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What is Network Cost?
Network cost refers to the expenses associated with creating, maintaining, and upgrading a local area network.
Designing and managing a network can be complicated — from determining your business requirements to navigating numerous hardware options, and dealing with installation and activation challenges. Ongoing maintenance, security, and monitoring, as well as hardware and software upgrades, can further strain IT resources and expertise.
In traditional network infrastructures, network costs can include distinct hardware components, such as access points, switches, software licenses, firewalls, installation and configuration labor costs, and ongoing maintenance and support services. The total cost of a network can vary greatly depending on the complexity and scale, as well as specific business requirements. As a result, total cost of ownership (TCO) for enterprise networks has traditionally been unpredictable and hard to control.
With the all-inclusive Nile Access Service, IT leaders replace manual workflows and searching through product SKUs with a single workflow that leads to cost savings. The Nile Access Service does not require a multitude of software licenses, countless product SKUs and accessories to choose from, or expensive support contracts.
With Nile, enterprise IT leaders enjoy >60% lower TCO with a vertically integrated network coupled with fully automated lifecycle management. They gain the industry’s first guaranteed performance for coverage, capacity, and availability, and eliminate unplanned downtime costs for their business associated with network outages. As they cut through operational burdens traditionally associated with legacy network infrastructures, they achieve a 3 year ROI for a 5-year subscription term when switching to the Nile Access Service. In other words, the Nile network starts generating “profit” for the organization in the middle of their subscription term.
For organizations, especially those considering transitioning to an as a service model, grasping the nuances of network cost is the first step towards achieving a balance between performance and expenditure. This foundational knowledge serves as a stepping stone for a deeper dive into network design and planning strategies that align with organizational goals and budget priorities.
Factors influencing network cost
Several critical factors play a role in determining the overall cost of a network. These factors not only influence the initial setup cost but also impact the long-term operational expenses.
Network design
The architecture of a network significantly impacts its overall cost. An intricate design requiring extensive redundancy and scalability options can lead to higher initial investments but may reduce long-term operational expenses by minimizing downtime and maintenance demands.
Technology selection
Choosing advanced technologies, such as the latest Wi-Fi standards and highest performing switches, may increase upfront costs. However, these choices promise enhanced performance and future-proofing benefits, aligning with efficient network planning principles.
Scale of the network
The size and geographic distribution of an organization’s operations directly influence network costs. Larger networks with widespread locations necessitate more extensive infrastructure and management solutions, and a greater amount of travel, elevating both capital and operational expenditures.
Labor costs
The expertise needed for network installation, configuration, and maintenance can significantly affect overall expenses depending on the complexity of the chosen architecture. Costs vary according to the required skill level and prevailing market rates for technical labor.
Security measures
Investing in comprehensive anti-malware and cybersecurity protection is crucial but adds to the network’s cost. These measures are indispensable for safeguarding the network against threats, underscoring the importance of incorporating security into network design and planning. The added technical expertise required can also influence the cost.
How to determine your network cost
Determining network cost involves a multifaceted approach, considering various components that contribute to both initial setup and ongoing operational expenses.
Assess your network requirements
The process begins with a thorough network design requirements assessment, where organizations must weigh the pros and cons of opting for either a centralized or decentralized network architecture. This decision is crucial as it influences both the initial setup and long-term operational dynamics.
Determine the scale of your network
Next, determining the scale of the network is pivotal. This step involves meticulously planning the number of sites to be connected and the extent of remote access needed, especially for organizations looking to expand their footprint nationally or globally. Such expansion might necessitate investments in additional regional data centers and enhanced cloud services to maintain consistent performance and user experience across diverse locations, directly influencing the overall network expenditure.
Select your technology
The selection of technology plays a significant role in shaping network costs. Organizations face choices ranging from adopting entry-level Wi-Fi 6 access points (APs) in branch locations to investing in high-performance Wi-Fi 6 or 6E APs for their main offices. While the latter option comes with a higher upfront cost, its benefits of faster speeds and superior support for a multitude of devices may justify the investment by offering a more future-proof solution and minimizing the need for premature technology upgrades.
Estimate labor costs
Labor costs also demand careful consideration. Organizations might opt to upskill existing employees to manage new network technologies rather than outsourcing to external consultants. This strategy incurs initial training expenses, but can reduce long-term consultancy fees and cultivate a pool of in-house expertise for ongoing network administration and troubleshooting. Constant re-training and the speed at which technology is refreshed across the entire organization must be considered.
Implement security measures
Implementing security measures might involve choosing between basic zero trust principles versus more advanced options, or a standard firewall for a more advanced unified threat management (UTM) system. Opting for advanced zero trust solutions or a UTM system, despite their higher initial cost, provides an all-encompassing security framework that includes better segmentation, anti-malware, intrusion prevention, and content filtering.
This not only elevates the network’s security posture but also mitigates the risk of expensive security breaches, underscoring the importance of investing in advanced security measures as a means to safeguard against potential financial losses.
Steps to calculate network cost
Calculating network cost is a critical process that requires a systematic approach to ensure all factors are considered. Here’s how organizations can navigate this task:
1. Define network requirements
Start by clearly defining the network’s scope and requirements. For instance, a multinational corporation planning to upgrade its global communication network needs to account for the diverse needs of its international offices, including varying bandwidth requirements and compliance with local regulations. This step sets the foundation for all subsequent cost calculations. Don’t forget cabling requirements and costs.
2. Select appropriate technologies
Once requirements are defined, the next step is to select appropriate technologies. An organization may decide to deploy high-performance Wi-Fi 6 APs across its main campus and Wi-Fi 6E APs in specific areas for enhanced connectivity and future scalability. This decision impacts the initial hardware investment and may involve additional costs for compatible devices and infrastructure upgrades.
3. Estimate labor and installation costs
Estimating labor costs involves considering both the internal and external resources needed for network setup and maintenance. For example, an organization might opt for a mix of in-house IT staff training and specialized external contractors for the deployment of a new security infrastructure, balancing the cost between developing internal expertise and leveraging external proficiency.
4. Calculate operational and maintenance expenses
Operational costs, including energy consumption, software subscriptions, routine maintenance, and long term support contracts need to be projected. A company implementing a cloud-based network management system might incur monthly subscription costs, but benefit from reduced on-premises hardware maintenance expenses.
5. Factor in security and compliance costs
As previously described, security and compliance are critical components of network planning. An organization operating in a highly regulated industry may need to invest in more advanced intrusion detection platforms and compliance audit software to protect sensitive data, directly affecting the network’s total cost of ownership.
6. Review and adjust for scalability and future needs
Finally, it’s important to review the calculated costs with scalability in mind. An enterprise or services organization planning for growth might include a contingency budget for network expansion, ensuring that the initial design supports easy scalability without disproportionate cost increases.
How to manage network costs
Effectively managing network costs is essential for organizations looking to optimize their IT budgets while ensuring network reliability and performance. Here’s how organizations can approach this task without specifically focusing on an as-a-Service approach:
Regularly review network performance and costs
Organizations should conduct regular reviews of their network performance against the costs incurred. For instance, a tech company might perform quarterly audits to assess bandwidth usage, application performance, and hardware efficiency. These reviews can identify areas of overspending or underutilization, allowing for timely adjustments.
Optimize your network design
Optimizing a network design for efficiency can lead to significant cost savings. A retail chain may decide to consolidate its data centers, leverage cloud services more broadly, or adopt more efficient routing protocols to reduce latency and the costs associated with data transfer and maintenance, ensuring that the network infrastructure meets business needs without unnecessary complexity or expense.
Invest in scalable technologies
Investing in scalable network technologies can reduce the need for frequent, costly upgrades. An educational institution could implement modular network components and cloud solutions that allow for easy expansion as student enrollment grows, avoiding the need for a complete network overhaul.
Implement cost-effective security measures
While security is non-negotiable, there are cost-effective strategies to maintain high standards without breaking the bank. A small business might use open-source security tools with a strong community support system, providing security features at a fraction of the cost of proprietary solutions.
Utilize energy-efficient equipment
Energy costs can constitute a significant portion of operational expenses. Companies can invest in energy-efficient networking equipment to reduce power consumption. For example, switching to more energy-efficient servers and networking hardware can lower electricity bills and contribute to sustainability goals.
Develop in-house staff
Utilizing in-house expertise to leverage AI and automation resources can reduce reliance on expensive operations. An organization can implement a training program for its IT staff on the latest network management and security practices, leveraging as-a-Service resources, and finding ways to reduce long-term labor costs.
By adopting these strategies, organizations can manage their network costs effectively, ensuring that their network infrastructure is both economically viable and capable of supporting their operational needs.
Nile’s Access Service offers a new as-a-Service model with AI networking and a zero trust campus approach to managing network costs, significantly reducing the total cost of ownership (TCO) for businesses. By leveraging cutting-edge technology and enterprise-class wired and wireless solutions, Nile simplifies network operations and offloads the need for multiple people with extensive in-house expertise.
The Nile service also provides organizations with a highly scalable and secure network infrastructure, built with zero trust campus principles, ensuring reliability and performance without the traditional capital expenditure associated with the third-party integration of on-premises solutions. Nile’s proactive monitoring and management capabilities reduce downtime and IT tickets, directly impacting operational costs and improving overall efficiency. With the Nile Access Service, organizations can enjoy a reliable, helping hands network experience that aligns with their growth objectives while keeping costs under control.
Cost breakdown of a business network design
Designing a network for a business involves careful planning and budget allocation to ensure the IT budget is spent as efficiently as possible. Here’s a breakdown of the key cost components involved in setting up a small business network:
Hardware costs
The foundation of any network is its hardware, including access points, switches, firewalls and gateways. For a small business, selecting hardware that balances performance with cost is crucial. For example, opting for a multi-function device that combines wireless connectivity, switching, firewall and gateway capabilities can be a cost-effective choice, reducing the need for multiple separate devices.
Software and licensing fees
Network operation also requires software for network management, security (including anti-malware solutions), and productivity tools. Cloud-managed options or open-source software can be a cost-saving option for some applications, but businesses must also consider the need for commercial software licenses, and knowledge staff to support the open-source platform.
Installation and configuration
The initial setup of the network, including installation and configuration of hardware and software, can incur significant labor costs. Small businesses can manage these costs by choosing solutions known for their ease of setup and management, potentially allowing for in-house staff to perform the installation with minimal external support. An as-a-Service model is proving attractive to small businesses today as many organizations maintain a small IT staff.
Ongoing maintenance and support
Maintaining network health requires ongoing support, including software updates, hardware repairs, and troubleshooting. Organizations can opt for service contracts or managed services, like those offered by Nile’s Access Service, which provide comprehensive support and proactive management to keep the network running smoothly, often at a predictable monthly or annual cost.
Training and development
Ensuring that staff are knowledgeable about network best practices and security protocols is essential. Investing in training for in-house staff can be cost-effective in the long run but relying solely on internal resources for network management and troubleshooting is not the only option. An as-a-service model can help speed up initiatives, re-focus resources and help drive business goals.
Example of costing out your network with effective network planning and design
Adopting Nile’s “as-a-Service” model presents significant financial savings across various facets of network management and operation, as it reimagines the traditional approach to infrastructure investment and maintenance. This model not only addresses the cost of capital but also enhances productivity, reduces maintenance expenses, and ensures access to high-end infrastructure.
The cost of capital, often a substantial concern for organizations due to the deep upfront investments required for network infrastructure, sees a notable reduction with Nile. By eliminating these initial costs, Nile allows for a minimum expected rate of return on invested infrastructure capital. This shift enables organizations to allocate resources more efficiently and focus on strategic initiatives rather than capital expenditure.
Infrastructure benefits with Nile are evident in the provisioning of high-end wireless and wired components, including sensors, and the utilization of AI networking and automation, softbots, and sensors that continuously optimize the service.
Productivity gains are another critical advantage of the Nile service, which promises to eradicate network performance and downtime issues that significantly impact productivity. With a service level agreement guaranteeing 99.95% uptime, organizations can expect to see savings equivalent to more than 60% compared to traditional networks in terms of total cost of ownership. This level of reliability and performance is crucial for maintaining continuous operations and achieving business objectives.
Maintenance costs, often a recurring financial burden due to the need for ongoing updates, upgrades, and support services, are substantially mitigated with Nile. The service includes these updates and support at no additional charge, contrasting sharply with traditional models that can cumulatively cost >4x of the total network CAPEX over five years. This comprehensive approach to maintenance ensures that the network remains current and secure without imposing extra financial strain on the organization.
Increase ROI and reduce TCO with Nile
By utilizing advanced network planning and design methodologies, and by leveraging AI and automating the entire wired and wireless network lifecycle management across campus and branch locations, Nile’s Access Service ensures that your network comes with performance guarantees for coverage, capacity and availability, effectively eliminating reactive, complex and costly maintenance tasks.
This optimization enhances the user experience, provides a better platform for the new generation of digital connectivity use cases, and leads to significant savings in total cost of ownership for IT organizations looking to improve their network infrastructure uptime.
With a focus on removing complexity out of day -1 to day N network operations and offering a reliable, hands-off network experience, Nile helps IT organizations streamline their edge network infrastructure, reducing TCO while maintaining high connectivity and security standards.
