% fortune -ae paul murphy

How to buy a $20,000 hammer

Sometimes people's behavior simply makes no sense - I don't grok, for example, paying for a Star Office license when you can get it for free under an enterprise software license or just use OpenOffice.org instead. One of the talkback contributers (whose contribution, of course, I can't find to reference now) said something recently that bears exactly on point "there are few IT problems a 14 Oz framing hammer, applied vigorously, can't fix."

I like that, and while I admit to having occasionally wondered how hard it would really be to make an untraceable 220 volt whoopee cushion, I'm not that big on framing hammers -they're way too lightweight. What you need is a $20,000 hammer- one that's got the bang for the job.

The source of that myth, of course, was a Reagan era defense procurement scandal in which various American senators waved $435 icons of Pentagon incompetence at gulliable, or complicent, journalists who promptly inflated the price first to $600 and later to $20,000.

In reality, what had happened on that particular contract was, at least according Harvard's Dr. Steven Kelman who looked into it, that the contractor was told to allocate total contractual overheads equally across all deliverables - raising the book price of a $15.00 hammer to $435 without affecting actual cost by a nickel.

Kelman was probably right, but the more general explanation is that certain kinds of sales have much higher costs than others.

Part of this difference is attributable to the selling organization's internal processes. If, for example, I were to buy a desktop PC from Dell using my VISA card, Dell's marginal cost on the transaction would be the (estimated) 0.7% bank charge. If, however, I were to try to have Sun Canada ship one of their higher end Opeteron workstations to an office in Grande Prairie (Alberta) their deal desk people would hold the transaction up for a couple of weeks while they ran through both personal and corporate pre-approval checklists -cheerfully covering burn scars earned from the dot dumb credit meltdown by incurring costs significantly exceeding Sun's gross margin on the sale.

Another part is attributable to the buying organization: basically the more hoops the seller has to jump through, the higher the real price will have to be. More subtly, if you have a high cost customer whose demand dominates the market for a particular product, that product's nominal price will rise for everyone.

That's why, for example, Sun's on-line store asks $1,094 for the 17" LCD Sun Ray - and that's before both the $115 smart card and $105 in applicable licensing for a total of about $1,314 per unit. I bet economists have a name for that: "supra-retail" maybe?

Of course in situations where these two factors combine you get the odd result that a company like Sun would actually be financially better off having paper work intensive customers pick up free machines then doing the paper work needed to make the sale, authorize completion, and collect the money.

That's where that $1,314 Sun Ray 170 comes from -it's a $20,000 hammer. On the plus side it works -there aren't that many user side IT problems to which, when vigorously applied, these things aren't the solution. The trick, of course, is not to pay $20,000 for them so here's a hint - well, two of them. First people should pay attention to Sun's enterprise licensing deal -it's a hassle free new way of pricing software: everything for everyone at about the cost of both ends of an Exchange CAL.

And, secondly, about that $20,000 Sun Ray? Before buying anything at list, get a look at the educational discount because that's really the basic price your sales guy starts from.

Paul Murphy wrote and published The Unix Guide to Defenestration. Murphy is a 25-year veteran of the I.T. consulting industry, specializing in Unix and Unix-related management issues.