September 7, 2022

Procurement and Vendors Manager

Overcome Supply Chain Issues for Network Service Providers

A robust and competitive supply chain is of vital importance to service providers in general, and their procurement teams in particular. This raises the question: how can the procurement team help the service provider improve readiness and make its network equipment supply chain more resilient while driving down costs? 

Overcome Supply Chain Issues for Network Service Providers

Cisco recently announced that it is expecting significant supply chain delays due to the current chip shortage. As a result, many service providers undertook premature, price-inflated purchasing to stockpile network equipment inventory, with the aim of not having to wait long periods for future chip delivery. 

As mentioned in our previous post, traditional networking routing devices are based on closed, single-vendor proprietary hardware and software packages, offered by only a few large vendors. This results in vendor lock-in, which negatively affects procurement in numerous ways.  

Supply chain vendor lock-in

Purchasing network equipment software and hardware from the same vendor weakens the procurement team’s negotiating position, as it eliminates the possibility to mix and match vendors. The scarcity of multiple competitors battling it out in the marketplace drives up costs and leads to reduced opportunities for cost savings and cost avoidance

Service providers pay a substantial premium (ranging up to 300%) for closed branded network devices. This premium negatively impacts the procurement team’s ability to achieve its target price in the short run and keep down network expansion and upgrade costs in the long run.  

Supply chain with hardware inconsistency

It’s interesting to note that although there are only a handful of large vendors offering single-vendor hardware/software routers, a traditional network has on average between  

10-15 different network device models from 2-3 vendors. This is because service provider networks are typically built in silos, where each domain (broadband, mobile) has its own, dedicated hardware resources. 

Procurement teams should consider the soft costs of maintaining a supply chain with such hardware inconsistency, which complicates network planning and operations. Such inconsistency also increases the cost of spare parts kept in the service provider’s warehouses. 

On top of that, the closed single-vendor model slows down innovation since traditional vendors may be slower in introducing new and disruptive technologies than newer challengers looking to penetrate the market.  

DriveNets modular networking software

Instead of continuing down the single-vendor “black-box” path, procurement teams should purchase best-of-breed networking hardware and software that are sold independently from a number of different vendors. In particular, procurement teams should closely consider DriveNets in their next bid process. 

Network Services

DriveNets Network Cloud transforms networks from hardware-centric to software-centric. This leads to simpler and standardized hardware across all network services (core, aggregation, edge).  

Regarding software, DriveNets offers best-of-breed, modular networking software sold independently of the hardware. Service providers pay only for the features they need, either on a time-based, perpetual or subscription license (OpEx expense). 

When it comes to hardware, DriveNets uses only two types of basic commercial off-the-shelf (COTS) “white-box” building blocks, which are available from multiple vendors. These two building blocks are common to all types of sites and all network functions. This makes the cost of spare parts and inventory significantly lower than with traditional networks, while shrinking the list of SKUs (stock keeping units) from a few hundred to only a dozen or so. 

Lessen exposure to supply chain disruptions  

DriveNets frees operators from vendor lock-in, allowing them to rapidly leverage new technologies, swap components and platforms, and switch vendors. Moving from a monolithic “black-box” model to an open “white-box” model lessens exposure to supply chain disruptions, empowers adopting new technologies from easily switchable open suppliers, and strengthens procurement negotiation model. 

Not only that, but costs are also kept down due to the healthy competition between multiple vendors and economies of scale across all network services. 

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5 Reasons Why You Should Include DriveNets in Your Next Network Bid Process