The following message is a courtesy copy of an article that has been posted to bit.listserv.ibm-main,alt.folklore.computers as well.
[email protected] (Ted MacNEIL) writes: > A contention which I disagree with. > It's cheaper to build one type of chip/card, and use other methods to > limit capacity, which is what software pricing is based on. aka there is a lot of upfront & fixed costs ... but volume manufacturing techniques frequently drop the bottom out of per unit costs (i.e. per unit price can be dominated by the upfront & fixed costs, leveraging common unit built in larger volumes can easily offset having multiple custom designed items). it actually costs both the vendor and the customers quite a bit to physically change item ... potentially significantly more than bare bones per unit (volume) manufacturing costs ... as a result having large number of units prestaged ... is trade-off of the extra volume manufacturing cost of each of the units against the vendor&customer change cost of physically adding/replacing each individual item. it is somewhat the change-over to 3rd wave (information age). Earlier, the cost ... and therefor perceived value, was mostly in the actual building of something. moving into the 3rd wave, much more of the value has moved to the design of something ... and volume manufacturing techniques has frequently reduced the per unit building cost as close as possible to zero. They are now doing multi-billion dollar chip plants that are obsolete in a few years. Manufacturing cost is the actual creation of the wafer ... with thousands of chips cut from each wafer (motivating move from 8in wafer to 12in wafer, getting more chips per wafer). The bare-bones cost for building one additional chip ... can be a couple pennies ... however, the chip price may be set at a couple hundred (or more) in order to recover the cost of the upfront chip design as well as the cost of the plant. It may then cost the vendor&customer, tens (or hundreds) of dollars to actually physically deploy each chip where it is useful. An economic alternative is to package a large number of chips in a single deployment ... potentially at loss of a few cents per chip ... in the anticipation that the extra chips might be needed at some point (possibly being able to eliminate cost of actually having to physical deploy each individual chip). note that the pharmaceutical industry has been going thru similar scenarios with brand drugs (with upfront development costs) and generic drugs. something similar was used as justification for the FS project ... the corporate R&D costs was significantly higher than the vendors turning out clone controllers ... including the one I worked on as undergraduate http://www.garlic.com/~lynn/subtopic.html#360pcm then the distraction of the FS effort (and drying up 370 product pipelines) is then blamed for allowing clone processors to gain market foothold. http://www.garlic.com/~lynn/submain.html#futuresys Some discussion here: http://www.jfsowa.com/computer/memo125.htm Article by corporate executive involved in FS effort: http://www.ecole.org/Crisis_and_change_1995_1.htm quote from above: IBM tried to react by launching a major project called the 'Future System' (FS) in the early 1970's. The idea was to get so far ahead that the competition would never be able to keep up, and to have such a high level of integration that it would be impossible for competitors to follow a compatible niche strategy. However, the project failed because the objectives were too ambitious for the available technology. Many of the ideas that were developed were nevertheless adapted for later generations. Once IBM had acknowledged this failure, it launched its 'box strategy', which called for competitiveness with all the different types of compatible sub-systems. But this proved to be difficult because of IBM's cost structure and its R&D spending, and the strategy only resulted in a partial narrowing of the price gap between IBM and its rivals. ... snip ... There have been some comments that the baroque nature of the pu4/pu5 (vtam/3705ncp) interface, did try & approximate the FS "high level of integration" objective. -- 42yrs virtualization experience (since Jan68), online at home since Mar1970 ---------------------------------------------------------------------- For IBM-MAIN subscribe / signoff / archive access instructions, send email to [email protected] with the message: GET IBM-MAIN INFO Search the archives at http://bama.ua.edu/archives/ibm-main.html
