ALE Preps Network-on-Demand Model for North America
In advance of making a network-on-demand service formally available in North America, Alcatel-Lucent Enterprise (ALE) has consolidated the number of sales regions it operates from eight to four as part of an effort to better scale global channel resources.
ALE has been offering a network-on-demand service in Europe under which it absorbs the costs associated with leasing its network and data center switches. The ALE program, however, goes beyond leasing in that IT organizations can opt to pay for the equipment using a per-usage model that goes all the way down to the number of ports actually to be invoked.
"They may have a 24-port switch installed, but if they are only using 12 ports, we're only going to charge them for that," said Charles Matthews, vice president of sales for North America for ALE.
Partners will still be able to make money on both the initial sales as well as on the recurring revenue generated by the deal. In addition, Matthews notes that ALE has published open application programming interfaces (APIs) that partners can employ to deliver their own services on a pay-per-usage model. As part of this program, partners also gain access to the analytics data that ALE generates about any given customer deployment.
Demand for this pricing model in the network sector is being driven by the rise of cloud computing, Matthews said. Organizations are already paying for servers and storage equipment using an on-demand model that they would like to extend out to the network layer.
The challenge is that while a campus switch can be managed remotely, it needs to reside on-premise. Because of that deployment model, there's still a fair amount of industry inertia concerning capital spending associated with acquiring network equipment, Matthews said.
Diane Krakora, CEO of PartnerPath, a consulting firm that specializes in channel management, said there's always been interest in leasing programs when it comes to network equipment.
"The trouble is neither the vendor nor a distributor has wanted to carry the cost of that lease on their books," said Krakora. "Everybody wants to report a product sale to look good to Wall Street and their investors."
The ALE network on-demand program covers the company's full line of switches, including the products it acquired via a merger with Nokia, with the exception of carrier-grade switches that don't typically lend themselves to a leasing model, Matthews said.
Not every IT organization is suddenly going to want to start treating network equipment as an operational expense. However, ALE is clearly betting that as the only network switch vendor with a pay-per-use licensing model, there's an opportunity to gain share at the expense of rivals that don't have the appetite to make a similar financial decision.
Mike Vizard has covered IT for more than 25 years, and has edited or contributed to a number of tech publications, including InfoWorld, CRN and eWEEK. He currently blogs daily for IT Business Edge and contributes to CIOinsight, Channel Insider and Baseline.