Brocade keeps elite view of port leasing

Brocade will limit a network infrastructure leasing model to elite partners whom it hopes will sell-through ports to enterprise customers or become customers of port-leasing themselves.

Vice president of worldwide channels Barbara Spicek outlined Brocade's channel strategy for the Brocade Network Subscription (BNS) product in Australia before the vendor's annual regional partner conference.

The switch vendor revealed earlier this month its intention to offer BNS in Australia.

BNS allowed firms to pay for switch ports on a monthly subscription basis and to turn the ports on or off as they were required.

Spicek told CRN that the service would become available in Australia within approximately six months.

Brocade was yet to secure the backing of an Australian bank to underpin the model but Spicek did not see that as a hurdle.

"I don't foresee difficulty getting the bank onboard," she said.

"We have a compelling model. That's not the issue.

"The rollout speed [in Australia] will depend on market opportunity because if you have no customer that is actually interested in the model then we're not going to create the model and infrastructure before we have market opportunity."

Brocade hoped to sell BNS in two ways involving the channel. First, it saw large service providers and VARs as potential users of BNS to underpin their managed service offerings.

Under BNS, customers - whether enterprise or service provider - were expected to estimate the number of ports needed to satisfy bandwidth requirements for base and peak loads on their system.

It was expected that customers would run their base loads on ports they owned and burst up and down to cater to peak demands on the ports leased under BNS.

Spicek said that Brocade's experience in the United States - where BNS has been available for some time - was that customers would run an owned/leased split of 60/40 or 70/30.

"There's very few customers that want to put their entire infrastructure on a lease or on a subscription basis," she said.

"They want to [use BNS to] deal with the burst of bandwidth requirements primarily. It's almost like bandwidth-as-a-service."

There would be no discounts for channel adopters of BNS, unless the deals were in the "multi-millions of dollars" range, Spicek said.

As it was, the minimum start point for a new BNS customer was US$500,000 [pdf].

Sell-through

Brocade wanted to sell BNS as part of a blended model - that is, a base hardware sale with BNS for burst capacity.

Elite partners that sold BNS through to enterprise customers under the model would get a cut of the monthly subscription fees, Spicek confirmed.

However, it appeared the lion's share of margin would still come from selling that customer hardware to manage their base load.

"We want to make sure that we work with the partner to bring the margins high enough to be satisfactory on the blended model," Spicek said.

"I don't think that we would be guiding them to take high margins on the subscription fee model because there's not that much 'air' in that system.

"But there is enough in the blended model that they could come up to a very compelling offer.

"We will help them to quote to make even more incremental margin on their hardware."

Spicek said that BNS timeframes were typically three-to-four years but were being offered in chunks as large as six years.

She highlighted that "stickiness" was a key advantage to elite partners, saying it enabled them to stay close to the customer longer in a "trusted advisory" role.

Lower barriers to entry?

Spicek noted that Brocade had no immediate plan to relax its targeting of only elite-level partners to sell (or buy) BNS.

"It's a possibility we lower [the bar] in a couple of years time but I think in the initial phase in order to justify this model from a financial perspective you need to have a certain critical mass of business," she said.

She highlighted potential complexity in 'whiteboxing' BNS to allow it to be offered in a two-tier model.

"It's just not something we're going to offer through distribution because obviously in a two-tier model it gets even more complex - any financial model like this would be difficult in a two-tier," Spicek said.

"[For the time being], we are offering it to our elite partners directly."