Network resellers: How SDN impacts hardware margins, product decisions

Mike Bushong writes that network resellers will need to evaluate new products for their catalogs and shift their selling strategies to account for SDN.

Although there's been talk of how SDN will impact vendors, products and customers, its effect on the broader networking ecosystem extends much further. At its most basic, SDN changes the way products are built and ultimately deployed, and, in turn, this will affect those who have built a business around selling and building networks. Resellers, including network resellers, will need to evaluate new products for their catalogs, learn how to architect around these new products and shift their selling motions to account for the changes. 

As SDN represents a new architecture, it's loosening the dependence on legacy features. This reduces the barrier to entry for new networking players, which allows for more competitors in the space. The increased competition will create downward pricing pressure for an industry that has benefitted from high margins for decades. Resellers will need to start planning for a world where they can't thrive on pure hardware margins alone.

Resellers need to start planning for a world where they can't thrive on pure hardware margins alone.

The counter to this trend on the hardware side is that SDN is making possible an entirely new set of software products. SDN controllers, network virtualization and analytics will all play a more prominent role in the network. These products represent high-margin opportunities for resellers that move first. While most of the industry will be looking at how SDN is impacting traditional switch and router sales, there will be time for players to maneuver and establish strongholds in the peripheral technologies, including network resellers.

This means that user interfaces, monitoring systems, and troubleshooting tools become interesting insertion points for new business. If SDN does mean that more types of gear from various vendors are going to exist under a layer of software, then resellers specializing in a single vendor are more at risk of seeing their revenue streams whittle away. Maintaining a presence in everything that surrounds the equipment could mitigate that risk.

Networking resellers get involved in the SDN game

Because SDN is leveling the playing field, there are more companies that can penetrate the networking space. Resellers have a growing number of solutions they can choose from when deciding what they sell. Early experimentation with newcomers could lead to early deals, which would allow resellers to stake out their territory before it becomes hotly contested. Resellers and channel partners should take an active role in evaluating SDN products. Building labs, experimenting with solutions and designing architectures early should provide business options as the market evolves.

In addition, most customers will need migration plans. To build out extensive automation suites, customers can benefit from the help of architects and engineers. These types of consultant and professional services are a great way to differentiate and generate lucrative revenue opportunities. But how can resellers prepare for this?

A network with SDN underpinning will still require networking specialists. But it will also require systems people who are capable of building the automation logic that dictates how the whole system works. This favors engineers who know networking, who understand broader IT infrastructure (like compute and storage) and who are proficient in languages like Python or Ruby. Resellers who attract this talent (or actively groom their own) will be in the best position to staff a professional services and support business.

The reality is, SDN is both a huge threat and a tremendous opportunity for resellers, and those that start early will get a hefty advantage.

This was first published in March 2014

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