[ale] Compaq Reliant web server

[Jeff Hubbs]

I'm quite familiar with the situation Bao is describing (I was there!).  The
company's costs, regardless of what they were, were covered by the
Government (read: YOU, the Taxpayer!).  It's the TOTAL AMOUNT that matters -
the "hit" that the Taxpayer is left covering.

I am finding that there is an arbitrary and artificial economic school of
thought that is being applied to IT these days and it's causing an
irrational thought process.  Computers, software,  and related equipment
have functional and economic characteristics that are very different from
any kind of assets used in any economy ever before.  I could give you all
kinds of analogical examples illustrating this with various amounts of
relevancy, but try to imagine what it would be like if a textile loom had
the economic and functional characteristics of a Windows NT server:

It would wear out LESS the MORE it was used.

At no additional cost and without much effort or downtime, it could turn
into a knitting machine, an industrial press, or a pattern cutter.

The best looms of 1996 could only go about 1/10 as fast.  In 2006, looms
will be 10 times faster still, and you won't be able to buy a new one slower
than ~7 times faster even if you don't need to make fabric any faster than
you are now.

It never had to be dismantled for regular maintenance; the parts that were
the most likely to fail were so plentiful and nonspecific to looms that some
of them could be bought in a store at 6PM on a Sunday in some big cities
(think Fry's).

You would have to pay extra for each user of the loom's output (think Client
Access Licenses - to fold Oracle license pricing into this thought
experiment, imagine that the cost of yarn for your loom was proportional to
how fast your loom was).

Can you see how freakish and surreal this is?  Only now that software and
hardware companies are multinational, multi-tens-of-billion-dollar concerns,
computers are in the majority of Americans' homes and businesses, etc. has
this really started to get to be a thorn in our collective sides.

- Jeff







-----Original Message-----
From: Bao C. Ha [mailto:baoha at sensoria.com]
To: ale at ale.org
Sent: Thursday, July 12, 2001 2:20 PM
To: 'Dan Mount'; ale at ale.org
Subject: RE: [ale] Compaq Reliant web server



Of course, you are correct, from a bean counter's point of
view.

I am viewing it differently, however.  There was already an
installed base of computer equipment.  There is a constant
flow of equipments to be upgraded all the time.  This is
a company with 25,000 people in one location.  And, there
was also a hand-down process to reuse equipment.  Although,
computer equipment is usually written off after five years,
their useful lives are longer than that.  I can sit down
with a bean counter to show that it makes sense to manage
the computer procurement better by buying it than to lease
it.  

In business, we do use leased equipments.  It sometimes makes
sense with high-end capital equipments.  

Bao

> -----Original Message-----
> From: owner-ale at ale.org [mailto:owner-ale at ale.org]On Behalf 
> Of Dan Mount
> Sent: Thursday, July 12, 2001 11:03 AM
> To: Bao C. Ha; ale at ale.org
> Subject: RE: [ale] Compaq Reliant web server
> 
> 
> -----Original Message-----
> From: Bao C. Ha [mailto:baoha at sensoria.com]
> Sent: Thursday, July 12, 2001 1:22 PM
> To: ale at ale.org
> Subject: RE: [ale] Compaq Reliant web server
> 
> <snip>
> 
> All of the computers are replaced by leased ones.  The
> 3 year-leases cost more than just to buy the computers
> outright.
> 
> Unfortunately, your tax-payer money is paying for these
> mis-management mistakes, which actually showed up as
> progresses.  This was an IT department which rebooted
> Unix servers at least once a week to fix a memory leak
> problem.
> 
> </snip>
> 
> I'm not an accountant (bean counters feel free to 
> elaborate/correct me),
> I'm not sure of specific numbers, but here is how I 
> understand the lease
> versus purchase decision.
> 
> Would you rather come up with all of that cash out of pocket, 
> or pay for
> it over time? A company buying large amounts of equipment 
> would run out
> of cash trying to buy all of the equipment that it might need. If you
> lease, you just start making monthly payments. Also leasing gives the
> company opportunities to write off the cost of the equipment 
> in the time
> of the lease. At the end of the lease the company would 
> probably replace
> the equipment anyway. Why not finance? Well, in certain cases it might
> be attractive, but leasing generally gives the company more 
> cash in hand
> and a quicker 'depreciation' versus purchase. Go talk to your bean
> counter about capitol expenditures versus leasing and he/she can give
> you more insight to the tax/financial implications that each brings.
> 
> DM
> 
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> 
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