Re: The Perpetual Myth of iSeries Obsolescence -- MIDRANGE-L

Remember the IBM Selectric typewriter and the type ball? That taught methe lesson. At $18 they were a bargain, well below any solution forvarying font machines from competitors. IBM admitted to a manufacturingcost of way under a dollar.

I also remember the discussions of how you "cost" an airplane design.The DC-3 had huge design and development costs, which they amortizedover a thousand planes. This seemed very reasonable because a build of1,000 units was a likely life-cycle for the design. Well, hell, wasn'tthat a boon when they built plane # 1,001, and the thousands that followed?


In other words, cost and selling price have no real logical relationship.


Peter Dow (ML) wrote:

Hi Scott,
A friend and I have this discussion over and over because I keepthinking price ought to have some relationship to cost. To keep sellingan item, a manufacturer obviously has to sell it at cost +, but if theyquit making it, the price can go well below cost. And if demand ishigh, price can go waaaay over cost.
In the case of p5 vs i5, I think it's probably more competition thancaptive market. My understanding is that AIX is a flavor of Unix, andhow many manufacturers make boxes that can run Unix? And how manymanufacturers make boxes that can run OS/400? With no competitors, IBMcan sell it for whatever price they can get customers to agree to; andcustomers agree to it because they like OS/400 and the hardware it runson. If the price gets too high, they can always move to another system,which I guess is what keeps it from being a monopoly.
*Peter Dow* /
Dow Software Services, Inc.
909 793-9050
pdow@xxxxxxxxxxxxxxx <mailto:pdow@xxxxxxxxxxxxxxx> /

Ingvaldson, Scott wrote:
No bother Steve, this is a good subject for a Friday afternoon.
Pricing IS market driven.  Frank Soltis said once that a processor costs
$10 billion to build; the second processor costs $5.  So take $10B +
$5(N) divided by the total (N) of processors sold to get the cost per
processor.  Add to that support and development costs.  Does an iSeries
customer call in twice a month and a pSeries customer call in twice a
year?  I don't know the answer to that, but I do know that when I worked
in the support center we would occasionally even get Microsoft questions
because the customers knew that they couldn't get an answer from
Microsoft!

Then there are market forces.  Why did the price of the gas already in
the tank at the gas station go up last week?  That gas was already
produced and it's cost basis did not go up.

The pSeries market is much more competitive, the iSeries market is
(historically) more of a captive market.  In the long run, if too many
ISV's decide that we're too much of a niche that will likely be the
beginning of the end.  On the other hand, if we can run every
application natively we could end up taking over the world.

I've always thought that the interactive tax hurt the AS/400's market
share, but that was demand driven also.  Many users with small
interactive needs did not want to pay for full interactive capacities.
So users with huge interactive needs paid dearly (captive market) and
some eventually migrated to "cheaper" platforms.

Regards,
Scott Ingvaldson
iSeries System Administrator
GuideOne Insurance Group


-----Original Message-----
date: Fri, 28 Apr 2006 14:46:48 -0400
from: "Richter,Steve" <Steve.Richter@xxxxxxxxxxxxxxx>
subject: RE: The Perpetual Myth of iSeries Obsolescence

Scott,

not to be a bother, but IBM made the decision just 2 yrs ago to slash
the price of the p5 and keep the i5 where it was.  A dual core p5 is
sold by IBM for $4000. AIX is $1500.  IBM software support is another
$1500. DB2 for the dual core p5 is $4600 per core or approx $130 per
user.

-Steve