The Cheap Revolution

In this week’s Forbes Magazine Dan Lyons has a cover story on the “Cheap Revolution“. It’s all about how the landscape of the tech industry is going to change with the advent of low-cost (or free) software, cheaper chips and an always accessible Internet. He believes that the old guard enterprise technology companies are in trouble; and based on the facts presented in this story he makes a pretty compelling case.

E-Trade Financial dumped Sun for Linux-on-Intel in 2002 and found that the new machines were faster and more reliable. Before the switch the online brokerage ran a data center that cost $25 million to operate, and this one costs only $3 million. E-Trade’s tech budget this year is $180 million, down from $450 million in 2000, yet the firm serves 40% more customers, manages nearly three times the assets and generates 70% more revenue.

The New Barbarians –

TIt’s hard to argue with the logic – when a company like eTrade canspend less on IT, grow its business and improve reliability, why would they chooseto do otherwise? There either needs to be a great untold story about why this approach doesn’t make sense out there or there must be a lot of software executives in a pretty bad mood. I’m betting on the latter.

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