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SDN 1

Alessandro Colombo
Mattia Giustacchini
Filippo Falconi
Diletta Miori
Alessandro Olivaris
Marcello Corrado Salati
Project
Big Switch
HP project
“Investing in new product development
and expanding the product catalog are
the most difficult things to do in hard times,
and also among the most important”
(Bill Hewlett and David Packard)
Our HP case
 Case 1 – Medium enterprise 2-tier Datacenter SDN based
in a timeframe of 5 years:
Company scenario: labsforall is a medium company
focused on hosting of complex IT environment dedicated to
new Network Function software validation. The company
has to manage manually segregation and flexibility on DC
network and a lot of “unplanned network downtime”. All
access and core devices were installed one year ago and
only 50% of access and all core devices are Openflow
capable.
Our HP case
Source: Hp
TCO analysis
Qualitative analysis
 Behavioural
 Pre-screening of the sector
 Assumptions and initial
considerations
Quantitative analysis
 Excel model (customizable
input data). Focus on:
 Downtime
 Flexibility
 IRR and ROI analysis
 Other TCO indicators
Key discriminant factors leading to the SDN
 Time To Market
 Usage Intensity
 Cost of Downtime
 Delay and Jitter

Before starting
Industries assumptions
Traditional
Solutions
Typical
Hourly Cost
of Downtime
Weekly Business Hours
Yearly
Business
Hours
Employee
Cost per
Hour
Hours
(per day)
Working
days (per
week)
Brokerage
Service
€ 4,76 9 5 2.340 € 22,26
Energy € 2,06 24 7 8.736 € 25,91
Telecom € 1,47 24 7 8.736 € 21,10
Manufacturing € 1,18 8 6 2.496 € 18,03
Retail € 0,81 8 6 2.496 € 12,35
Healthcare € 0,47 24 7 8.736 € 17,94
Media € 0,07 24 7 8.736 € 23,95
Time To Market
“IT has become inert, it is just another cost of doing business”
Nicholas Carr
SDN
service
facilitator
Reductio
n of time
to market
Lower
opportunity
costs
First mover
advantage
Mature markets where the
competition is high and it is
mainly based on the
competitive services offering

…The SDN may even go
beyond this, providing an
edge over competitors
Usage Intensity
 More a consideration than a discriminant variable
 Starting from the assumption that a network infrastructure
is already present, this behavioral indicator’s aim is only
to justify the investment
Total yearly business
hours
Brokerage Service 2,340
Energy 8,736
Telecom 8,736
Manufacturing 2,496
Retail 2,496
Healthcare 8,736
Media 8,736
Cost of Downtime
 Downtime refers to the periods when a system is unavailable.
 Downtime or outage duration refers to a period of time in which a system
fails to provide or perform its primary function. Reliability, availability,
recovery, and unavailability are related concepts.
Source: Soundgardas
Source: Network Computing, the Meta Group and Contingency Planning Research;
Vision Solution
Delay & Jitter
 (Long) delay: amount of time it takes for a bit to be
transmitted from the source to the destination.
 Jitter (or delay variability): delay that varies over
time.
Delay & Jitter
 The acceptable parameters for application
performance, defined by SLAs, are often challenged by
network congestion, particularly in live media (ex.
streaming, online gaming, voice over IP and
videoconferencing) which are affected more by long
delay and jitter.
 SDN applications could monitor network health (by
analyzing metrics like link utilization, switch queue depths,
application flow delay, jitter and packet loss) and
empower the network whenever it risks to fall out its SLAs.
In case network cannot meet the SLAs, an alert could be
sent to optimize subsequent data center operations.
Industries considered
Brokerage
Service
Energy
Maufacturing
Retail
Health
Care
Media
Telecom
Brokerage
Service
Energy
Health
Care
Media
Telecom
Manufacturing
Retail
Services Industries
Production Industries
Brokerage Services
Competition in the brokerage industry is
growing rapidly, thanks to:
o elimination of the traditional
restriction against banking activities
o the disappear of the entry barriers
o technological advances
Unbundling the Offerings: The Old Guard vs. the New Wave
Source: Booz-Allen & Hamilton
Time to market
Downtime
Cost of dowtime/h (Million €)
Brokerage services 4.76
Source: Network Computing, the Meta Group and Contingency Planning Research;
Vision Solution
Energy
Time to market
o Oligopoly market
o Change in the regulamentation
of the sector in the 1996, which
aim was to liberalize the market
 Decrease of the barriers to entry +
ENEL not monopolist in the sector
anymore

Contribution of the biggest company to energy production in Italy
(2011)
Source: FIRE Federazione Italiana per l’uso Razionale dell’Energia
Cost of dowtime/h (Million €)
Energy 2.06
Downtime
Usage intensity
Total business h/year
Energy 8,736
Source: Network Computing, the Meta Group and Contingency Planning Research;
Vision Solution
Telecommunication
o High Concentration


o Mature Market
o Price War competition
Time to market
Downtime
Cost of downtime/h (Million €)
Telecom 1.47
Usage intensity
Total business h/year
Telecom 8,736
Delay and Jitter
o Importance of providing a reliable,
fast and invariant service
o Reduce at best bottlenecks

Source: Network Computing, the Meta Group and Contingency Planning Research;
Vision Solution
Source: sole24ore ottobre 2013
Retail
o Mature market
o Lower opportunity to develop
o Less loyal customer
o High competition
o Moving toward the global
sourcing

Time to Market
Source: Pwc 2014
Total retail: a real opportunity beyond
the multicanality.
The growth of digital channel completely
changed the behaviors and the
consumers’ needs with respect to
suppliers and distributors.
Healthcare
Usage Intensity
o Big market that produce a
huge amount of data
o Increasing relevance of on
time data updating
o Need for constant uptime,
efficiency and flexibility
o Need of cost savings
Total business h/year
Healthcare 8,736
Media
o High concentration

o High entry barriers
 Price competition

o Last changes: internet, digital TV,
smartphone, globalization,
customization of media
services…
Time to market
Usage intensity
Source: Market revolution
Total business h/year
Media 8,736
Delay and jitter
o Importance of providing a reliable,
fast and invariant service
o Reduce at best bottlenecks

Manufacturing
?
Industries – SDN indicators matrix
Time to
Market
Usage
Intensity
Downtime Delay and
Jitter
Brokerage ✔ ✔
Energy ✔ ✔ ✔
Telecom ✔ ✔ ✔ ✔
Manufacturing
Retail ✔
Healthcare ✔
Media ✔ ✔ ✔
The Model
Simplifications
 No rack, cabling, cooling & space costs considered in detail
 No computational and storage components
 No decommissioning costs evaluations
 Service layer components out of scope (firewall, Load
Balancer, ..)
 Noc & Soc assurance: 15 FTE
 Noc & Soc delivery: 10 FTE
 Engineering: 5 FTE





Assumptions
 Migration cost as setup cost of the whole SDN structure
 Option 1: setup cost minus 30% of controller and related components
cost
 Option 2: 1
st
year equal; 2
nd
year included the remaining 30%
 Migration cost: 4 persons for the SDN installation (3 months)
 Migration activities are assumed to be done during normal
working hours
 Reskilling costs: 2000 € per person per week
 Time of reskilling hours: 5 hours, 5 days, 3 weeks



Assumptions
 Business hours are used to calculate Total revenues per
hour
 Estimated % of human errors solve by SDN: 55%
Source: Cost-Unconscious: Denying the True Cost of Network Downtime, Tim Hebert, 2008
 Time of implementation of new components which allow
implementation of new services:
 TRADITIONAL: 8 h per day, 10 days, 5 persons
 SDN: 8h per day, 4 days, 5 persons
 Number of services implemented per year: 1


Hypothesis
Input hypothesis in order to compare the industries:
 Whole system reliability: 0,999
 Number of personnel: 200
 Yearly revenues: 20.000.000 €
 Downtime penalty: 80.000 € per hour


Input
Legenda
Red values: must be inserted in “INPUT SHEETS”
by the users
Green values: are those that change according to
the sector
Input cost
Type Input costs Category
Current
Solution
Proposed (SDN)
solution
Year 0 Year 0 Year 1
OPEX Unplanned downtime Facility Management € 776.524 € 776.524 € 349.436
OPEX Extra-costs opex (due to flexibility) Facility Management € 173.275 € 173.275 € 69.310
CAPEX Access Hardware acquisition (tor) Hardware € 350.355,15 € 350.355,15 € 200.202,94
CAPEX Core hardware acquisition Hardware € 292.205,88 € 292.205,88
OPEX Access Hardware Mainteinance Hardware € 50.039,71 € 50.039,71 € 28.594,12
OPEX Core hardware Mainteinance Hardware € 56.532,35 € 56.532,35
CAPEX Total Infrastructure Set-up cost Personnel € 428.912 € 428.912 € 3.088
CAPEX Reskilling development team Personnel € 16.950
CAPEX Reskilling delivery team Personnel € 47.325
OPEX Noc&Soc Assurance Personnel € 1.050.000 € 1.050.000 € 770.000
OPEX Noc&Soc Delivery Personnel € 700.000 € 700.000 € 420.000
OPEX Engineering Personnel € 350.000 € 350.000 € 350.000
CAPEX Software management IMC Software € 11.029,41 € 11.029,41 € 11.029,41
CAPEX SDN controller solution of acquisition Software € 7.352,94
OPEX Software management IMC mainteinance Software € 4.411,76 € 4.411,76 € 4.411,76
OPEX SDN controller solution mainteinance Software € 2.941,18
Downtime
Current Reliability Current Proposed (SDN)
Whole system reliability 0,999 0,999
Total percentage of outtage 0,001 0,001
Total hours of outtage per day (estimate) 0,024 0,024
% of human errors solved by SDN 55%
Total hours of outtage per year (estimate) 9 4,05
Personnel uncovered cost Current Proposed (SDN)
N° of personnel 200 200
Number of hours of outtage 9 4,05
Estimated percentage of personnel
affected
90% 90%
Average employee cost per hour 21,10 21,10
Total cost (moltiplication) € 37.980 € 17.091
Downtime
Revenue opportunity cost (Residuals) Current Proposed (SDN)
Gross yearly revenue € 20.000.000 € 20.000.000
Total yearly business hours 8.736 8.736
Total Revenues per hour € 2.289 € 2.289
Estimated percentage of revenues
affected
90% 90%
Downtime hours 9 4,05
Total opportunity cost € 18.544 € 8.345
Penalty Current Proposed (SDN)
Cost per hour € 80.000 € 80.000
Number of hours of outtage 9 4,05
Total penalties costs € 720.000 € 324.000
Current Proposed (SDN)
Total
Downtime
Savings
Total Downtime € 776.523,96 € 349.435,78 € 427.088
Total Downtime per hour € 86.280,44 € 86.280,44
Flexibility
Cost of a service implementation Current Proposed (SDN)
Time of implementation (hours) 80 32
Cost per hour 21,10 21,10
N° of people affected 5 5
Personnel costs € 8.440 € 3.376
Revenue opportunity cost Current Proposed (SDN)
Gross yearly revenue € 20.000.000 € 20.000.000
Total yearly business hours 8.736 8.736
Total Revenues per hour € 2.289 € 2.289
Estimated percentage of revenues affected 90% 90%
Time of outtage 80 32
Total opportunity cost € 164.835 € 65.934
Current
Proposed
(SDN)
Total
Flexibility
Savings
Total costs of the flexibility
infrastructure
€ 173.275 € 69.310 € 103.965
Other costs
Migration Current
Proposed
(SDN)
Personnel needed 4 4
Time of
implementation
2160 2160
Cost per hour € 50 € 50

Total migration € 432.000 € 432.000
SDN controller € 3.088
Total migration cost € 428.912 € 432.000
Reskilling costs
Total cost for reskilling per
person
€ 6.000

Development team 2
Total reskilling for dev. Team € 12.000
Service Team (NOC) 5
Total reskilling costs for NOC € 30.000
Labor opportunity costs
Time of reskilling Hrs 75
Cost per hour € 33

Development Team 2
Total labor cost for reskilling 4.950
Service Team (NOC) 7
Total labor cost for reskilling € 17.325
Personnel Current
Proposed
(SDN)
Cost per year € 70.000 € 70.000
Noc & Soc -
Assurance
15 11
Total assurance € 1.050.000 € 770.000
Noc & Soc - Delivery 10 6
Total delivery € 700.000 € 420.000
Engineering 5 5
Total engineering € 350.000 € 350.000
SDN specific costs
Personnel costs
Migration costs
Scenario
Lifecycle 5 Interest rate 7%
0 1 2 3 4 5
Option 1 (current) 2013 2014 2015 2016 2017 2018 Total
Total CAPEX Current € 1.082.502 € - € - € - € - € - € 1.082.502
Hardware € 642.561 € - € - € - € - € - € 642.561
Software € 11.029 € - € - € - € - € - € 11.029
Facility Management € - € - € - € - € - € - € -
Personnel € 428.912 € - € - € - € - € - € 428.912
Total OPEX Current € 3.160.783 € 3.054.211 € 3.054.211 € 3.160.783 € 3.054.211 € 3.054.211 € 18.538.409
Hardware € 106.572 € 106.572 € 213.144
Software € 4.412 € 4.412 € 4.412 € 4.412 € 4.412 € 4.412 € 26.471
Facility Management € 949.799 € 949.799 € 949.799 € 949.799 € 949.799 € 949.799 € 5.698.795
Personnel € 2.100.000 € 2.100.000 € 2.100.000 € 2.100.000 € 2.100.000 € 2.100.000 € 12.600.000
Total Current € 4.243.285 € 3.054.211 € 3.054.211 € 3.160.783 € 3.054.211 € 3.054.211 € 19.620.912
Option 2 (proposed SDN)
Total CAPEX Proposed (SDN) € 1.082.502 € 285.949 € - € - € - € - € 1.368.451
Hardware € 642.561 € 200.203 € - € - € - € - € 842.764
Software € 11.029 € 18.382 € - € - € - € - € 29.412
Facility Management € - € - € - € - € - € - € -
Personnel € 428.912 € 67.363 € - € - € - € - € 496.275
Total OPEX Proposed (SDN) € 3.160.783 € 1.994.693 € 1.966.099 € 2.072.671 € 1.994.693 € 1.966.099 € 13.155.037
Hardware € 106.572 € 28.594 € 106.572 € 28.594 € 270.332
Software € 4.412 € 7.353 € 7.353 € 7.353 € 7.353 € 7.353 € 41.176
Facility Management € 949.799 € 418.746 € 418.746 € 418.746 € 418.746 € 418.746 € 3.043.528
Personnel € 2.100.000 € 1.540.000 € 1.540.000 € 1.540.000 € 1.540.000 € 1.540.000 € 9.800.000
Total Proposed (SDN) € 4.243.285 € 2.280.641 € 1.966.099 € 2.072.671 € 1.994.693 € 1.966.099 € 14.523.488
Cash flow statement
Cash Flow Statement
2013 2014 2015 2016 2017 2018
Δ Cash flow (Savings/Losses between
options)
€ - € 773.569 € 1.088.112 € 1.088.112 € 1.059.518 € 1.088.112
Cumulative Savings (losses) € - € 773.569 € 1.861.682 € 2.949.794 € 4.009.312 € 5.097.424
ROI 0,00% 56,53% 136,04% 215,56% 292,98% 372,50%
NPV € - € 722.962 € 950.399 € 888.224 € 808.301 € 775.809
Total NPV € 4.145.695
Actualized costs/savings and IRR
2013 2014 2015 2016 2017 2018 Total
Actualized costs
Current solution
€ 4.243.285 € 2.854.403 € 2.667.666 € 2.580.140 € 2.330.043 € 2.177.610 € 16.853.147
Actualized costs
Proposed (SDN)
solution
€ 4.243.285 € 2.131.441 € 1.717.267 € 1.691.917 € 1.521.742 € 1.401.801 € 12.707.452
Actualized savings € - € 722.962 € 950.399 € 888.224 € 808.301 € 775.809 € 4.145.695
IRR 70%
Five years Usage Based TCO
TCO per
business hour
TCO per hour
Current Solution € 386 € 386
Proposed (SDN) solution € 291 € 291
Savings per business hour € 95 € 95
% Savings/TCO Current 24,60% 24,60%
TCO comparison – Cumulative savings graphs
€ -
€ 500,000
€ 1,000,000
€ 1,500,000
€ 2,000,000
€ 2,500,000
€ 3,000,000
€ 3,500,000
€ 4,000,000
€ 4,500,000
2013 2014 2015 2016 2017 2018
TCO Comparison
Total Current
Total Proposed (SDN)
€ -
€ 1,000,000
€ 2,000,000
€ 3,000,000
€ 4,000,000
€ 5,000,000
€ 6,000,000
2013 2014 2015 2016 2017 2018
€ -
€ 773,569
€ 1,861,682
€ 2,949,794
€ 4,009,312
€ 5,097,424
Cumulative Savings (losses)
Cumulative
Savings
(losses)
Actualized costs/savings and ROI graphs
0%
100%
200%
300%
400%
2013 2014 2015 2016 2017 2018
0.00%
56.53%
136.04%
215.56%
292.98%
372.50%
ROI
ROI
€ -
€ 2,000,000
€ 4,000,000
€ 6,000,000
€ 8,000,000
€ 10,000,000
€ 12,000,000
€ 14,000,000
€ 16,000,000
€ 18,000,000
2013 2014 2015 2016 2017 2018 Total
Actualized Costs/Savings
Actualized costs Current solution
Actualized costs Proposed (SDN)
solution
Actualized savings
Qualitative and Quantitative advantage graph
Qualitative advantage: 0-5 represents how many relevant qualitative indicators (Time To Market,
Usage Intensity, Cost of Downtime, Delay and Jitter) have been identified for the sector or the firm (Customized)
Cost Advantage: % actualized savings/ actualized TCO current
0
1
2
3
4
5
22% 23% 24% 25% 26% 27% 28%
Q
u
a
l
i
t
a
t
i
v
e

A
d
v
a
n
t
a
g
e

Quantitative Advantage
Qualitative and Quantitative Advantage
Brokerage Service
Energy
Telecom
Manufacturing
Retail
HealthCare
Media
Customized
Conclusions
 In the provided Web hosting firm case, there is a clear TCO
advantage in completing the implementation of the infrastructure,
so adopting the SDN.
 For our case and for each of the considered industries, the
outcome of the TCO model highlights that SDN is able to bring a
relevant cost advantage (between 20% and 30%)
 However it becomes even more relevant in those sectors in which it
affects the qualitative indicators or even better brings an important
competitive advantage. Thus besides the cost advantage there
are different reasons linked to different industries’ features, which
should lead to the adoption of SDN
 Interesting is to notice that sectors, in the Qualitative and
Quantitative Advantage graph, tend to be clustered confirming
our hypothesis of differentiating production industries and service
industries for what regards the adoption of SDN
References
o Brokerage service competition - Booz-Allen & Hamilton 2007. strategy-business.com/article/8926?pg=all
o Energy competition - FIRE Federazione Italiana per l’uso Razionale dell’Energia 2014.fire-
italia.it/caricapagine.asp?target=elettricita/attori.asp
o Telecommunication competition – “Telecom e Vodafone perdono quote nella telefonia mobile in Italia”,
Andrea Biondi, Ottobre 2013.ilsole24ore.com/art/impresa-e-territori/2013-10-02/telecom-vodafone-
perdono-quote-120403.shtml?uuid=AbIxeZiI
o Retail competition: “Retail & Consumer”, PWC, 2013 pwc.com/it/it/industries/retail-consumer/index.jhtml
o Media competition: “10 motivi per essere ottimisti sul futuro del mercato dei media in Italia”, Stefano Russo,
2013 marketrevolution.it/10-motivi-per-essere-ottimisti-sul-futuro-del-mercato-dei-media-in-italia/
o Downtime structure calculation - Assessing the Financial Impact of Downtime, Vision Solution, 2008.
strategiccompanies.com/pdfs/Assessing%20the%20Financial%20Impact%20of%20Downtime.pdf
o Human errors estimated in an IT Datacenter - Cost-Unconscious: Denying the True Cost of Network
Downtime, Tim Hebert, 2008. changingminds.org/articles/articles08/cost-unconscious.htm
o Human errors estimated in an IT Datacenter - Addressing the Leading Root Causes of Downtime, Emerson
Network Power, 2010. emersonnetworkpower.com/en-
US/Brands/Liebert/Documents/White%20Papers/data-center-best-practice_24656-R10-10.pdf
o Estimation of penalty per hour - The Cost of Downtime, Deepak Kanwar, 2013.
blog.zenoss.com/2013/06/the-cost-of-downtime