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On Saturday 10 November 2001 10:13 am, Leif Svalgaard wrote: > If as you say, server programs are far MORE efficient, people > can get by with smaller boxes further eroding IBM's revenue > and thus the viability of the platform. I think I may be missing > something here, but I can't see what. Well, you should be thinking that not all revenue is the same. Consider that if IBM sells $10 billion in iSeries that revenue must support the R&D, marketing, support etc. of that platform. Those expenses are probably different if they sell $10 billion in Wintel machines. So, it could be that selling $8 billion in Wintel is as attractive as selling $10 billion in iSeries (sans the "interactive tax"). But by charging more for the interactive capability of the iSeries, IBM reaches a win/win situation (for themselves). First, the product line stays profitable. That keeps IBM happy with the fact that they produce and sell it. Second, if there is a migration away from interactive jobs, this leads to a whole new win/win for IBM because either: 1. The need for iSeries will drop off as the revenue for interactive features drops off, so when the lack of CFINT revenue makes the product line unprofitable, the customers who have migrated away from CFINT will find it easier to migrate to IBM hardware that has not been discontinuted. or: 2. The migration of applications available on the iSeries to n-tier architecture will make the product more attractive in the marketplace allowing greater sales and increased overall revenue. This would offset the loss in CFINT revenue and keep the product profitable. Now let's suppose IBM cannot charge more for the interactive feature. What will they do? I don't think they will continue to provide the product line at a loss, so what will their choice be? If they cannot find a way of selling machines at the same price they are selling them today, then they will need to spread the overhead of the product line evenly. This would mean that the users who rely specifically on interactive processing would surely see a price break. I'm sure those machines would come down in prices as their current prices represent additional allocation of support for iSeries specific features. But the machines currently being sold a servers in the market would fall well behind the market price/performance curve as their prices went up to support their share of the load, thus cutting off the iSeries future in those markets. I think this would certainly lead to a quickly dwindling market share. At that point, the cost of the iSeries models would rise because the volume to support manufacture of the product would not be there. Sooner or later, the machine would be discontinued. The key, Leif, is to remember that not all revenue is the same. Just as you'd be much happier with getting $100 for an hour of your time than $1000 for your house, IBM has their preferences too. Now, if the iSeries is as profitable as it has been in the past, then there might be room for IBM to reduce costs and still be making as good a margin as they do in other areas. I think it is good for user's groups and customers to keep pressure on IBM to do this. But I don't know how to determine what the profitability of this area is within IBM. -- Chris Rehm javadisciple@earthlink.net And thou shalt love the Lord thy God with all thy heart... ...Thou shalt love thy neighbor as thyself. There is none other commandment greater than these. Mark 12:30-31
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