Tomorrow's Fortune 500

I remember a particularly unpleasant conversation with a Sun executive about a year ago. The introduction of our "eco-responsible" Niagara systems had just blown up a $250,000 purchase order from a big customer, replaced by a $25,000 Niagara (sorry, T2000) order. "You're killing me," he said, "are we trying to shrink or grow this place?" What followed were some choice words about headquarters being out of touch with the field, not understanding real world challenges, pricing going in the wrong direction, etc. And frankly, pricing Niagara was a big bet - putting a price on innovation is an art, not a science. And lest you ask... yes, we're trying to grow, not shrink. But there's an interesting phenomenon in the computer marketplace, which strikes some as counterintuitive: if you double the performance of a machine, customers don't buy half as many, they tend to double their order. Same goes for utilization, if you can double server utilization via Solaris containers or VMWare, people don't buy fewer computers - they buy more. The value of innovation, at least to our core customers, is growing so fast that if the price declines, the overall return (value/price) goes through the roof - encouraging a feedback loop. Moore's Law and free software drive relative pricing down, and customers accelerate their growth. So I had two pieces of advice for the unhappy executive, 1) I'm sorry to hear about the order (executives are p...

Date: November, 29 2006
Url: http://blogs.sun.com/jonathan/entry/tomorrows_fortune_500

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