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Juniper pricing to reflect industry shift to software

Juniper pricing for networking products is changing, as the company prepares to become a software business, moving away from per-port pricing.

Juniper Networks Inc. wants to do more than prepare service providers -- its largest market -- for major trends in networking. It also wants them to get ready for dramatic changes in pricing.

This week, Juniper CEO Rami Rahim kicked off the switch maker's inaugural NXTWORK user conference with a warning that the industry's march towards software-defined networking (SDN) was making the hardware maker's per-port pricing model obsolete. Charging by the number of ports a customer buys no longer made sense when 85% of the company's engineering resources were dedicated to building software for routing, switching and security.

"Clearly, that's got to change," Rahim said of per-port pricing. "It won't change overnight, but it has to change."

Rahim gave no details on future Juniper pricing models. But with a sea change on the way, some service providers planned to start doing their own calculations on how much they would be willing to pay.

"I don't know what's reasonable yet [in terms of price]," said John White, director of product strategy at managed services provider Expedient Data Centers. "That's one of the things I'll definitely be working on internally at Expedient -- trying to figure out what that future might look like."

There was one certainty in Expedient's planning. The Pittsburgh-based company would not pay more, or even the same amount, as it had for hardware. "I'm going to want to receive a lower price," White said.

Juniper pricing for Junos license

Because of the growing importance of software in networking, Juniper announced at the show that Junos, the company's switching operating system, would no longer require Juniper hardware. In the future, a company would be able to buy Junos and run it on any hardware that supported the Open Network Install Environment (ONIE) or the Switch Abstraction Interface (SAI), which is managed by the Open Compute Project.

ONIE defines the platform for installing operating systems on bare-metal switches. SAI provides a common language between the network operating system and the chip that powers the physical switch.

The only pricing Juniper disclosed is that Junos will be sold under a subscription or perpetual license.

After talking to Juniper executives, Shamus McGillicuddy, analyst for Enterprise Management Associates Inc., based in Boulder, Colo., said he believed the vendor would adopt tiered pricing for Junos. A basic package would run a generic top-of-rack switch, while higher priced versions would contain more advanced features.

McGillicuddy expected the subscription license to be set up so a company would break even with a perpetual license within three years. "In other words, if you're planning to use a specific Junos license in your data center for more than three years, you're better off buying the perpetual license."

That kind of Juniper pricing may not satisfy service providers, which prefer buying software under a consumption model. Expedient, for example, would prefer to pay a monthly fee based on the amount of bandwidth going through the software.

The model fits a service provider's business. If the amount of bandwidth rises, then the company is likely selling more services, White said. "If my bandwidth is increasing, usually my revenue is increasing."

Whether a consumption-based model or something else, buying software is a major shift from purchasing networking gear as a capital expenditure that is written off over a period of time. As a result, service providers are "a little bit nervous" about the changes ahead, White said.

Anxious or not, Juniper's business is changing quickly, and service providers, as well as enterprises, should be prepared.

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