AMD [IBM] press release

[Bob Drzyzgula]

On Wed, Nov 20, 2002 at 10:25:29AM -0800, Dominic Wu wrote:
> 
> Brand names do not necessarily add significantly to the price of all units.
> In the cases of both Dell and Intel, economy of scale kicks in and the
> heavily marketed "Dude, you're getting a Dell" and "Intel Inside", while do
> nothing to add intrinsic value to the end product, nonetheless has the end
> effect of lower Workstation and CPU cost for the masses.  If only AMD sold
> as many Opterons (or Athlons, for that matter) as Intel does the P4's and
> the P4 Xeons, you'd see more performance at even better values.

Yes and no. I agree with you that the intensive marketing
by these companies is a major factor in raising the
volumes, and by consequence lowering the prices, for
these chips. And I agree that, for like specifications and
sufficiently small purchase -- like one or two systems --
a brand name system can be cost-competitive with privately-
or locally-assembled systems.

However, there are circumstances in which the brand name
does create a premium. At my job, my group deploys about
three hundred systems -- including desktops and servers --
per year. I have never, in many years of doing this, been
able to find brand-name systems which precisely match our
requirements. Always, to get what we need, we would have
to take stuff we don't need: Operating system licenses,
application software licenses, cheap keyboards and mice,
service contracts, it's always something. At the same time,
it is rare that we can get them configured with everything
we *do* need: Fiber-optic NICs, or LS-120 drives, for
example, have been issues in the past.  Yes, Dell would
sell those things to us, but they wouldn't integrate
them into the machine -- they send them in separate
boxes -- because our volumes are too low to justify a
custom configuration. Then there are the things that they
simply will *not* provide at all, like detailed motherboard
documentation and spare parts in bulk up front. (We do all
maintenance in-house for a number of reasons, including
security and response time). Lastly, there are the things
that a brand-name system is likely to contain that we would
never have chosen ourselves, such as inferior disk drives.

In the end, by assembling the systems ourselves, we are
able to carefully optimize what we purchase to exactly
meet our needs, and our purchase volumes are sufficient
to bring bulk pricing (you should see the prices you
can get when you order, like, 150 motherboards with no
handling required). We are able to buy spare parts
in the same batch as the originals, so there's never
a compatibility problem after a repair and we don't
have to pay premiums or suffer repair lags because of
out-of-production parts. (If we run out of spares of a
certain part, we'll usually move to a different but but
equivalent component rather than buy more of something
known to be problematic.)

OEM parts come with documentation that is much more open
and complete.  Some parts, like enclosures, keyboards, NICs
and LS-120s, can be used in multiple generations of systems
(we replace the guts every eighteen months, one third of
our staff every six months, which minimizes generational
performance skew, and allows us to buy less-than-leading
edge parts, which are *much* cheaper than the latest,
greatest thing.) We buy retail software licenses that
can be carried forward from one hardware generation to
the next, and in many cases eliminates the forced-upgrade
syndrome that affects many brand-name customers. We can
pay a little extra to get premium components like Seagate
Barracuda disk drives, that minimize maintenance costs and
downtime for users.  The labor to assemble, image and test
one of these systems is within a few minutes of what it
takes to unpack a brand-name system, integrate after-market
parts, re-image the hard disk, and test. And, we never have
to waste staff time arguing with a maintenance contractor.

We *do* have to maintain a competent staff and a well-
equipped integration facility, but tools and ESD benches
are cheap compared to computers, and the empowerment
that comes from all this self-reliance does wonders for
job satisfaction and staff retention.

--Bob