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Disk costs and formats.

DISK COSTS AND FORMATS Since software companies are heavy users of diskettes, we asked our respondents how much they spend on media. When we tabulated the responses on this question, we found that the median price points for diskettes came out about where we expected--42.5^ for 5.25" disks and $1.00 for 3.5" disks.

However, we were surprised by the extremely broad variation in actual prices that appeared in our database. Common sense suggests that diskettes are as close to a commodity component as any item that software companies purchase, yet there is very little evidence of a marketplace consensus about prices. High-volume buyers seem to end up paying essentially the same prices as much smaller companies. We also looked for a "camel's hump" pattern that might reflect different clusters of prices for low-density and high-density 5.25" disks (or for formatted and unformatted media), but the bumps on our actual curves were pretty indistinct.

Frankly, we haven't a clue about what's going on here. The wording on our survey questions did not seem to suffer from ambiguity, most of our respondents supplied full data for this section of the questionnaire, and the responses we got back seemed to be accurate and consistent.

About the only conclusion we can draw, therefore, is that disks are not a true commodity product--that there are enough differences in quality, vendor service, and other variables to justify substantial price premiums over the cheapest disks on the market. If this is a valid conclusion, then the disk market is a good deal more complicated than we thought.

Fortunately, other data on diskette usage yielded much more consistent results. Some of our key findings:

* For DOS-based products, 5.25" media is still the dominant standard for distribution. Companies that sell DOS products reported that they purchase about four 5.25" disks for every 3.5" disk they buy. (The greater capacity of 3.5" disks skews this ratio somewhat, of course.)

* There is still no strong consensus among PC software companies about how to deal with two disk standards. Overall, almost half the companies who responded to this question said they ask their customers to turn in one set of disks to get copies in an alternate format; about a quarter of respondents include duplicate sets of disks in the same box; another quarter sells each format as a separate SKU; and a small number supports only one format.

When we looked at these policies in terms of product pricing, however, some significant variations began to show up.
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Copyright 1989, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:software manufacturing survey results
Date:Sep 1, 1989
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