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8/9/2009
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Hardware Vs. Software: The Great Price Divide

How much value does commercial software really offer for the money? It's an interesting question, given our assumptions about the price of computer hardware.

How much value does commercial software really offer for the money? It's an interesting question, given our assumptions about the price of computer hardware.Over the past 30 years, hardware prices have plummeted. That would be obvious even if hardware performance had not also increased dramatically. It has, and that fact makes this trend even more remarkable.

Anyone who has ever looked at the price of a computer -- any kind of computer -- intuitively knows that is true. Today, for example, an entry-level desktop is easy to find for well under $500. A decade ago, anyone buying a new PC at that price would have been arrested for accepting stolen goods.

But the best way to quantify this trend is to look at price-versus-performance numbers for specific PC components. Consider two frequently cited examples: hard disk storage and RAM:

  • According to a 2003 EBU Technical Review article, the price per MB of RAM between 1990 and 2003 dropped by half every 18 months. Over the entire 13 year period, prices per MB thus dropped by three orders of magnitude.
  • The same article found that the price per MB of disk storage dropped by half every 12 months during this period. That means prices per MB dropped by four orders of magnitude.
  • A slide from a 2003 Web Services Summit presentation tells the same story in even more dramatic terms. In the mid-1960s, 2K of Univac mainframe core memory cost over $100,000. By 1979, 12K of CMOS cost $7,000, and by 1988, 8MB of DRAM cost around $880. Finally, in 2003, 512 MB of DDR RAM cost $79. (Today, by comparison, 1GB of DDR2 RAM is easy to find for $20-$30.)
  • Amother site keeping track of RAM prices between 1993 and 2005 delivers similar results, including an average improvement in cost per MB of around 75 percent each year. Even working off a somewhat lower figure of 50 percent per year for the past five years, the author notes that "we can expect to pay only $1 for a GB of RAM by 2017."
The trend is obvious and undeniable. And it raises some equally obvious questions: Have software prices followed a similar pattern? And if not, why?

The answers to these questions are complicated and potentially very contentious. In my next post, I'll spend some time sharing my thoughts about them and what they mean to business IT users.

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