to Push "Subscriber Computing" Rentals 'R' Us?
- October 20th, 1999
1999 (CNNfn) - Personal computer maker Micron Electronics said Tuesday it will
spend $210 million on its "subscriber computing" initiative. Aimed at small
businesses, subscribers will be offered packages of services including hardware,
Internet access, e-commerce solutions and desktop software, and will be billed
one rate for the entire package.
of the Micron strategy is to let customers use software such as Microsoft Office
on a per-use basis, rather than requiring them to buy expensive initial packages
or upgrades. Micron will handle the behind-the-scenes upgrades needed, and make
the software accessible via the Internet.
business leases have existed for decades, this is a significant attempt to push
the business computing model toward a rental-based hardware system combined
with a pay-per-view software scenario. Customers who cannot easily afford to
purchase hardware and software (primarily small businesses) will now find that
the entry price has dropped in the short-term. This program will provide Micron
with market share increase in segments such as startup companies and businesses
with less than 50 people. This will overflow into other areas, such as businesses
with 50-100 people. In general, this move will take market share from purchased
systems, much as car leasing took "market share" away from car purchasing.
This move also
follows Microsoft's hints that it may move to a per-use or leasing model for
its software, starting with Windows 2000. Micron feels they have a chance to
"change the world", but it is unclear if the hoped-for change would be for the
better. On the hardware/services side, Hewlett-Packard announced a similar strategy
at Telecom 99.
As with any
major purchase, users need to do a cost-benefit analysis for buying vs. leasing.
Customers, and especially their internal finance group, should also understand
that lease cost and actual cost (often referred to as TCO Total Cost of Operation)
can be vastly different. Among other things, the value of unconstrained utility,
i.e. the ability to use software freely as often as you like, will be quite
high in some organizations.
In the short
term, customers who decide they "need" to do this will be better served with
a short-term lease a year or less to see if this model is really beneficial
to their organization. It is often the case that a long-term rental costs more
than buying the equipment up front, so customers will need to ensure pricing
is truly beneficial. However, those organizations without the cash to make a
purchase, will derive significant benefits, even if the price is slightly higher