560-site deal across the United States. We were happy to help with the diagrams and build him a business case. What we figured out might shock you.
Customer saves $1.676M in hardware costs using Bonded Internet™
We asked our partner what hardware they traditionally use for OSPF and were told that they use Cisco gear. The customer wanted to have a 50Mbps fiber circuit at all locations with a back-up cable connection – we figured they’d need a CISCO 881 and a CISCO 1921 at each location in order to accommodate those levels of bandwidth – and to manage hardware costs as best as possible.
We priced out the boxes at a resale cost of approximately $700 for the CISCO 881 and $2700 for the CISCO 1921. All said, that’s a per-site hardware cost of $3,400 for the customer – at 560 sites, that’s an initial investment for the customer of $1.9M.
If that same customer chose to use Bonded Internet™, it could take advantage of the latest PC Engines APU hardware at a retail cost of roughly $400, the partner would be making $200 and the customer would be buying, in hardware, $224,000 – a savings of $1.676M.
Partner makes the same profit from Bonded Internet™
Assuming all else was the same, and assuming the partner made roughly 40% profit on the hardware, our math (and we don’t necessarily want to give away our pricing model until you contact us) indicates that our partner will make the same profit on the deal had he used the Cisco gear or used our service. There is, obviously, value to be added using our service and the partner could easily charge more (and make more) if he chooses. For example:
- Bonding of Circuits/Connections
- Same-IP Failover
- End-to-End Quality of Service
- Site-to-Site and Site-to-Core Encryption (for IPVPN – it’s in beta at the time of this post)
- and Bi-Directional Compression.
Partner saves over $600,000 in IPv4 inventory.
Where we really were blown away was in the difference in number of required IPv4 addresses between the two solutions.
If you assume that a public IP address has a value of $5.00/month, here’s how the math works:
(keep in mind that the value of an IPv4 address will increase over five years)
For OSPF – our partner will need to use 4 IP addresses per site for the solution – one in the core, one on each CISCO device and one additional for the OSPF set-up. That’s a /29 (8 IP addresses) per site – a cost of $40/month on top of the service. It will leave each customer site (if they need it) with 2 additional IP addresses that either go to waste or can be used – but are unnecessary.
For Bonded Internet™ – the partner can use a /30 at each site, using up half the number of IP addresses per customer site – a total of 4. (which would be $20/month). The customer could put one on the CPE device, one in the core (our aggregator), and have the same two IP addresses left over for the customer to use if necessary.
At 560 sites, the cost to the partner is as follows:
- OSPF Solution – $40 (IP addresses) x 560 (sites) x 60 (months) = $1,344,000
- Bonded Internet™ Solution – $20 (IP addresses) x 560 (sites) x 60 (months) = $672,000
Total Savings: $672,000 (either in savings, or in re-allocatable inventory – which might prove important as IPv4 addresses become less available).
Now, the question you have to ask yourself is:
What are you doing to maximize your IPv4 revenue and not leave tomorrow’s money on today’s table?
Care to talk about the technology some more? Call us at 1-866-578-6957 or Contact us here.