RE: optics pricing (Re: Weird GigE Media Converter Behavior)

Mailman List Mirror (Read Only)
1

Mikael Abrahamsson wrote:
If the VSR card was $899k, the SR card was $999k and the LR
card was $1099 you wouldn't hear any complaints from me.

That's even worse than the current prices! Given that the VSR is
currently 330k, the SR could be 450k and the IR 500k.

It's the fact that Cisco is reselling optics (which
is not their core business as far as I see it) at a
huge markup that is bothering me.

Grow up; when you buy a Saab "brand" part or option for a Saab car, it
costs twice as much as the same aftermarket part, which still is twice
as much as what you could get if you bought a box of 10 directly from
the manufacturer, which is twice as much as it costs them to manufacture
overseas. Everyone does that.

Besides, there's nothing new about Cisco doing it, they've always have.
DRAM and Flash is not their core business either, and they have sold
both for 20 times the street price just because they built a proprietary
connector. Then some smart @55 at Kingston and Viking figured out if
Micron could manufacture the Cisco part so could they and that there was
tons of money to make and they begun to sell memory for "only" twice as
much as it could be, which in turn caused Cisco memory to drop to "only"
4 times the price of regular.

Economics 101. Cisco (and many other vendors, BTW) are not charities.
Their purpose is to make investors and shareholders (which includes me)
happy. And yes, this includes reselling OEM hardware at astronomical
prices when they can, because it never lasts long.

Michel.

2

Grow up; when you buy a Saab "brand" part or option for a Saab car, it
costs twice as much as the same aftermarket part, which still is twice
as much as what you could get if you bought a box of 10 directly from
the manufacturer, which is twice as much as it costs them to manufacture
overseas. Everyone does that.

All of us have been on the underside of Cisco and other vendors' capitalistic boot from time to time. Just because it chaffs every so often is not an indictment of capitalism.

> Economics 101. Cisco (and many other vendors, BTW) are not charities.
> Their purpose is to make investors and shareholders (which includes
> me)
> happy. And yes, this includes reselling OEM hardware at astronomical
> prices when they can, because it never lasts long.

One could argue that this public & private chaffing is what precipitates the competition that alleviates the condition. If another vendor doesn't realize there is demand...

DJ

3

If the listprice was 4 times the manufacturer cost you still wouldn't see
an argument from me. I'll gladly pay 2-3 times the cost to get a fully
supported and approved product from the manufacturer.

It's the 10x-50x markup I find repulsive, and compared to other
manufacturers equipment (were I actually have a choice of buying from
other manufacturers and testing it myself) the Cisco business case gets
really bad.

Also, the "time to market" is a big factor, the fact that Finisar was late
in developing 80km SFPs compared to other manufacturers made for instance
Extreme Networks (don't know about Cisco) very late in releasing this
product. At that time, Extreme also coded their optics so there was no
choice. This made us not purchase their SFP based offerings at all for
quite some time. I'm still very hesitant when it comes to Cisco SFP based
products for the same reason. I now see the same thing with Xenpak WAN
PHY.

When you have an industry standard for interchangable optics, why should a
manufacutrer lock in their customers to their own branded optics? (Yeah,
I've heard the sales excuse before).

4

Obviously. But us folks who run networks aren't charities either (though
given most folks' current economic status, they might as well just become
501(c)(3)'s and call it a day). A few of us actually have business plans
that involve something other than scheduling our next chapter 11 filing,
which every so often requires the use of that squishy thing between your
ears.

Smart folks understand that router vendors are reselling optics for
10x-100x the price they can actually be purchased for. Obviously it is the
job of the vendor to try and squeeze as much money out of their customers
as they possibly can, but at least smart folks have the CHOICE not to take
the bait. We start to get annoyed when the vendors remove that choice by
engaging in practices like locking down GBIC/SFP modules by vendor ID
codes for no reason other than to force customers into paying absurd
markup for their optics, intentionally designing interfaces with fixed
optics so that you have to purchase more cards than you might actually
need in order to have the necessary optics, etc.

5

Deepak Jain wrote:

One could argue that this public & private chaffing is what
precipitates the competition that alleviates the condition. If
another vendor doesn't realize there is demand...

Competition & capitalism are great in my book. My personal worry about this kind of overpricing is when it is combined with legal muscle power (via patents et al.) to prevent _fair_ competition. Cisco do not appear to be trying that in the hardware area, or at least that's how it looks from the outside - as someone who has never ever bought a single cisco product in over 10 years of being here.

On the other hand, the use of patent licenses (like those that say "free if you don't claim against us") for things like VRRP do worry me.

rgds,

6

Peter Galbavy wrote:

On the other hand, the use of patent licenses (like those
that say "free if
you don't claim against us") for things like VRRP do worry me.

Everybody's entitled to their opinion, but this excerpt from
http://www.ietf.org/ietf/IPR//VRRP-CISCO does not seem to me
to portend predatory pricing:

/qw
Cisco believes that implementation of draft-ietf-vrrp-spec-05.txt will
require a license to Cisco's patent #5,473,599. If this protocol is
approved as an IETF standard, licenses will be available to any party on

reasonable, nondiscriminatory terms for implentation of the protocol.

On March 20, 1998, the definitive statement from Cisco Systems was
received:

  The following statement is in response to recent requests for a
  clarification on Cisco Systems' position regarding both its Hot
  Standby Router Protocol (HSRP) and the Virtual Router Redundancy
  Protocol (VRRP) proposal:-

    In Cisco's assessment, the VRRP proposal does not represent
    any significantly different functionality from that available
    with HSRP and also implementation of 'draft-ietf-vrrp-spec-06.txt'
    would likely infringe on Cisco's patent #5,473,599.

    When Cisco originally learned of the VRRP proposal, the Hot
    Standby Router Protocol was then promptly offered for
    standardization with the understanding that, if approved,
    licenses for HSRP would be made available on reasonable,
    nondiscriminatory terms for implementation of the protocol.
    This offer stands for the adoption and implementation of
    HSRP.

    However, now that the 'draft-li-hsrp-01.txt' submission is
    approaching expiration and the Working Group is continuing with
    the VRRP proposal, Cisco Systems reserves the right to protect
    its intellectual property. Furthermore, Cisco takes the position
    that standardizing on another proposal that so closely mirrors
    an existing, well established, extensively deployed protocol
    is out of step with the principles and practices embodied in the
    IETF and would thus represent cause for concern within the
    industry.

/qw

7

However it does make an open source (and certainly a free) implimentation
very difficult to do.

A license of $1000 per machine is "reasonable and nondiscriminatory terms"
for $100k routers but not for a something that I want to download and run
on a few Linux boxes.

8

In that case the $1000/machine licence discriminates against OSS
implementations, and isn't "reasonable and nondiscriminatory". <grin>

- Matt

9

Then there's always the option to implement something else. Hm, where
can I order a CARP license again...?

http://www.openbsd.org/lyrics.html#35

/leg

10

Lars Erik Gullerud wrote:

Then there's always the option to implement something else. Hm, where
can I order a CARP license again...?

... which is why I think I used VRRP as an example - "ignore and replace" as opposed to "embrace and extend".

In answer to Mark Borchers' point about the IETF draft mentioning "reasonable and non-discriminatory", I have the reply from Cisco's dude (whose name I forget, but I think he reads NANOG) that offers "me" the license, on non-discrimintory terms, part of which is to never claim against Cisco for any patent I may hold. That's not reasonable to me. But hey.

I only used VRRP as an example and by no means as the single only one. I like W3C's way of doing things, and not the IETF's for the moment - but I suppose the subject line should change to reflect a different area of discussion... still about the network operators costs though.

Peter