CPU Price Wars: Beware the Numbers Game


In a falling economy, the challenges are many. And while it may seem like one of the few bright spots in a recession is falling prices of data center equipment, the reality of the situation is a little more complicated.


Take the microprocessor field, for example. AMD and Intel have been locked in a price war for some time. The latest moves were announced earlier this month when Intel came out with price drops of some 40 percent off its Core 2 quads and other models. AMD following suit a few days later with 18 percent cuts in its Phenom II X4 devices.


Sounds good, no? Well, it is -- partially. But I'm not going to riff on the dangers of deflation; there's been plenty of that in the popular media of late. (Although I will note that the price cuts are being accompanied by mass layoffs at both companies). Rather, there is a more immediate detriment to playing the pricing game when it comes to fundamental technologies like CPUs.


Suppose you do put your capital improvement budget on hold in the hopes of a better deal later. Well, that means your enterprise capabilities stagnate, doesn't it? Processing, storage, throughput-all sitting on a plateau, at least for a little while. Not such a terrible thing, considering business is slowing down anyway? Perhaps, but the funny thing about the modern enterprise is that even as activity trails off, the amount of data continues to grow.


So you have a frozen enterprise architecture sitting on top of a growing pile of data, and then guess what happens? Prices start to move up again, except this time there are no company announcements and no headlines in The Wall Street Journal. Price increases tend to move stealthily, and those chips you could have bought in January for $300 a piece are now $350.


And in the meantime, you're behind the curve when it comes to the newest technologies hitting the channel. AMD just announced a new set of quad-core Opteron HE and SE devices aimed at cutting power consumption even while they handle the heavy data workloads that your current systems are struggling to handle. Those new chips could also go a long way toward consolidating older hardware if firms like Rackable Systems deploy them in their latest virtualization platforms as expected.


So here's the rub: you could try to time the hardware market like the investment banks tried to time the stock market, or you could stick to your existing refresh cycles to keep you enterprise systems on a steady, upward slope. By all means, strive for the lowest costs possible, but don't try to play a numbers game. It's just not good business.