Demythologizing Cisco Part V: “Cisco Leads in Total Cost of Ownership"

Cisco often claims that it may charge a little more (a little?!) for its network switches than the competition, but when all things are considered, Cisco leads in Total Cost of Ownership (TCO).  Really?

Wikipedia defines Total Cost of Ownership as “a financial estimate intended to help buyers and owners determine the direct and indirect costs of a product or system.”  TCO is a financial tool that places a single value on the complete costs associated with the acquisition and operation of an item or system, including what might be considered hard costs (capital outlay), maintenance and operations,  and soft costs, the most significant of which is training.  Here is a simplified yet reliable TCO formula that belies Cisco’s claim to offering the lowest TCO:

TCO = Equipment Cost + Maintenance Cost + Operational (power, cooling, etc.) Cost + Training Cost

Evaluating Total Cost of Ownership

We have already visited the topic of the “Cisco Tax” associated with the price premium it charges for equipment versus what, for example, Alcatel-Lucent Enterprise charges, in other installments in this series.  While we have not delved in great detail into price comparisons of Cisco’s maintenance versus others, it is common knowledge in the industry that Cisco’s services are far-and-away the most expensive and the least discounted of any networking equipment vendor.  One K-12 education customer commented that Cisco’s Smart Net is “gold plated and blessed by Tibetan Monks” (i.e., it must be for what they charge for it!). 

With respect to the operational costs of power consumption and cooling, this one is not so cut and dry.  Vendors tend to leap frog one another in this arena and, depending on where they happen to be in a technology refresh cycle at any given time, one may hold a slight advantage over others for a season and then it flip flops.  All in all, most vendors are successfully striving to render their offerings ever more economical from a power consumption and cooling standpoint.  As such, this needs to be evaluated on a case by case basis pitting each vendor’s proposed configuration against that of the others.

When it comes to training, this is what Cisco counts on to offset its massively overpriced products and services.   Its argument is not only unconvincing, it’s downright inaccurate.  The dominant presumption in Cisco’s claim about TCO (aside from their general attitude of “Who are you gonna’ believe, me or your lyin’ eyes looking at the actual numbers?” and Obi Wan’s “these are not the prices from the other vendors you are looking for”) is that personnel trained in Cisco are readily at hand and those knowledgeable of other vendors’ systems are not ubiquitously available.  While this is a bit of an oversimplification, let’s grant Cisco its point—at least that there are many Cisco trained people out there.  I think that it is self-evident that there are more technicians trained on Cisco than on any other vendor’s networking equipment.  There’s more Cisco equipment out there than any other vendor’s equipment, after all.  It might not even be a stretch to surmise that there are as many people trained on Cisco as there are on all other vendors’ equipment combined.  We all owe a debt of gratitude to Cisco for training so many people in networking.  Thank you, Cisco!

Having granted Cisco its contention that there is a deep bench of trained people out there, however, the next part inherent in Cisco’s claim simply cannot be granted or substantiated in any way.  Specifically, Cisco, with the faces of its salespeople filled with abject horror, makes a big deal out of the supposed herculean, virtually impossible, disruptive, expensive, a-bridge-too-far (pun intended), certainly-beyond-the-aptitude-of-your-networking-professionals’ prospect of learning how to configure and maintain another vendor’s equipment.  This assumption, readily embraced by many feeding at Cisco’s trough, is patently ridiculous and absurd to the point of being laughable.  Yet it is all too easily assumed by otherwise highly intelligent yet remarkably unsuspecting customers every day.  Come on, people! Seriously! Do you really think that your IT staff would have a hard time learning another company’s networking equipment?  If so, you might not have the right people on hand!

The reality is that we regularly see technicians steeped in Cisco readily and easily pick up on our technology.  Those same intelligent and creative skilled technicians, proficient in Cisco networking technology, handily acclimate to configuring, troubleshooting and maintaining networks comprised of ALE equipment.  How?  Because the syntax of the command lines is quite similar as are the fundamental concepts underlying the networks themselves.  Networking is networking.  The majority of the learning investment that has been made in one becoming proficient in Cisco technology is transferrable to learning our technology, and that of most other networking vendors’ technologies.  The alleged Mount Everest climb of learning another vendor’s networking wares is patently false!

Does Cisco Lead in TCO?

This leaves us with the following in evaluating our calculation for TCO:

Equipment Cost: Cisco is nearly always at least 20% more expensive than others, including ALE, and has been known to be as much as 2X to 5x as expensive.   See previous blogs in the series Part I, Part II and Part III.

Maintenance Cost: Cisco’s Maintenance costs are nearly always at a significant premium to that of ALE, generally anywhere from 10% higher to double ours.

Operational Costs: In some cases, Cisco’s switches are less efficient than its competitors and in other cases more efficient.  We are generally more efficient than Cisco when comparing apples to apples, but since this can go either way in a given comparison, we’ll consider it a wash and recommend that this be evaluated on a case-by-case basis using the specific configurations under consideration.

Training Costs: Cisco has the advantage here if it is assumed that the staff is already trained on Cisco and that it must learn another vendor’s equipment.  What really does it cost for a trained Cisco person to become proficient in , for example, ALE equipment?  ALE offers a training course specifically designed to leverage one’s prior knowledge of Cisco’s command line comprised of 5 days of lecture and lab work.  By Day 2, most are astonished at how easy it is to work with our equipment, and with rare exception students leave at the end of the week with a substantial and reliable working knowledge of our equipment. 

TCO in Summary

In summary, here is how the TCO comparison comes out:

Cisco’s leadership in TCO is yet another Cisco-promulgated myth!  Contrary to its spurious claim, Cisco does not lead in Total Cost of Ownership unless one is using Cisco math, which dictates that Cisco’s wild claims supersede the actual numbers.  But that’s not the universe that I inhabit, and it ought not be the one that you do either!


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