Blade Watch

About gosh it must have been 17 years ago, my dad was buying a new car, it was between at the time a Vauxhall Carlton (or GM in the US), and a Volvo. The Volvo man said basically, “it comes with a stereo, steering wheel and seatbelts…”, the Vauxhall (or GM if you like) came with everything, leather seats, air conditioning, so a Vauxhall Carlton was ordered and delivered to a very pleased daddy.

A few years later, it was car time again, dad looked around, another Vauxhall, a BMW or a Volvo? As a result of re-structuring some more interesting products, dad turned up looking at these Volvo 850’s, and was astounded when the man said, “if you want that, buy the SE pack, it’s £2000 but you get……..(a very long list of stuff)” basically everything my dad could ever think off (though my little brother noticed something called electric seats), but I’ll move on.

They’d changed the pricing structure, they had re-branded, re-badged or compartmentalized the cost. This is the base (but we’ve only sold 3 base ones world wide), it’s supplied with these features and functions. If you like you then choose bundles for enhanced features, (like the S or the SE pack in the Volvo 850 world at the time), which brings us on to my concerns with pricing in the IT world.

I remain a fan of the concept of compartmentalizing the pricing structure, it allows the end user to choose the features, the components they need to deliver the service/features they need. However, the issues ignores two challenges, marginal cost, I wonder if it’s not cheaper to supply one unified configuration or a very limited variant on that theme, a light and full version rather than effectively a per customer configuration.  Secondly everyone loves a bargain, by focussing on the low initial cost, you run the risk of disappointing the customer when by the time they go through everything, add on the bundles the price is significantly higher and everyone feels disappointed. I’m also concerned that in lowering the cost you might reduce the user experience for what is in real terms reduced savings?  Can we not have a McDonald’s style meal, or like the Volvo, standard, S and SE? Entry, middle and Club class?

There is something though that I’ve noticed more recently the concept of licensing, of packs, of bundles/extras.  I appreciate that software companies need to earn revenue, they need to protect their intellectual property, but as the CIO and the specialist both mentioned to me on separate occaisions that the list of what’s not included in the box seems to be getting that little bit longer than what is deemed an extra function, an add on which you do not need to use if you wish to use the product.

That’s fine, but we need to address and consider what is a core function, whether it’s virtualization, operating systems, database or monitoring, there are core aspects of the product which I feel should be included, put finely, I’ll buy the SE pack, but the per socket/per instance/per data center/per ‘excuse number seven’ as to why the base price is £2 million but an extra £700,000 for this feature of the bundle pack and that part is a fine line.  I wonder if this has not increased the adoption of open source?

As the CIO had complained to me, the cost of an extra processor on their public facing database server in licensing costs was more than replacing the hardware – that CIO was now wondering is it that database he needs, or whatever open source downloaded written by a guy called Marvin on Tuesdays version.  Or the specialist who illustrated wonderfully how the lines had been re-drawn so that in the new version, what was core is now ‘an extra feature’.

The reason for the article was to highlight that as we virtualize, as we consolidate, as we achieve more with less, using smart technologies, even smarter applications and open source products, we should be making it cheaper to use the ‘original products’, so end users want it. Windows is THE example of this, if Windows XP was £40 even £50, I wonder how many small businesses would be found running illegal copies of Windows, or indeed might be thinking you know what stuff it, I’ll get a mac, I’ll try this linux stuff, or even application streaming/Citrix.

By making it expensive, by making bits extra, you make the end user think:

1. Do I need it?
2. Can I buy it from someone else
3. Can I get it done in house or buy in a product that’s cheaper

Could it lead to the end user experience being as one end user had said to me, “…frankly it’s pants, everything’s extra, designed by people from Neptune, I’ll do everything I can not to use it or recommend it.”

I could be accused of being emotional, but what you need to consider is internal mathematics, yes cloud might arise, outsourcing could transform the landscape, but eventually we can only shift the cost, play with the maths so long.  Like the CIO had highlighted to me, the recent quote he got to monitor 1200 blades in his data center in sunny Wales, was £20 per blade, fine if you’re deploying say 50 servers, but remember that’s a monthly cost. Now the monitor people might say “but look at what you get for that”, but consider it’s not them that have to convince the application owner, the business sponsor that they need all that functionality for a bunch of blades running in a grid farm which is going to cost him £24,000 per month in order to conform with IT standards for support.

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