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Monday, October 25, 2010

The Cost of Replacement...

When I first started in computers in the mid-1970's the state of the art disk storage system for small computers was the DEC RK05 (pictured top left over a DEC PDP-11/70) or something like it.  The drive was removable and stored about 2.5Mb of data.

The list price was around $7,900.00 USD in 1970's dollars - something like $30,000.00 USD in 2010 dollars.

By 1991 you could buy a 200 Mb disk drive for about $700.00.  At this time you could install multiple operating systems (Windows, SCO Unix) on that disk and still have plenty of spare space for work activity.

I bought a drive like that, made by Seagate, in order to launch my first business.  It would cost about $1,088.00 dollars today.

A few months ago I bought a backup 1Tb drive at the local big-box office store for $100.00 USD.

In the last couple of days I came across a few articles on Apple computer related to DVDs and disk drives.   The first on Apple and DVDs: link.  Apple doesn't like DVDs any more, nor does it like Java.  So, rather than support them, it simply relegates them to history and moves on. 

Similarly Apple on the Air Book and the SSD (Solid State Disk): link.

From the link:  During the conference call, marking Seagate's first quarter of fiscal 2011, Seagate chief executive Steve Luczo was asked about whether SSD will replace hard drives in laptops.

"So, do I think that's where mainstream notebook computing is going, if that's what your question is? No, I don't." sas Luczo.

Well, of course not.  Why would I, as president of a company that makes complicated, tiny, hard to manufacture electo-mechanical devices, think that these would be replaced by a small circuit board with a couple of gold contact pins?  Presumably he's not that dumb and realizes that the days of electro-mechanical devices are going the way of the dinosaur.

(Now I am sure that there will always be some application for hard drives, just like for DVDs and other things, but not in the same way as today.)

Right now the extra cost for a SSD on a MacBook Pro is about $1,300 USD for a .5Tb SSD and $200 for 128 Gb SSD.  This will drop, and quickly.  It took decades for the disk drive to reach .5Tb.  SSD will blow past this in terms of significant additional cost in probably 18 months.

Next is Netflix: link.  These guys a few years ago were a DVD rental company with side business streaming movies.  Today they are a movie streaming business that rents DVDs on the side.

So what's my point with all this?

Well, on the one hand the cost of replacement.  Replacing anything technological with a newer item always costs about the same and gets you significantly more capability.  SSD, like the cost of flat TV's that I have written about before, will drop in price quickly.  Coupled with a phaseout of DVDs I would venture to guess that in two years or so "netbooks" and many laptops, particularly on the lower end, will have no moving parts (save the hinges and keys).

The only thing preventing the keys from disappearing is ergonomic - its not efficient to type on a tablet - particularly if its not horizontal.

On the other hand, what happens when you reach the end of the technological road?  Say DVDs in the coming years, hard drives or "traditional print"?

Well that's a bit different.  What I see there is that devices or technologies don't simply vanish.  Instead they become, at least temporarily, so low cost that they can move into other areas.

What I mean by this is say I have a large plant making DVD drives.  If Apple stops buying them today I will have a lot of spare capacity.  Rather than simply close the doors and walk away I will find something else to put the DVDs into - typically at a lower cost than say Apple was paying - but still enough to make money.

This is where print is today, at least in my view.  We've been squeezing cost out for decades.  iPads and notebooks are taking away from print in the form of eBooks and so forth. 

Print becomes "unhinged" from its traditional role and there is a buildup of spare capacity.

I think this is why you see "digital packaging" and things like it.

These are ways for the existing print infrastructure to be expressed outside their traditional roles.

Sadly, in 2010 the timelines for all this change are much shorter than say in 1970.  After all it took probably a decade for disk drive prices to drop significantly.

But that just means we have to be smarter about picking the future path.

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