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Micron to Push "Subscriber Computing" Rentals 'R' Us?

Written By: R. Krause
Published On: October 20 1999

Micron to Push "Subscriber Computing" Rentals 'R' Us?
R.A. Krause - October 20th, 1999

Event Summary

October 19, 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.

Another component 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.

Market Impact

Although hardware 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.

User Recommendations

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 than desired.

 
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