Discount of Switch Products
August 13, 2011
Jim Duffy did an interesting report on Cisco’s 76% discount of their Nexus 7000 to Purdue University.
While it is not a secret that incumbents usually give out hefty discount on their switch products, this particular case is still quite interesting for two reasons.
- Nexus 7000 is Cisco’s relatively new flag-ship product. We know it is not usual for the incumbents to give heavy discount on their “old generation” products, such as Cisco 3K or 4K products, but it is interesting that Cisco is also giving such a heavy discount on their mainstream products.
- The volume of the Purdue deal is not particularly big. If Cisco is giving 76% to win Purdue’s case, one has to wonder how much discount would Cisco give to win Microsoft or Facebook.
For years, the networking incumbents have been inflating their listing price in order to give heavy discount to win deals. In parallel to the heavy discount, the incumbents usually inflates their support-and-maintenance annual fee in order to make up their loss in the price discount.
This inflate-then-discount pricing scheme might have worked in the past when the switch products are vertically integrated and encapsulated as a black box. However, as we move toward more commoditized networking world, the pricing of network products should become more transparent and the end-users should be able to start enjoying the benefit of open competition.
If you are using Cisco or HP and believe you have got a good discount, search the internet and you will be surprised (or upset) about the deals you got. If you are thinking of getting a 2nd-hand Cisco or HP switches, negotiate hard. 🙂