[Info-vax] Ask the Wizard archives?

[etmsreec at gmail.com]

On Tuesday, 28 May 2019 02:20:16 UTC+1, Arne Vajhøj  wrote:
> On 5/25/2019 8:09 AM, Kerry Main wrote:
> >> -----Original Message-----
> >> From: Info-vax <info-vax-bounces at rbnsn.com> On Behalf Of Arne Vajhøj via Info-vax
> >> Sent: May 23, 2019 10:37 PM
> >> On 5/23/2019 10:10 PM, Kerry Main wrote:
> >>>> -----Original Message-----
> >>>> From: Info-vax <info-vax-bounces at rbnsn.com> On Behalf Of Simon
> >>>> Clubley via Info-vax
> >>>> Sent: May 23, 2019 2:17 PM
> >>> Reason RHEL has eaten OpenVMS, Solaris, AIX, HP-UX lunch is because of
> >>> the RHEL business model.
> >>>
> >>> High up front licenses are considered CAPEX (capital expenses) in Cust
> >>> budgets which requires senior Cust exec signoff's and is very visible
> >>> and painful to get through.
> >>>
> >>> Support / subscription costs are considered OPEX (operations expense)
> >>> which no one sees or cares about except the Cust Operations Director.
> >>
> >> Not true in well managed organizations.
> >>
> >> Senior management want to know total cost = upfront cost + number of
> >> years * annual cost.
> >>
> >> The reason RHEL has won is that:
> >>
> >> CAPEX(competitor) > 0
> >> CAPEX(RHEL) = 0
> >> OPEX(RHEL) < OPEX(competitor)
> >>
> >> Besides a large upfront license fee the competitors has asked for more
> >> money for support contract - usually way more than Redhat.
> > 
> > That’s what I stated - RH OPEX is not visible to anyone except the OPS
> > Director.
> > 
> > The normal C level approvers for large CAPEX do not even see the costs of
> > the RH support costs since this is part of the OPS Director annual budget.
> > In many cases, the OPS Director might even choose a 3 year support
> > subscription agreement so it only appears as a line item on Y1, but nothing
> > on Y2 and Y3.
> 
> The C level approvers may not see the OPEX lines items (even though they
> will very often ask for impact on OPEX when approving CAPEX), but they
> will see and approve the total OPEX budget.
> 
> Operations can not just increase their total OPEX budget.
> 
> So the business model of just dividing upfront license cost
> with a number of years and make it an annual cost does not sell
> in itself.
> 
> That would decrease CAPEX but increase OPEX budget and require
> operations to go to senior management.
> 
> The business model with no upfront license cost and lower
> annual cost than what is being replaced works.
> 
> Because that keep the cost within total OPEX budget.
> 
> If the choices are:
> * "Big Unix" with upfront 25 K$ and annual 10 K$
> * Linux with upfront 0 K$ and annual 2 K$
> then replacing 100 "Big Unix"'es with 250 Linux'es becomes an
> easy sell - no upfront cost and a small reduction in annual cost.
> 
> (numbers made up, but ...)
> 
> Arne

The difference between CAPEX and OPEX can be somewhat artificial, here.  Depending upon the company, one might find that the annual maintenance renewal for hardware and software support actually is forced into CAPEX approval, just because of the high cost.
e.g. a firm I was at in the late 1990s.  The annual maintenance renewal came to just over the OPEX approval limit.  CAPEX rules had to be followed, even though it was a revenue item.