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Hardware Economics

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PCQ Bureau
New Update

Bl.JPG (14145 bytes) face="Arial" size="2">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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