Network as a Service: A Different Business Model

You can offer a flat rate on an entire network, including maintenance and management, and lease the whole thing as a service to your customers.

By Joshua Liberman

We've been building networks for almost 20 years. Frequently, we chance onto a new customer by responding to a "point problem" (my printer isn't working, my computer is slow, etc.). Many times we get to the site and find the company's network in flames. They have no backup, no AV, no Windows updates, no firewall, perhaps even a failed RAID drive or dead UPS. Occasionally, we see all of this at one site.

At this point we have two options. We can fix the little problem and walk away, leaving a business card behind. Or we can explain the reality of the situation. If we're lucky, the mess is years old and they're aware of it, so it's not as if everything is new or they had no idea there was a problem. Either way, there is a great gulf to cross from the point fix to a managed network.

If we get them interested in addressing these issues, the next question is usually, "What would it cost to have a managed network?" Again, there are two ways to approach it. We can provide great detail, pricing out servers, operating systems, AV, backup, power protection, and the like. But eight times out of 10 that leads the owner to price shop and then say, "I can have it done it cheaper than that." Instead, I have begun to tell potential customers, "It's $100 to $200."

THE HARD COSTS
After the stunned response, I explain that it's not the total, but per user, per month.

Though I hate to use the analogy, it makes sense to compare these costs to buying a car. Car dealers like to talk about lease or loan payments rather than the car's total price. So it doesn't cost $48,000, but $1,000 monthly for 48 months. We talk about monthly costs as well, and for most small networks, that works out to about $100 per user, per month. To arrive at the $100 number, let's look at a typical, well-outfitted 10-user network.

The client will purchase a Windows Small Business Server with 10 licenses. With a quality tape drive, OS, AV software, and backup and imaging software, you are at about $8,000. Add a managed switch, a firewall, and UPS, and that's another $2,000. Ten midrange desktops with a good flat panel (or laptops) with MS Office adds $15,000. Add a few networked printers, a spare PC, and two years of AV and firewall maintenance for $5,000 more, then $3,000 to do the networking, and BAM-$33,000. Let's pad that by $3,000 just in case, and we have $36,000 over 36 months over 10 users: $100!

THE SOFT COSTS
Now let's talk managed services. If the client wants to buy into our Complete Managed Service for total coverage of their day-to-day networking and computing needs, they will spend $400 monthly on the server and $60 monthly on the desktops. That means $1,000 per month over 10 users, or $100. They end up paying as much over three years to maintain the hardware and software as they do to buy it. This is a very good TCO in the computing game.

Obviously, there are variables. Some 10-user networks need two servers (one for a vertical, for instance). Some networks need just one printer, or $800 workstations, or $2,000 CAD desktops. Other networks will have powerful desktops but only a basic file and print server. And the numbers scale well to a 25-user network (with two servers) or even a 50-user network (with three servers). The bottom line is, within 20 percent either way, the client spends about $100 monthly.

These numbers assume that the client replaces everything (servers, infrastructure, desktops, and so on) every three years and covers all equipment with managed services. We strive to use the most conservative numbers we can and adjust where necessary. We further urge customers to keep items under warranty, helping to drive the three-year cycle we would all like to see.

SPECIAL SAUCE-NETWORK AS A SERVICE
There is clearly nothing special about pricing hardware and software over time. What makes it special is the idea that you can offer a flat rate on an entire network (hardware, software, installation, support) and lease the whole beast as a service to your customers. Pricing this way, including managed services, also encourages customers to keep their systems patched and well maintained, greatly limiting downtime and emergencies.

There are caveats, however, and you'll learn a lot more about contracts and service agreements than you want to. But the magic is that the next time someone asks you how much a network costs, you can tell them $100 to $200 per user, per month. If that sounds like a lot to them, ask if they have an iPhone. It costs about the same.

Profile: Joshua Liberman
President, Net Sciences Inc.

Location: Albuquerque, N.M.

Established: 1988 as PC Services; 1996 under current name

Web site: www.netsciences.com

Number of employees: 4 full time

Company focus: We are a network systems integrator that builds, connects, maintains, and supports networks-including remote access and security-for small businesses in New Mexico.

Favorite part of my job: I like the toys. From my new Core i7 SSD Windows 7 desktop to the Intel Modular Servers we build (think blade server and SAN in a single box), they're all fun.

Least favorite part of my job: Marketing