Confirmation on T&C issue

I had previously noted that some T&C’s we run into are, well, not fit for company consumption. This isn’t the only aspect of of the HPC market … clusters as commodities and other related phenomenon lead to extremely thin margins.

As Doug at Lead Follow or … notes in one of his posts on comments from an Intel person :

He then spent time talking about the economic challenge of serving the HPC market. My interpretation (not Steve’s words) would characterize the HPC procurement cycle as one that barely allows vendors to recoup R&D costs. Steve pointed out that wins for large deployments typical have terms that penalize failure far more than rewarding success. This appears to be a business problem that any sane vendor should avoid. Why pursue a high profile, high risk opportunity with normal return on investment as the best case? While the PR is good, I can think of other ways to garner good press without putting a company at risk. It feels like the HPC market’s answer to subprime mortgages. Do you agree?

Yes Doug, I do. We walked away from a particularly onerous set of T&C. Passed it through to a partner who held his nose and said “No way!”

If you are a consumer of HPC systems, and are reading this, please keep in mind that the harsher the T&C the fewer vendors you are going to have. Maybe this is what you want. Moreover, the harsher the T&C the less risk the vendor will take, so the less forward thinking you will see, and the less innovation (e.g. high risk you will see). If you are an HPC system consumer, be aware that you have a choice, a pretty simple one at that. You get to pick one of

  1. low cost acquisition and cookie cutter with no real innovation, and it may not even achieve your stated RFP goals, but low risk
  2. higher cost acquisition, with innovation, and risk

You don’t get low cost and and innovation. Someone has to pay for this innovation, and vendors are not in business to subsidize customers.

The T&C we walked away from requested ridiculous support committment terms, and ominously had specific insurance targets that you must provide. The message was clear, that if we failed to give the level of service demanded (and in this market, effectively for free), that we would be sued.

The only thing to do is to walk away from the table for deals like this. Luckily some other recent RFPs in this space have not had the onerous T&C. Hopefully (though this may be wishful thinking), customers will get the idea that the customer-vendor relationship is symbiotic, and not parasitic. Once they recognize that vendors actually have to make money to stay in business, maybe, just maybe, they will stop with the T&C shenanigans. This is wishful thinking though. Purchasing agents are measured by how far down they can lever pricing, as they are missioned with the concept that value == inverse of price. It isn’t and this is a problem.

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