LinuxSA Mailing list archives

  From: Richard Russell <richardrussell@internode.on.net>
  To  : Alan Kennington <akenning@topology.org>
        LinuxSA <linuxsa@linuxsa.org.au>
  Date: Wed, 30 May 2001 20:26:24 +0930

RE: commoditi[sz]ing?

> That article has included the perplexing word "commodity" for
> the zillionth time, and I still don't understand how
> marketing people use this word.
>
> Could someone please explain it?

IANAM (I am not a marketer) but my interpretation is that it means that the
item in question is becoming a commodity... which means that it is becoming
like the "commodities" we see talked about on the news -- minerals, grains,
meat, etc -- as opposed to a tailored product. ie, it's becoming somethign
where there is little differentiation between suppliers. For eg, the
difference in suppliers of wheat is small... it's mainly the ability to
deliver and the quality of the grain that matters. There is nothing
intrinsicly superior about Australian wheat over American... they all sell
for the same price, etc... another eg is oil -- it's $USx per barrel no
matter who supplies it, and one oil is pretty much the same as another.

I think that makes it clear...

In the context of protocols or datacentres or OS's, it means that the
functionality offered between vendors is the same, and you compete not on
product differentiation, but things like reliability, abuility to deliver,
support, and so on. Web servers are a commodity (despite MS's best efforts),
because the HTTP protocol is independant of the server software, and unless
you are doing something dynamic and complex, any web server can serve static
pages...

There has been a trend in recent years to commoditisiation of all things
computer-related. When this happens, margins go down, volume goes up, and
people stop looking for product differentiation.

egs of commodities in computers:

floppy disks
memory
low-end PCs
web servers
low-end databases
smtp/pop3/imap clients and servers


egs of non-commodities in computers:

high-end databases (though, as the writer said, they are becoming
commoditised)
high-end hardware
custom applications
groupware applications


an easy test (in my mind) for is X is a commodity (in the context of a
specific market) is if you can say "an X is an X is an X", and it's mostly
true. Most things tend towards commoditisation, and companies either try to
gain the highest volume in a commodity, or try to keep moving ahead of this,
adding new value, to maintain margins at the cost of volume.

<snip>

> "Now the data centre is also commoditising, with
>  just a few operating systems and just a
>  few hardware platforms to choose from."

ie: the data centre market is consolidating. There are fewer OS's and
hardware platforms to choose from, and they have less differentiation
between them. There is a recognised feature set developing that really
defines "data centre", and there is not much divergence from this.

HTH

rr

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