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Tech Talk: Expert on Comm Equipment

On October 10, we hosted a fireside chat with Chris DePuy, Technology Analyst and Co-Founder at 650 Group. Our discussion included Network-as-a-Service (NaaS), unit versus revenue trends in campus networking, and consolidation/partnerships to provide all the elements of a network managed from one pane of glass (usually in the cloud). This report contains a transcript of our conversation, which can be accessed on demand. DePuy outlined how NaaS consists primarily of ethernet switching and enterprise class wireless LAN. Historically, these two markets have been sold upfront and companies buy the equipment and operate it themselves. NaaS is a very low single-digit percentage of the total revenue associated with campus networking, but paying monthly has several attributions that both vendors and customers like. These include lower capital outlay and possibly lower operating costs for customers (the vendor should be more efficient). For vendors, the stickiness is greater, recurring revenue is more consistent and highly valued, and they sell the services as well. We also discussed the trends over the last couple of years in campus networking, as units are lower than expected recently as offices stay empty, but the supply chain has caused prices to rise. DePuy mentioned that he has seen average selling prices for access points grow 40-50% depending on the vendor versus prices five years ago. DePuy highlighted how the desire to have everything easily managed has driven consolidation so that vendors can offer everything. For example, a networking company would partner with a security company and therefore do a little bit better in both markets. That leads to an acquisition, but now it could be by the security company as it often has a higher market capitalization and P/E. Tech Talk consists of short discussions of the technical issues surrounding a technology investing topic. See previous editions of Tech Talk and other WTR technology reports here.