When it comes to building or upgrading your company’s IT infrastructure,

you are likely to receive a lot of advice pushing you towards investing in
routers or Layer 3 switches, which have the most bells and whistles. These
options also bring additional (potentially significant) costs, but bigger doesn’t
always mean better.
As previously mentioned, deciding whether you need a Layer 3 switch or a
Layer 2 switch is much more dependant on your specific requirements than a
like-for-like comparison. It would be like asking whether a flat-head or a
Phillips-head screwdriver is better – the answer is always dependent on the
job at hand.
Much like the difference between Layer 3 and Layer 2 in the OSI, the main
difference between a Layer 2 switch and a Layer 3 switch is the routing
function. A Layer 2 switch only works with MAC addresses and doesn’t
interact with any higher layer addresses, such as an IP. A Layer 3 switch, on
the other hand, can also do static routing and dynamic routing, which
includes IP and virtual local area network (VLAN) communications. This
dual-layer functionality is why a Layer 3 switch is also known as a multilayer
switch.
In practical terms, this means if your network runs on a Layer 2 domain then
you would get no benefit from a Layer 3 switch. But, if you need inter-
VLAN capabilities then you will need a Layer 3 switch.

Less is more (sometimes)

It’s important to remember that operating with lower-layer technology
requires less hardware and fewer modalities of operation, which often means
an overall lower cost.
For example, a Layer 3 switch-based infrastructure needs routers to be
installed on all sites, whereas a Layer 2 system can use Ethernet switches
with router functionality as a subset.
IT costs have been rising steadily for most businesses as they look to embrace
digitisation. Now, we are at a tipping point where embracing each and every
technological innovation may actually be hindering more than helping
business growth. Today, the savvy business leader should focus on
streamlining your infrastructure and avoid investing in redundant capabilities.
In terms of a Layer 2 or Layer 3 comparison, a Layer 3 switch will cost more
and configuring it, along with the VLANs, will require further build and
maintenance costs than using Layer 2 switches. In turn, routers will cost more
than Layer 3 switches for all the similar reasons.
However, although you should seek to streamline your infrastructure where
possible, some investments cannot be avoided. For example, although Layer
2 switches are effective within LANs, their lack of WAN capabilities means
they cannot totally mitigate the need for a router to access the
internet. Determining which is better is up to you and your requirements.