Networking vendor Vyatta says it has established a way for companies that provide cloud-computing services to organizations to enjoy the same flexible pricing options they are giving their customers.

Vyatta CEO Kelly Herrell says the company is heralding "the radicalization of the pricing model for service providers" in a blog post on Monday.  He explains that the way service providers acquire the networking infrastructure to support their customers is out of sync with their own business models, since these providers have to pay for costly networking equipment, as well as installation and configuration fees, upfront. Meanwhile, they offer their customers pricing models that are far more attractive, such as monthly fees or even pay-as-you-go options. But, based on those pricing models, it could take years to cover the cost of the networking infrastructure gear that those customers base their businesses on.

Vyatta recently launched its Service Provider Licensing Agreement that includes options such as paying monthly, instead of annually, for the vendor's software-based routing, firewall, and VPN products that run on off-the-shelf hardware. The new agreement also offers options for service providers to only pay for systems in use over the past month, says Herrell. He calls it pay-as-you-go networking.

Herrell offers up this example:

Over the course of six months an SP (service provider) adds 100 new customers and therefore needs 3 new routers, 80 new firewalls and 20 new VPNs.  Over that same six months, 10 existing customers churned and that revenue stream stopped.  Plus, 25 existing customers grew their infrastructure so their network scale-out grew, requiring 10 firewalls and 8 VPNs to be replaced with larger units.  So for six months the SP is a) buying a lot of new infrastructure, b) physically shifting around some existing infrastructure, and c) shelving some units that were outgrown.  That's an ugly combo and it hits the SP's bottom line right away.

Now consider how that scenario is addressed with Vyatta.  New virtual routers/firewalls/VPNs are spun up with hardly any CapEx; unused ones are simply deleted; and existing ones are scaled up by allocating more hardware resource via virtualization.  And the cost?  Small and time-based, and calculated AFTER the SP's customer billing cycle.

Will service providers who use Vyatta's products under this new licensing agreement pass along those savings to their customers?