In a previous post, we looked at trends of cost per port for data center network switching. Now, everyone is focused on cost per switch port but nobody seems to be paying much attention to the fact that every port requires a transceiver and a cable (whether optics or direct-attach copper).
Let’s look at your run-of-the-mill data center deployment to wire up three thousand odd servers at 10 gig. Pick your poison, but basically the transceiver-cabling tax % overhead stays the same, independent of the vendor.
Network Switching Costs
| Server Access Ports (10GE) | 3072 |
| Access Uplink Ports | 1024 |
| Total Access Ports | 4096 |
| Interconnect Ports (to Aggregation & Core switches) | 2560 |
| Access ASP/Port | $280 |
| Interconnect ASP/Port | $700 |
| Access Switches ASP | $1,146,880 |
| Interconnect Switches ASP | $1,792,000 |
| Total ASP Switches (1) | $2,938,880 |
| Server Access DAC Cables | 3072 |
| Interconnect Transceivers | 3584 |
| DAC ASP (3 meter) | $60 |
| Fiber Transceiver ASP (SR) | $400 |
| Server Access DAC Cables ASP | $184,320 |
| Interconnect Transceivers ASP | $1,433,600 |
| Total Cables+Transceivers (2) | $1,617,920 |
| Cable + Transceivers Overhead as % of ASP Switches Cost(3=2/1*100) | 55% |
| TOTAL | $4,556,800 |
Welcome to the 55% vendor tax.
And, where else might you have expected to pay an average effective tax rate of 55%?
In the Soviet Union. In 1990.
(page 33: http://www.imf.org/external/pubs/ft/fandd/1996/06/pdf/cheasty.pdf)
Glasnost? Niet. Support for apparatchik transceivers only.
Surely, you say, a lot of R&D investment has gone into these gizmos to justify their price? Nope, all made by the Avagos, Finisars, Opnexts et al. of the world.
And your vendor can publish thousands of RFC’s and other protocol alphabet soup in their datasheets but not a list of compatible (=the ones that they will support) transceivers??
So if you would like to see at least one of your favorite vendors sing and dance the kalinka, be sure to request the cheaper USR transceivers* for the 100m runs so common in today’s data centers 
*: A discussion on USR transceivers at Greg Ferro’s blog.
Do you imply that Avago/Finisar etc are the beneficiaries of this tax ?
Thanks for clarifying. No, what I meant was the systems vendors (the Ciscos, Junipers, Aristas et al.) charge this tax for their value-add of slapping a sticker with their SKU# on the parts.