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Are Cisco switches really so expensive?

Are Cisco switches really so expensive?

Synergy Research Group finds that Cisco is not much more costly than its competitors

Cisco is the dominant LAN switch vendor, both in the amount of ports it ships worldwide, and its revenue for switch ports sold. One common industry assumption is that Cisco gear is high-priced, but worth the investment for the company's quality support and advanced features. Another assumption is that Cisco switches are just plain overpriced.

But comparing overall LAN switch port prices -- based on figures from Synergy Research Group -- Cisco is not that much more costly than some of its high-performance competitors. On a price-per-port basis, it's not even the most expensive. Force10 Networks, at US$513 per port, is the priciest switch vendor; more than half of Force10's revenue is from 10G Ethernet switch port sales. The second-most expensive switches per port are from Foundry at US$162 per port. Cisco is third at US$124 per port, followed by Extreme at US$113. Enterasys, Alcatel and Nortel cost US$89, US$88 and US$80 per port. The cheapest brands are Netgear (US$4), D-Link (US$5) and Cisco's Linksys (US$6).

While Cisco may be associated with high-end products and price, its lower-end gear is among the most expensive. If you're in the market for a fixed-configuration box -- usually a stackable wiring closet switch for connecting end users or maybe a rack of servers -- Cisco is not your cheapest bet. The company had the highest per-port price for fixed-configuration switches (a superset of Layer 2 and 3, Fast, Gigabit and 10G speeds) at US$73 per port. Extreme was second at US$72 and Alcatel was third at US$48.

However, Cisco is also hedging on the low end of the market, as its Linksys switch brand sold for around US$7 per port -- third-cheapest among the company's tracked by Synergy Research Group.

Even in the higher-end category of modular switching, Cisco was still fifth among its peers in price per port, at around US$300. Force10, Foundry, Extreme and Alcatel were the respective one through four). Only when you start narrowing down categories to high-end features, such as Gigabit, Layer 3 modular ports, does Cisco make the top three in most expensive; it's US$388 per-port price for Gigabit Layer 3 modular ports was behind Nortel's US$421, and Force10's US$462.

(Keep in mind that market figures from Synergy Research Group, or other analyst firms, use switch sales and shipment numbers provided by vendors; these numbers typically represent transactions between the vendors and resellers, distributors, and value-added resellers. Whether getting a low-end switch from BestBuy or having a backbone core router installed by IBM Global Services or EDS, buyers will see a retail markup.)

Users say one of the major costs associated with Cisco gear is the annual NetSMART contract that is required in order to get software updates or technical support on the device once it's installed.

"Cisco is definitely an expensive switch company," when support is rolled into the total cost of ownership, says Brandon Buffin, systems administrator at Ball Homes, a Lexington, Ky., maker of pre-fabricated homes and structures. To avoid paying additional maintenance costs on the fixed-configuration Catalyst 3550 switches -- which can add up to almost US$1,000 a year per switch -- Buffin just buys a few extra switches as spares in case one breaks. Since he is not using advanced features such as Network Admission Control or other software-dependent add-ons, software updates are not essential for the switches.

"If I were to say something is a little high in price, I'd say it's Cisco's annual maintenance -- and I only say that because I hear about that from [my boss]," said Jon Campbell, director of network services at healthcare network FirstHealth of the Carolinas, in an earlier interview. "It's kind of a give and a take; [Cisco's pricing] is probably high on some things, and low on others," in terms of support, he said. But on the other hand, "if something breaks, they replace it without question. That's really nice."

Another factor that figures into Cisco switch TCO is the cost of recruiting and hiring IT staff fluent in Cisco hardware and IOS software, versus IT staff with expertise in other vendor's products.

"A search on monster.com reveals that the number of trained individuals for Cisco equipment exceeds any other manufacturer by an order of magnitude," writes Zeus Kerravala, a Yankee Group analyst, in the report "Is Cisco Worth the Premium?"

According to the Yankee Group, Cisco accounted for 55 percent of LAN switch port shipments in 2005; there is simply more gear from Cisco out in the market, meaning more people are trained on, or at least familiar with, the technology. None of Cisco's closest large-enterprise switch competitors accounted for more than 5 percent of the market in terms of ports shipped.

Kerravala says that in talks with CIOs, non-Cisco network professionals could command salary as much as 10 percent to 15 percent higher than the market average, since detailed knowledge or experience with gear from vendors such as Nortel, Enterasys, Extreme Networks or others is rare in a market with a glut of Cisco-certified network professionals. Such a network professional, Kerravala says, "has more leverage in salary negotiation."


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