[SunRescue] New Sun midrange servers...

[Ken Hansen]

Chris,

I think your cost estimates are to low, and you are leaving out other costs:

1) There was a non-trivial effort to design, build, test and manufacture these machines - on the order of 10's of millions IMHO.

2) Solaris had to be "convinced" to support this architecture (I am speaking of the effort involved, not that Sun actually had to decide to support it), that was a non-trivial effort as well.

3) The support afforded a site that purchases a $2M machine is several orders of magnitude greater than the typical Sun customer.

4) The salesman spend more than a month on such a sale - clients don't typically know they have a $2M problem, they think they simply need to add more mid-range servers. The salesman convinces them that their server farm is inefficient, convinces them to upgrade, then engineers design a cutover plan and implement it.

5) The high-end machines are built on-site, at a non-trivial expense (they don't ship in *really* big boxes, instead a few hundred boxes. (I once watched a mainframe being built, it took several men several 12-14 hour days to complete it, and when they were done, it was then ready to be powered-up for the SEs to test on before cutting over for the client)

6) They have to take back all/most of those midrange servers you sold the client in the last year or two to help support the cost-savings claim (see #4 above).

7) You have to buy a lot of expensive meals for the client to convince them they need this machine.

8) You have to dedicate a staff to bring the site admins up to speed on the new hardware (Sun does not just drop-ship a few hundred brown cardboard boxes with a one really big "Read Me First" Card ;^).

9) Nobody has $2M *extra* in their budget, most such sales are made in one accounting period, but do not close until a later accounting period, when the money can be "arranged for".

And finally, you have to get your terminology correct - they are not selling a machine, they are selling a "solution" (see above #1-#9).

Ken

> -----Original Message-----
> From: Chris Byrne [mailto:chris at chrisbyrne.com]
> Sent: Friday, March 23, 2001 2:26 AM
> To: rescue at sunhelp.org
> Subject: RE: [SunRescue] New Sun midrange servers...
> 
> 
> What truly amazes me is the margin on high end hardware.
> 
> Okay, a fully loaded E10K for example can go for 2 million 
> bucks plus. The
> actual manufacturing costs on it are only a few thousand, 
> probably less than
> 10k.
> 
> The IP they have to license from other companies is minimal 
> so I figure it's
> covered in the production costs.
> 
> The technology is something like seven years old at this 
> point, and it's
> development costs were fully amortized a long time ago.
> 
> Selling the thing takes maybe one man months (probably WAY 
> less. If you need
> an E10K you know it and aren't likely to need a lot of sales 
> effort). These
> are people who make something up to 300k a year if they get 
> all their bonus
> targets and max their commissions, so let's say 1/12th of 
> 300k is 25k (If
> you don't believe a salesman makes that much watch Glengarry 
> glen Ross and
> listen to Alec Baldwin's speech.)
> 
> Let's say another 25k to help cover the costs of marketing, 
> storage, and
> overhead for the company, in fact lets take our total, and 
> round it up to
> say, 100k as the actual cost to Sun every time one of these 
> bad boys goes
> out the door (I think it's a hell of a lot less personally, 
> probably more
> like half that).
> 
> At that point they are selling the machine at a 2000 percent 
> markup. The
> only other products that sell at that kind of markup are diamonds  and
> recreational pharmaceuticals (up to 10,000 percent markup on 
> both of those
> actually).
> 
> But if people keep buying them at that price, and they sell 
> them faster than
> they can make them so obviously they do, Sun will keep 
> sealing them at that
> price.
> 
> Chris Byrne
> 
> -----Original Message-----
> From: rescue-admin at sunhelp.org [mailto:rescue-admin at sunhelp.org]On
> Behalf Of Jonathan Katz
> Sent: Thursday, March 22, 2001 08:35
> To: rescue at sunhelp.org
> Subject: Re: [SunRescue] New Sun midrange servers...
> 
> 
> Pete wrote:
> > I've got a wish list that includes the deskside Sun Fire 
> 4800... Man, that
> would
> > make a nice basenji.com, with 12 procs and 96GB of RAM... 
> <big, dreamy
> grin>
> > All I need is $365K for the base 4-proc/8G system, and 
> whatever else the
> other 8
> > procs and 88G costs...
> 
> Yeah.. but think discount :)
> 
> 
> -Jon
> Jonathan Katz = J. Random BOFH = http://jonworld.com = 
> jon at jonworld.com
> 	"Mhz is the benchmark for childhood head-injury victims."
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