Confronting the High Prices Charged for Fiber Optic Tech

Operating data centres is not easy – it is an expensive exercise that requires a lot of capital and investment in high quality optical components. Most network engineers depend on the original equipment manufacturers for equipments that are essential in data centres such as Direct Attach Cables (DACs) or transceivers. But not many understand how OEMs operate – OEMs don’t really manufacture the optics. Instead, they get them in bulk from companies that do. OEMs make use of cabling, vendor codes and connectivity standards in order to hold on to customers. This method is called as vendor lock-in.

Vendor codes are considered very important in this business model. They are strings of characters which are saved in memory chips that are embedded in the transceivers. Their purpose is to detect compatible hardware. So if the transceivers detect the wrong code, the router or the switch would issue an alert, and stop the system from operating.

This is how top original equipment vendors such as Dell, Cisco, Juniper and Brocade operate, for which they charge hundreds of dollars, even as high as $1,000 or more, just for a piece of cable or circuit that costs less than $100 to manufacture. What is even more galling is that most customers have to link the hardware from several different vendors, as the transceivers are required to support multiple codes. This can create complications such as having your equipment made by companies that cease to exist in a few years time.

Is this fair? Certainly not. This creates an unnecessary expense for datacenter owners. What they could do is to source compatible DACs and transceivers from elsewhere, such as from China. Now, branded equipment can offer a guarantee of high performance, but the cheaper alternatives may not. This is a problem, as reliability is all important in datacenters. That’s why you have companies such as 1000 GIG, ProLabs, Fiberstore and OSI Hardware, which offer a better solution by providing high quality optics with lifetime warranty which are perfectly compatible with the networking equipment from other top vendors.

Reducing Cost – Not Quality

1000 GIG transceivers are compatible with equipment from over fifty different OEM platforms and cost 70 percent cheaper than branded equipment. The trick to this is lower expenditure on marketing, smaller margins and hiring highly talented engineers to improve networking standards. The company sources most of its parts from China – from the same factories from which companies such as Cisco and Dell source their branded optics. These equipments are then tested by 1000 GIG at its own center to maintain a high level of quality. They work with many datacenters and make sure that the DECs are delivered on time, in a matter of days, not weeks.

Compatibles can help extend the features of OEM interconnects such as on the existing Cisco, Arista or Juniper multi-coded transceivers. So, this means if you are running switches from 3 different vendors you can order an original DAC if any of them turns out to be faulty and wait weeks for the delivery. A better solution would be to have DAC cables from 1000 GIG in stock, which work with all vendor platforms. The only real issue with this model is that there could be a gap in the time from when the networking company releases new equipment, till there is a compatible to go with it as well. That’s because to create a copy, following the release of equipment, the original transceivers need to be reverse engineered. This takes time, although this is not an issue of intellectual property. All interconnects are created as per the same industry standards, but since the OEMs don’t communicate with compatible makers, the process can take long, sometimes up to 2 years.

A Bright Future for Compatible Networking Products

The networking industry is not the same as it was only a few years ago. Now, with open source projects such as Open Compute and OpenDaylight around, some networking hardware can now run on open source software. There are also many open source hardware components that run proprietary code. Another big change is that many new factories have come up in different parts of the world, and are capable of manufacturing high quality products.

Brand loyalty plays a role as well. Just as there will be people who will want to purchase branded cables, there will be a number of companies that would gladly sell such branded cables at a premium.

So, the business of compatibles continues to remain strong, because of the need to match the demand and supply equation in the market. As long as networking engineers stay loyal to certain brands such as Cisco or Dell, the demand for compatibles from young and ambitious companies such as 1000 GiG will remain strong.