IPROF Management Roundtable

918DX financing options:
improving its base configuation,
and why rental isn't a good option

Q.I was disappointed to see Jeff Vance's recent posting on HP3000-L that leasing was no longer an option for small developers purchasing the 918DX. Rental is now the only other option to outright purchasing.

Renting equipment that you intend on keeping for a substantial period of time, unfortunately, is a mistake. Generally, payments are such that you pay something on the order of 10 percent per month for the product, thus you essentially "purchase" the system in less than a year, although you acquire absolutely no equity ownership in the process. Once you stop paying rent, you must turn the machine back to HP.

Leasing, when put together as a true lease, is a much better deal for a small startup company than outright purchase -- but purchase itself is a far better arrangement than renting, especially if the goal is long-term product development.

I understand that FRD, HP's division that handles leasing arrangements, has a minimum $20,000 equipment price tag before they will consider a lease. The 918DX, of course, falls substantially short of that minimum price and thus leasing agreements seem impossible. I can, however, imagine several scenarios that would allow leasing arrangements to be possible, if CSY wished to participate. And Wirt goes on to define what some of those scenarios are.

Ken Sletten added that Wirt did an excellent job of pointing our some of the problems with leasing a 918DX. I would just like to add that unless this changes, as a practical matter small developers are pretty much left with just the "buy" option.

Remember: Purchase of a 918DX costs $7,077. Renting costs $375/month for one year or $450/month for six months. So renting a 918DX for one year costs 64 percent of the purchase price. Since at the end of a rental period you have to give the machine back, I would think that not many if any serious developers will rent it. But let me add that $7,077 for the 918DX with all the HP and third-party software that it includes is a great deal

Roy Breslawski: We do have to realize that an awful lot of partners kicked in a lot of product onto this box that we build, and $7,077 is a great deal for it. Unfortunately, we can’t do everything for every single person out there. We have to put something together that we think can put a lot of developer bundles into a lot of small developers’ hands. Contrary to rumor floating around in some quarters, 918DXs have been shipped to developers. There are some out there, and they will continue going out.

We can explore some other alternatives. One suggestion, in particular came out was maybe getting our distributors involved in this in the US, similar to the way it’s done in Europe. Although I might add that in Europe it is at a higher price because of the miscellaneous costs. We’ll look into that, but I’m not going to be able to promise anything significant at that point right now. If there are things that we can change that will make it better without just creating an entire new program, we could look into that. But realistically we need to move forward too, instead of just tweaking the program. Realistically, there’s other things that we think are more important.

If there are some other constructive ideas, we’re open to it. I think in the same timeframe that these questions were posted, there was a lot information put on 3000-L about who the contact person is and how to get information to us. I want to encourage you to take advantage of that, but for the moment the program as it stands is what will be going forward.

Joe Geiser: Actually, you can lease a 918DX. The fact of the matter is that in its current configuration, seven thousand and some odd dollars it’s inadequate for developer’s box with a 64 Mb memory base. You need at least 128 Mb with 5.5 and doing the proper development that you need to do, especially if you’re working on client server Web-enabled applications with multiple listeners running.

What I also found is that with the 918DX as quoted, the support costs are twice the costs of the machine itself. You’re also bundled with a lot of compilers that you may not need, for example, RPG. I don’t need it. I would be very happy to get rid of RPG. I’d be happy to get rid of Pascal. I’d like to keep C. I’d like to keep COBOL. Get rid of the rest of it, not have to pay the support costs on it.

Also, from the lease, the only way you can really get it over $20,000 is to take three-year lease option. So you can lease a 918DX. The fact of the matter is that’s out of the reach of most of us. That’s why I had to do the Channel Rent option as well. The other thing is from a financing standpoint, HP's very happy to go with Channel Rent with me at almost $1,000 a month because I did kick up a memory and kicked up the disk. It won’t go $1,200 with me per lease without absolutely checking my books. It seems that for a measly $200 a month I have to go through all that red tape.

I think there’s first of all some support issues that need to be addressed. The support area was late in coming in. We need to be able to pick and choose which compilers we need. If we don’t need RPG we should be able to drop RPG and not have to pay for it, but from what I understand, I have to keep RPG. I have to pay support on it. And if that’s not the case I’d like to know.

Gary Biggs: Basically, I got a fully loaded 918DX, except for the memory which was just too darn expensive. I did not delete the licenses for the compilers, but we did delete all of the support, so what happened today was I got 12 boxes of manuals. They say that it takes up over 20 linear feet in my office.

We bought the 918DX. It came in at about $9,000. We bought the support and bundled that into a three-year lease and the payments are in the $870 range. So, there is some flexibility there in the program to do some of that, so I think there is a lot of misinformation around there. I was certainly able to configure this and get financing on it at what was more attractive than I got it for my bank.

Joe Geiser: As I said, 64 Mb memory, four gigabyte disk is not adequate for this development machine. If you’re going to do some serious development in order to get it to a serious development level it brings it up in price quite a bit. I want to make sure you know early on the support area was the problem, and from what I understand, it still is. The support is twice the cost of the box. I can drop that that’s great I’m going to, but I don’t want to have to buy it if I don’t need it. Can we drop support for compilers we don’t need?

HP’s Adrian den Hartog: I’ve taken over the program from Steve Little. This is the first time we’ve put something like this together and are some problems that we’re working through. There is a lot of confusion at the moment that we’re looking to clear up, and I am talking to support to see if we can do a la carte on some of the options.

At the moment as it stands the way we’ve been told is that when you order support on the main product what’s going to happen is that automatically it’s going to put support on the main the products that are bundled. So I think what has happened is that if you do not order support on the main product, but on the individual software that you want support on, then that will work.

Cortlandt Wilson: I was involved in the initial advocacy for the 918DX program line when Alfredo Rego and Wirt Atmar were the main ones involved. In fact, at one point Alfredo offered to create his own lease program, so maybe we’re going to have to go back and take him up on that. He was ready to put up over $100,000 in a bank account at least create a few leases.

What disturbs me about this is that we were working together with HP, and I had a very positive feeling. I’m a little distressed that the program has changed and I wasn’t contacted. as far as I know, none of the people were working with you before were contacted on the changes. It seemed like we had a great relationship, and that stopped. How can we have advocacy that isn’t a stop-start thing and continues to work over time.

Roy Breslawski: I think that is the key right there. Adrian is responsible for the program now, and he is the person you should work with. We are executing on that program.

Adrian den Hartog: I’ve actually had the opportunity to sit down with Jennie Hou, and she will have information on some of the things that I’ve discussed with her today as to what we think the criteria are for getting the 918DX. So she’ll be there to represent us.

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