Layer 2 vs Layer 3 Networking: What’s the Big Deal?

How do I know what type of topology should I use?
One of my network engineers always chooses Layer 3, his reasons are that Layer 2 creates much more broadcast and I am not entirely sure about this.
In which of these two will I spend more money on equipment. Which one is more heavily loaded?
I would like to understand when and what to choose, does this obey to type of traffic (audio, data, etc)? size of my network? Others.
Thank you
Luis Diego FloresAsked:
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Mal OsborneAlpha GeekCommented:
Layer 2 does everything based on MAC addresses. It does not understand IP at all.
Layer 3 recognises IP addresses, and can do stuff like routing.

If you only have a single subnet, then Layer 2 switches are fine. Layer 3 switches can function like a router, and can route IP packets between VLANS.
Andy SCommented:
As mentioned, Layer 3 understands IP's, so you'll usually spend more money on L3 equipment.
In spending that money you'll also get more functionality,  If you have a larger network and / or want to use IP to do things such as restrict or route your traffic, then L3 it is.
If you want to connect a small flat network L2 would be fine.

If your budget allows for it I'd agree with your network engineer and get L3 stuff nearly every time.
In your network you need at least one L3 device (depending on size of your company, you may need much more than one). L3 switches can route traffic between VLANs much faster that routers do, so if you want fast network that's the way to go.
One of my network engineers always chooses Layer 3, his reasons are that Layer 2 creates much more broadcast and I am not entirely sure about this.
L3 devices break broadcast domains, so it will keep broadcast traffic at low level, so your network engineer is right. L2 and L3 switches work at the Layer 2 level the same way  so on the places where L3 functions will not be used (mostly access switches) usually there's no need for L3 switches. Even new Cisco recommendation how to build your network is to get L3 devices almost anywhere...

Since I don't know exact topology (place in topology, and operations that switch should perform) it is hard to say when it is justified to buy L2 or L3 device.
There would be a few basic criteria for choosing L2 or L3 device:
- location of switch (access switches are usually L2, distribution and core switches are always L3)
- size of network (big network - you will need a lot of L3 device to break broadcast domains)
- some function present on L3 switch that is not present on L2 switch and you need it

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Asad KhanCommented:
Layer 2 is Mac-Address based (traffic forwarding) so you need Access layer switches (Cisco 2960s, 3500 etc.), But if you need to route data between different VLAN's then you must need Layer 3 device (Cisco 3750, 4500 etc.) which are ofcourse more expensive as capable of handing network layer. Layer 2 topology works If you have small business and handling by one VLAN/subnet.
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