Computer Price Comparisons with the Mustang Index
The DataServices World conference was co-located in Silicon Valley with SOAWorld and the first Cloud Computing Expo. Because IT costs are a major factor driving the adoption of cloud computing, my welcoming address tried to present the expense of today's computers in an historical context. Rather than using the Consumer Price Index to adjust prices for inflation, the Mustang Index has been the vehicle I've used to compare computer prices across the decades. This index is based on the price of a new Ford Mustang compared to the price of a new computer, selecting hardware intended for use by small and medium businesses. If you were doing database development in the early years, your only platform choice was a mainframe. But recent comparisons can use servers that are fully capable of hosting databases.
Hardware has gone from major investment to commodity pricing.
Because that's true, the perpetual angst about IT budgeting and hardware costs is perplexing. Decades ago companies embarked on tortuous studies of the price of various computing options, how they were to be depreciated over several years, what real costs and opportunity costs would be without acquiring a new computer and so on. Today you don't engage consultants and do weeks of planning and analysis when you can cover the price of a computer with a credit card.
Over several decades, the price of computers has dropped dramatically - as the Mustang Index shows - and productivity of knowledge workers has risen. Of all of the things purchased or leased by organizations today, computers are undoubtedly the biggest bargain. That's not to say I disagree with those who want to move to the cloud to reduce capital expenditures. But let's drop the notion that Information Technology (IT) is a vast sinkhole where money goes in and nothing of value comes back.
Certainly businesses such as eBay and Amazon and government agencies such as NASA could not fulfill their mission and be successful without understanding how computing and software are integral to their success.
If you view the video excerpt from my presentation, you'll see comparisons between computer prices and Mustangs begin in 1964. That was the year Ford introduced the wildly-popular Mustang and IBM introduced the System 360, it's third-generation computer. For the most recent computations, I've used a Dell PowerEdge T110 server and a 2011 Ford Mustang V6 that's listed by a dealer for $22,785. The base server configuration includes 1 gigabyte of RAM and dual 160 gigabyte hard drives (RAID 0). The price of $398 yields a server cost of .0174 Mustangs.
Adding Windows Server R2 Foundation Edition, with Hyper-V virtualization enabled, increased the price to $657, or .028 Mustangs. Taking it up a notch by adding Microsoft SQL Server 2008 R2 Workgroup with 5 client licenses increased the price to $1636. That's the equivalent of .071 Ford Mustangs.
Most organizations would love to have experienced a comparable drop in the amount they've spent for energy, real estate, labor, communications, legal, marketing and other expenses.Over several decades, the price of computers has dropped dramatically - as the Mustang Index shows - and productivity of knowledge workers has risen. Of all of the things purchased or leased by organizations today, computers are undoubtedly the biggest bargain.