The question I like most is – “so how much money do you save me?” That’s usually a sign that we have shifted gears from pre-sales to negotiations. Even better, negotiations now start from the value we bring rather than the cost we incur.
Wholesale data capacity is quasi-commoditized (see Capacity Magazine), so market prices are known by the parties. Therefore it seems simple to calculate the value in replacing physical capacity with virtual capacity. Let’s consider an ISP with 3Gbps, paying $50/Mbps/month. By using DiViCloud, the ISP can now add 1Gbps of virtual capacity over the existing 3Gbps link. Seems simple – we provide a value of 50 x 1,000 = $50,000/month or $600,000/year.
It doesn’t end there. To add 1Gbps of traffic the ISP would typically take additional 1.2Gbps capacity, to avoid congestion. DiViCloud, on the other hand, generates virtual capacity, so there is no need to take spares; the traffic simply does not load the network. The alternative cost of 1.2Gbps physical capacity is $60,000/month or $720,000/year.
Moreover, DiViCloud’s capacity is charged by consumption, based on 95/5 model (see Dr. Peering). Physical capacity’s fees are usually for committed bandwidth, whether used or not. To compare apples to apples the ISP should consider the alternative price of burst-capacity rather than committed. Naturally this figure is higher. For example $65/Mbps/month, rendering DiViCloud’s value as $78,000/month or $936,000/year.
The typical question at this stage is – “Yes, but all you are doing is deferring costs and not replacing them. As demand increases we will eventually have to purchase additional physical capacity”. Well, if this were the case, then once the physical capacity is in place the ISP could turn off DiViCloud.
Virtual capacity is equivalent to adding an upstream pipe; it provides perpetual benefit regardless of the basic physical capacity. Actually, the ISP should always plan to take about 70% of its capacity from physical upstream providers, while 30% will be provided as virtual capacity at Half Price.