csg@pyramid.pyramid.com (Carl S. Gutekunst) (07/26/88)
In article <201@pigs.UUCP> haugj@pigs.UUCP (Joe Bob Willie) writes: >Nonsense, the purpose of NCR is to make money. The typical manufacturer's >markup on disk drives and peripherals is near 100 percent. Try 200 percent, relative to OEM cost. You'll find even greater markups on items the vendor has a lock on, e.g., memory boards for a proprietary bus. A vendor's justifications run something like this: - It costs the vendor something to physically pass the drive through. There are the handling costs associated with receiving, inventory, and shipping. This definitely justifies *some* markup above OEM cost. - Vendors perform drive *systems* tests, that is, the drive installed in the system, running the vendor's software. The drive manufacturer obviously does not do this, and certainly a distributor does not. In the case of NCR, they *do* perform more rigorous drive tests than the drive manufacturers do themselves. - A peripheral provided by the vendor will be covered by your maintenance contract. So you are paying the costs associated with the vendor educating its field staff on how to service that drive. This argument is actually more specious than most, since (1) you should be paying for the cost of maintenance entirely in the maintenance contract, and (2) most vendors don't actually service disk drives, they just replace them. But there are various competitive reasons for a vendor to shift costs from field service to purchase price. - Vendors are in the business of making money (obviously), so they will charge the highest price they can and remain competitive. Systems vendors generally do not consider themselves as competing with drive vendors, since they know (correctly) that the majority of their customers are not capable of instal- ling a disk drive. So they set prices not on what the drive vendors charge, but on what other systems vendors charge. This is a game that changes with time. Pyramid was competing with DEC back in 1984, so Pyramid's prices for Fujistu Eagles were set to compete against DEC's RA-81. Now Pyramid also competes with Sequent, Gould, CCI, and others, so the price is chosen to be competitve with *them.* - There are competitive reasons for shifting costs from the CPU to the periph- erals. On *systems* bids, this makes no difference. But many competitve bids don't include peripherals. (Bright lads up there in Washington.) So the ven- dor has good reason to decrease the CPU cost to below where it makes a profit, and make up the difference in peripherals. In summary, the vendor is selling you security -- here is a drive that works, you don't have to worry about it. If it breaks, we'll fix it; you don't have to gamble. And generally the vendor wins -- most customers *are* willing to pay a significant premium for a drive that the vendor assures them will work. I am much more sympathetic towards vendors that allow you to add your own peripherals, and allow you to take your own risks, even if they overcharge for the peripherals they sell. I *believe* Pyramid's policy is that you must buy at least one drive from them, so that there will be at least one known good drive on the system (for maintenance purposes). Additional drives you can add yourself, and many customers do. The aftermarket for DEC-compatible periphe- rals is legendary, and I am aware of a number of Sequent and Sun customers who have added their own drives. I have also added my own drives to the NCR Tower, although I was working for NCR at the time. :-) Disclaimer: I am speaking only for myself, obviously. <csg>