Cradlepoint shifts business model and lowers price points with new NetCloud subscription pricing

The new, simplified solution packages for Cradlepoint Branch, Mobile and IoT solutions are not an option, but will become the sole route to market after May.

Boise-based WAN networking specialist Cradlepoint is pivoting their business model. While the company has been a force in 4G LTE-enabled enterprise network solutions – and plan to do the same in 5G – they have also seen the industry shift toward the cloud, and adjusted their old hardware-centric model. Now they are taking the next step.  They have announced new NetCloud Solution Packages – a subscription-based, single SKU- oriented model of consuming Cradlepoint solutions which, after a short transition period, will be the only way to consume the company’s solutions going forward.

“In 2016, we made a very hard shift to software and cloud, where we made a majority of our R&D investment in those areas,” said Todd Krautkremer, Cradlepoint’s CMO. “What we are doing now is making a shift to a subscription-based pricing model.”

Customers have been able to purchase Cradlepoint in a cloud on a subscription basis in the past. That in itself is not new.

“What is new here is that the cloud subscription now combines the hardware, the software, and the 24/7 support, as well as a lifetime limited warranty on the hardware,” Krautkremer said. “We have some legacy hardware platforms that will not be supported, but they are being end-of-lifed.  If they have something like a recent IBR900, they will be able to upgrade their current packaging into their new model.”

The NetCloud packages are tailored to the three solution areas that Cradlepoint addresses: branch network solutions; mobile solutions, and Internet of Things solutions, and offer a single SKU in each.

“We have packaged the essential features that each of these need into their SKU,” Krautkremer said. “What IoT needs, for example, is not what branches need.”

These packages are not designed as an option, to fit certain use cases or customer preferences. They will soon be the exclusive model going forward.

“There will be a transition window until May, where they will be able to choose, but after May, it will be the only way to purchase,” Krautkremer said.

Krautkremer stressed that their subscription pricing offers much greater value for customers.

“The new model now includes our 24-7 support, which was very expensive before,” he said. “It also provides limited lifetime support, which didn’t even exist before.

The core services are now all included in the basic package, which is new for Cradlepoint.

“In the past, we had a Good, Better, Best system where the good stuff was available at the top level,” Krautkremer said. “We have now flipped it. The Good, the Better and part of the Best are now all in our core Essentials Package.”

That change in philosophy is directly related to the subscription model.

“We give them most of our best stuff in the basic package because we want them to renew,” Krautkremer said. “This will maximize renewals. Giving our best support up front also lets us dramatically reduce the number of SKUs.”

There is an advanced option that customers can purchase, but it’s not all the best stuff, just things that are important in some use cases.

“This includes things like BGP routing and advanced application analytics,” Krautkremer said.

The overall cost of these packages will significantly lower the prices customers pay, as well as giving them more than they were getting before.

“This significantly improves our competitiveness in the market,” Krautkremer indicated. “We were priced at too much at a premium before, so partners sometimes had to find lower-priced solutions to win the deal. We are okay with not getting all the margin up front like we used to, because with the subscriptions, we will get it over time”

On the new IOT NetCloud solution, the cost will be $USD 539, compared to $771 for its equivalent in the old system. That’s a 30 per cent savings.

“It’s not only less expensive, but it’s materially better because now IoT Security is bundled in,” Krautkremer said.

For the Mobile solution, the savings is 14 per cent, $USD 1029 compared to $1189.99 before.  For Branch, the savings on the AER1600 is less – 6 per cent – because Krautkremer said this solution was already competitively priced. It will now cost $USD 1139, down from $1210.99. However, the AER2200 has a significant premium compared to the old AER3100 at $USD 1379, down from $2060.99 – 33 per cent less.

“All of these also include our NetCloud Perimeter solution, as an additional differentiator,” Krautkremer added. All pricing is based on 3-year contracts.

Cradlepoint goes to market exclusively through channel partners, and so the channel’s attitude to this major change in the go-to-market model becomes critical.

“You will see all kinds of responses, from enthusiasm to resistance, but overall the reaction has been positive to enthusiastic, although there are still a lot of questions,” Krautkremer said.

He indicated that reaction has been different among distributor, VAR and MSP partners.

“Synnex and Ingram Micro, our distributors, are both already well into a cloud model, so this is fine with them,” Krautkremer noted. “Our VARs tend to be elated. This makes their life simple, because they don’t want to stock stuff anyway. Our VARs would also rather sell us than plug holes with another product, which they had to do before when we were more expensive, so they love this.”

MSPs have been a trickier issue.

“MSPs are still kind of a little ‘wait and see’ because part of their value is taking hardware inventory and staging it before sending it to the customer,” Krautkremer said. “A lot of that will now be done in the factory, so we have removed that value-add. So we will have a special program where they can continue to control value. They can still hold inventory, but the way packages are now, if you buy inventory for packages, you have to pay on the subscriptions. Through our Partner Inventory Account Program, we delay the entitlement clock until it ships to the customer. They can set up an account with this flexible entitlement, so they don’t get subscriptions before they deploy.”

In addition to the new pricing and bundles, Cradlepoint also appended a couple of products to their announcement, which are part of the NetCloud Branch solution

“As part of our strategy to drive more software value, for 5G we have added a new router and new access points that allow us to build a completely wireless branch,” Krautkremer said.

The Cradlepoint AER2200-600M Branch Router is the world’s first LTE router with 3-carrier aggregation, and the first SD-WAN-capable router to integrate the latest LTE Advanced modem, with a maximum download throughput of 600Mbps.

The Cradlepoint AP22 Branch Access Point is designed to provide affordable 802.11ac wave2 for small branch networking solutions. It features a full security feature suite, and full application visibility when pared with an AER router.