Tech Companies Facing New Wave Of High Costs

from the goodbye-deflation dept

Fri, May 5th 2006 9:21am — Joseph Weisenthal

Rapid price deflation is a constant when it comes to technology. It's a curse for suppliers and a blessing for large buyers. One of the big differences, we're told, between today's startups and those of the last boom is how much cheaper it is to run a company now. But lower technology costs aren't being enjoyed by everyone. Some are noticing that a few of the major tech bellwethers are forecasting sharply higher capital expenditures in the coming year. Most notable is Microsoft, which announced that it's going to plow billions more into its fight with Google. It's not just a matter of wanting to win the search wars; key to both of these companies' ambitions seems to be along the lines hardware as a service. Both want to be able to offer huge grids for crunching data and online storage. Needless to say, this is going to cost these companies a lot of money. By combining hardware costs with an expected increase in hiring, and the end of bandwidth overcapacity, it's easy to see how costs might add up. Meanwhile, those startups, whose business models are predicated on low fixed costs, may need to do some new calculations.

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Moogle, 5 May 2006 @ 11:06am

I think Jeff Matthews is making it up. It sounds more like an arms race between a few companies that specialize in infrastucture and a couple unrelated data points. Unless I'm missing something, this doesn't seem like it should affect startups (or anyone else) in the slightest, unless they're trying to compete in holding data against google.

Am I missing something?
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Joe Smith, 5 May 2006 @ 11:13am

Exponentials
The problem with hardware (storage or bandwidth) is that demand is growing exponentially and costs are falling exponentially. Depending on the balance you get rich or go broke but one thing is certain - customers are only going to pay if they come out ahead and that usually means getting more for less.

Sounds like a treadmill that companies should not be staking their futures on.
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garfalk, 5 May 2006 @ 7:03pm

bi-polies
if things don't turn around, pretty soon google and Microsoft will own half the websites on the internet. then it's just a matter of one of them builds a robot or something to kill the other. or just assplode their hq.

but then, that's retarded. it only happens in the movies.
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