What do users REALLY want?

["Leslie A. Walko" <attila@FLASH.BELLCORE.COM>]

Date: December 20, 1989
Org: Bell Communications Research

Having read all the foregoing discussion about the SLUG agenda/wish-list
I find it difficult to actually determine what users really want.  I
believe that to keep users happy, users themselves have a responsibility
to say what problems they are encountering and suggest ways of how it
may be fixed by the hardware/software vendor.

So here are some of the things that would help us.  Please note, that I
temper my wish list with an underlying assumption that the vendor must
make money while fulfilling my wishes. (Yes, it would be nice to have it
all for free; no, I don't think it will happen that way. The perennial
question: should/is/will Symbolics be a hardware/software company is
answered --albeit in a curious fashion.)

What is at stake?  Will our environment be around say in 2-3 years?  Or,
will the high prices kill it?  Why is the price high? (Here I presume
that most users are happy with the quality of the software, hardware,
service, etc., but they have real problems with the price.)

So, why is the price *too* high?  The high price of hardware is a result
of (mostly)
	1. small production volume
	2. hidden software subsidy.
I believe that much of the unhappiness faced by the users, the high
price image of the hardware, and the sales problems Symbolics had are
due to #2, cross subsidy of software.  This leads to #1 which makes the
whole thing worse.

To begin with some facts:
Note that when one pays $75,000 (nominally) for an XL400, the
environment is "free".  On the other hand, a MacIvory is available with
a runtime environment or with a development environment.  The latter is
50-80% in addition to the cost of the MacIvory 1 or 2 board.

First suggestion:  
Sell processors with free "runtime" licenses, and charge for development
environment.  I think my management would be willing to pay $10-15,000
per XL and UX *development* environment in return for dropping the
hardware price by the same amount.

So, what is the advantage?  Basically, this would bring Symbolics in
line with the industry. When you buy a SUN you do *not* get a fancy
development environment for nothing.  When you buy a VAX/DecStation the
price of the software can be 50-150% of the hardware. If you want a
development environment you must buy it from someone.  By unbundling the
price, the user benefits because they only pay for what they want;
Symbolics benefits because, they will be able to sell delivery machines
at the lower price, almost certain to sell development software.  The
user further benefits since in most organizations, including ours, the
hardware and software come from different budgets.  Hence the cost is
born by the organizational structure obtaining the benefit.

Second suggestion:
Port some of the very attractive layered software to run on Unix.  This
means porting
	Joshua, Statice, Concordia.  
With the rumored new Lucid compiler, the performance may be acceptable
for many applications.  The port would increase sales volume, and
generate enough revenue not only to pay for itself in relatively few
sales, but has the potential of becoming a real profit center for
Symbolics.  This I suggest, would lead to lowered unit cost for the
licenses.

Taking this argument one step further, Symbolics should make a serious
attempt to port the compiler, debugger, inspector, Zmacs, Zmail... etc.
to Unix boxes.  By selling it in pieces, anyone would be able to effort
what they want.  Selling the whole lot together would generate more
revenue than  the bundled price.  Furthermore, this may be a good way to
build a survival strategy for Symbolics.  If the hardware market
collapses, they should remain a viable software company.

Since you probably heard all of the previous theoretical suggestions
before, the following are some down to earth practical ones.

Third suggestion:  
Sell the UX400 at $15,000.  Sell the XL400 at $25,000.  Yes, don't
laugh.  [Remember the charge of $10-15K for the development
environment.]  Since the development is actually amortized, there would
be very reasonable profit in this at 25K.

Sell the upcoming 20MHz XL400 at $35,000.  Most managers, including
mine, will think that 40% price premium for 300% clock speedup is a GOOD
DEAL.  Six month later drop the price 5K, another 6 month drop it 10K,
bring the next-next machine in at the old price.  (This is what all the
Unix vendors do.)

Can Symbolics make money at these prices.  I believe that this would be
the case. (I estimated the price of the chips, board, disk, etc. and the
numbers seem to work out.)  What this would mean is that Symbolics would
have to increase their volume. 

How much would they have to increase sales volume?  About 3 times
current rate of sales.  Where to get the customers?  As it turns out, I
checked the serial numbers of the XL400s that came in June and the ones
that arrived here on September 7th. Simple arithmetic tells me that,
relative to the size of the installed base, they are not shipping a
whole lot.  It is not unusual for a micro computer maker to turn over
more than 35% of its installed base in one year.  Even the most sluggish
mainframers like Unisys turn their base over about once every 7 years,
or about 14% year.  Based on the estimated size of the Symbolics
installed base, they are turning this over a lot slower than even the
worst performing mainframers.  So, a little price incentive would go a
long way towards keeping users happy and making money.

Fourth suggestion:
4MW of memory for the XL400 list at $15,600.  This is a joke! I can get
1MB plug-ins for the SUN or DECStation (with ECC) for <200, and about 240
respectively. If Symbolics brought their memory prices in line --notice,
I did not say *competitive*-- we would put 4 and 8MW cards in every
single machine we have.  As it is, we are not buying NONE!

Fifth suggestion: 
A 760MB XL400 paging disk list at 11,500.  We buy the same capacity CDC
WREN VI *with* the SCSI interface for 2,800.  (However, we are going to
switch to WREN VII because they will have more capacity and are cheaper
by the byte.) If Symbolics sold the same disk at $4,000 we would order
all future machines with dual disks. [We already choose to upgrade the
current machines since our world is 160,000+ blocks; hence we need about
400,000 block of page minimum.  But, our situation is *not*
typical.] 

And guess what? Can they make money on a disk at *only* 4,000? You
better believe it.  Lots of companies, smaller and larger than Symbolics
operate on smaller gross markups and operate *successfully*!

The bottom line is this:  

There needs to be a change in attitude at Symbolics. They have done a
good job of cutting cost, now they must do an equally good job of
generating more revenues.  They must realize that customers treat
hardware as commodity but are willing to pay for software.  They have no
choice but to adopt to this world.  They must begin to push hardware out
the door as fast as they can, and make the money on the software.

Yes, this means, we users must start paying more, or in some cases,
paying for the first time for the software we use.  So, this may be the
end of the free (software) lunch era.  Well, there is no well...

Leslie A. Walko attila@bellcore.com