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HP Works with Telcos to Sell LANs on a Pay-Per-Use Basis

Added on Dec 13, 2012 by Mikael Ricknäs, IDG News Service (London Bureau)

Hewlett-Packard will allow enterprises to pay for managed LAN offerings based on usage, in much the same way they pay for cloud services, through a partnership with telecom service providers.

HP's FlexNetwork Utility Advantage Program will allow enterprises to pay a monthly fee for their networking equipment, based on the number of ports used, for example.

Until now, enterprises have had to make big upfront investments or lease the equipment such as switches, and buy networking hardware based on expected future demands, which has often resulted in over provisioning.

On average, only 60 percent of the capacity of networking equipment installed in an enterprise LAN is used, according to Mike Banic, vice president of marketing at HP Networking.

The FlexNetwork Utility Advantage Program will be available worldwide through authorized operators and cover both wired and wireless networks.

The first operator to get onboard is Swisscom, which is offering HP's switches for 6 Swiss francs (US$6.50) per month per Gigabit Ethernet port, according to Oliver Spring, head of product line management at Swisscom.

So far, Swisscom is only selling switches for wired networks, but the plan is to launch a wireless offering next year. The operator still hasn't decided how it will charge for that, Spring said.

Options include something as simple as charging per user, in an effort to make it as easy to understand as possible, according to Matt Greenly, vice president, finance at HP Networking.

HP is currently in discussions with several other operators, but isn't ready to announce any other partners besides Swisscom.

"We are looking at limiting it to a few partners in each region ... We want to make sure we don't cause conflicts," Greenly said.

HP is also hoping the change will allow more enterprises to upgrade their networks, which, like other internal IT investments, have been affected by the economic downturn.

During the third quarter, enterprises spent less on lower-speed Ethernet switches that are typically used to connect users, according to recent report from Dell'Oro Group. However, spending on higher-speed switches used to connect hardware in the data center remained quite robust, it said.

At the same time, the wireless LAN market posted record revenues in the third quarter, thanks to 19 percent revenue growth over the same period last year, Dell'Oro said.

HP is convinced that as more applications are moved to the cloud, hardware vendors increasingly have to adopt the same pricing model, and it wants to be at the forefront of that trend.

Send news tips and comments to mikael_ricknas@idg.com