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Re:Bank of America's CEO says it's saved $2B per year by bui... by learc83 on Monday October 21, 2019 @03:55PM (#21316543)
> Auto manufacturers use machines built by other businesses and parts built by other businesses.

Yeah but they generally aren't renting those machines. Renting critical pieces of business infrastructure that aren't easily replaceable is opening yourself up to rent seeking on the part of your supplier. Remember the Oracle business model--lock people in and then keep raising the price just below what it would cost to rebuild from scratch.

Re:Bank of America's CEO says it's saved $2B per year by bui... by txcwpalpha on Monday October 21, 2019 @11:16PM (#21320075)
I don't think the renting example is that true. AFAIK auto manufacturers certainly do "rent" many of the factory machinery they use, and they certainly "rent" the maintenance contracts from the companies who service them (the big exception I'm aware of being Toyota, which makes their own factory robotics).

In other examples, many airlines do lease airplanes, and even among the airlines that do own the planes, they still usually lease the engines.

As the GP said, there's a balance to be struck. Delta doesn't have the expertise or the economies of scale necessary to build their own engines from scratch, but they do have the ability to lease those engines and then have their own teams maintain them. Similarly, most companies don't have the know-how or the EoS to run their own data center, so instead they buy cloud services and then have a smaller team to maintain it. It's a win-win. Some companies like BofA might be big enough where they can run their own cloud and it be cheaper than using a cloud provider, but that's definitely not a common thing.

Re:Bank of America's CEO says it's saved $2B per year by bui... by eesmith on Tuesday October 22, 2019 @12:53AM (#21320487)
Could you clarify "AFAIK auto manufacturers certainly do "rent" many of the factory machinery they use, and they certainly "rent" the maintenance contracts from the companies who service them (the big exception I'm aware of being Toyota, which makes their own factory robotics)."?

Rental only makes sense if there is a marketplace for used machines. Eg, planes and plane engines are components that aren't really tied to one place or company. (The "that aren't easily replaceable" from the parent post.)

But industrial robots for car manufacturing seems like rather specific hardware. If, say, the Ford plant in Claycomo, Missouri no longer needs a machine for making the F-150, who is going to rent it? How is rental a better cost-savings for Ford than buying the machine and later selling it?

I tried looking this up, but failed. The closest I found was that "over half of industrial robot purchases in North America have been made by automakers" at https://www.robotics.org/blog-article.cfm/The-History-of-Rob... .

Also, '"rent" the maintenance contracts' doesn't make sense to me. I sell maintenance contracts to my customers, I don't rent them, and I don't understand what "rent" could even mean in that context.

Re:Bank of America's CEO says it's saved $2B per year by bui... by dodobirdlord on Tuesday October 22, 2019 @01:23AM (#21320583)
The difference between renting and purchasing gets murky (sure, not literally) when you are dealing with sensitive hardware that you rely on but cannot maintain yourself. Such systems usually require frequent maintenance by the supplier. Sure, you could end your maintenance contracts, but then the systems you have purchased will very rapidly become useless. The up-front cost of hardware is often very small compared to the ongoing cost of maintenance contracts, and so the relationship ends up looking a lot like rental.

The parent comment mentions that Delta rents their airplane engines. I imagine that they have the capability to do general maintenance on the engines, but that the engines need to be periodically sent back to the supplier (probably GE or Rolls-Royce) for a teardown, safety inspection, and rebuild. Without regular inspections an engine can't be flown, and is essentially worthless. Not much point in actually owning the engine if you can't use it.

Re:Bank of America's CEO says it's saved $2B per year by bui... by eesmith on Tuesday October 22, 2019 @02:11AM (#21320798)
I guess I have a naive view. I think of "buy" as something which is a capital expenditure, can be depreciated, etc. while "rent" are things which fall under operational expenditure.

With that in mind, I can see support contracts as an operational expenditure.

But if "over half of industrial robot purchases in North America have been made by automakers" then that's a lot of capital expenditure. I never got the feel that the companies which make modern industrial robots primarily rented them out (akin to IBM's renting out of tabulation machines 100 years ago). I really thought they mostly sold the robots.

Re:Bank of America's CEO says it's saved $2B per year by bui... by caspper69 on Tuesday October 22, 2019 @03:51AM (#21321223)
Many of these industrial systems are built from reusable components. In my experience at a Tier 1 OEM for the US domestic auto market, a line could be torn down and re-purposed to another line by adding or removing physical components, modifying the physical layout where appropriate, and then adjusting the PLC programming.

An assembly line isn't really a "product," per se. It's more of amalgamation of several products and technologies, many legacy, that forms a cohesive but loosely-coupled whole. You may have several vendors' products / systems in a line. So what you end up with are ongoing contracts that provide for installation, programming, troubleshooting, maintenance, etc.

There's actually a whole specialized industry that does nothing but design assembly lines. It's pretty neat.

Re:Bank of America's CEO says it's saved $2B per year by bui... by eesmith on Tuesday October 22, 2019 @06:09AM (#21321955)
Thank you for your response and insight!
Re:Bank of America's CEO says it's saved $2B per year by bui... by dodobirdlord on Tuesday October 22, 2019 @02:38AM (#21320914)
They probably do sell them. I believe most industrial robotics systems are built custom, or at least heavily customized. But I have no idea (and I'm sure they closely guard) what percentage of their revenue comes from direct sales and what comes from support contracts. Somewhat related, I recall reading that one of the things that caused financial issues for GE Power was broken incentives around support contracts. To meet quarterly targets the sales team started offering to trade larger up-front prices for reduced costs on support contracts so as to frontload revenue. Too many customers saw the golden opportunity and GE ended up losing a ton of money.
Re:Bank of America's CEO says it's saved $2B per year by bui... by DEADBEEFC0FFEE on Tuesday October 22, 2019 @04:59AM (#21321535)
It's more common than you think. In industries that are locked into legacy apps, cloud costs are massive. Same for industries where storing massive amounts of data for decades is normal. Healthcare and banking spring to mind. I wouldnt be surprised if big pharma are private cloud too.
Re:Bank of America's CEO says it's saved $2B per year by bui... by Gravityloss on Wednesday October 23, 2019 @01:18PM (#21336729)
There are quite many different types of airlines. If you show up for some flight, it might actually be operated by personnel that are on the books of some other airline.

There's Boeing which also used to have an airline. It was made illegal IIRC.

And there are things in between these two extremes.

Some airlines have a heavy maintenance organization. Some have outsourced it. Different companies have different market segments and safety records etc.

The point is, there's no one true way for all.

Re:Bank of America's CEO says it's saved $2B per year by bui... by weberc2 on Monday October 21, 2019 @06:22PM (#21318174)
Why is it better to be locked into your own company’s IT department rather than AWS? I would argue AWS gives a better ROI than 95% of corporate IT departments, and generally less hostile to boot.
Re:Bank of America's CEO says it's saved $2B per year by bui... by greglindahl on Monday October 21, 2019 @09:26PM (#21319476)
One hopes you're not arguing that companies shouldn't bother trying to figure out if they're in the 95% or the 5%.
Re:Bank of America's CEO says it's saved $2B per year by bui... by weberc2 on Tuesday October 22, 2019 @12:22AM (#21320357)
No, it wouldn’t make sense for me to make the 95/5 distinction only to prescribe a 100/0 response. My post was a call for sober judgment, which is admittedly not very popular here.
Re:Bank of America's CEO says it's saved $2B per year by bui... by greglindahl on Tuesday October 22, 2019 @01:21AM (#21320575)
Making up opinions and then arguing against them is not popular here.
Re:Bank of America's CEO says it's saved $2B per year by bui... by weberc2 on Tuesday October 22, 2019 @07:23AM (#21322380)
No straw men here Greg. Looks like you’ve confused this thread with another.
Re:Bank of America's CEO says it's saved $2B per year by bui... by StreamBright on Tuesday October 22, 2019 @02:21AM (#21320841)
Many people did not realize that IT infrastructure is a utility, it should not be owned all the time by most of the companies but purchased when needed. AWS couldn’t exist if it wasn’t better than on-prem IT. How better is defined is different case by case. Usually it includes TCO, ROI, turn around time, efficiency in terms of capacity management and fee more. These are the things many small companies do not have to deal with or easily solved. Yet there are many companies choosing AWS to solve these problems for them. In my experience AWS really start to make sense if you are spending more than 100.000 / month on infrastructure.