by January 6, 1999 0 comments

Bl.JPG (14145 bytes)In October 1998, a Delhi-based design agency Media Workshop bought
57 Hewlett-Packard PII/333 systems, a couple of servers, and networking equipment, to
install in its new office building in Noida, UP. The bill crossed Rs 1 crore. But with
last-minute delays, the new building took an extra six months to complete, and the PII
systems stayed in their cartons. Their value rapidly declined. When the company was ready
to move, newer versions of those Rs 85,000 PII systems listed at Rs 55,000, and the
original price would have got them power-packed PIIIs. Through the six months that the
systems stayed in their boxes, their value dropped sharply, while the company kept paying
interest on Rs 1 crore. Over 1998-99, PC Quest spent an average of Rs 15,000 per PC
on hardware upgrades, from RAM and video cards to hard disks and monitors. PCs that could
not be upgraded–including several branded PCs–were simply replaced.

The last few weeks have seen yet another round of price
cuts by CPU manufacturers. Price cuts are a normal occurrence in the PC industry. What is
abnormal is the fact that the total cost of owning hardware is going up, not down.
Industry observers tend to attribute this to the rising cost of software and support.

Software/support costs form a substantial chunk of the
total cost of ownership, but they are not the only reason for increasing total cost of
ownership. It’s my contention that the cost of ownership of hardware alone is
increasing. There’s a very interesting relationship between cost and obsolescence,
which I intend to explore in this column.

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