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To: Naveen Kumar who wrote (4884)	5/18/1998 5:43:00 PM
From: John M. Zulauf	Respond to of 14451

> bucket mentality Naveen, bucket mentality is actually a far more pervasive disease than just the computer companies. When I was back in aerospace at McDonnel Douglas, we had some outdated PDP-11 series computers driving our CAD terminals -- one PDP-11 for each two terminals. The annual maintenance on these computers was $20,000 each. New CAD terminals were being hooked to MicroVAX's, and instead of 2 terminals per one PDP-11 it was 4 terminals to a MicroVAX. New MicroVAX's cost $20,000 each. This means that for half the maintenance cost of the two PDP-11's one MicroVAX could be purchased to server four terminals. In addition the PDP-11's required a controlled, cold room environment (which upon to moving to a new building MDC built for several thousand additional $s) whereas the MicroVAX's could be sited next to the terminals (saving cabling costs as well). When I asked our MIS department if they knew about this they said, yes, and I asked them -- why are we paying twice -- more than twice as much money for the same functionality they said. "Oh we can't afford to buy the MicroVAX's" "What?" I replied. "We're spending twice already." "But the PDP's are maintenance money, and buying a MicroVAX is capital acquisition." "I know," I further pressed, "but why can't you transfer the money from the maintenance account budget item to the capital acquisition budget?" "Oh we can't do THAT!" was their horrified reply. Bucket thinking. Feh! (BTW before anyone retorts about maintenance being expensible and capital acq's depreciated, MDC's marginal tax rate wasn't high enough at the time to nullify the 2x cost savings, there still would have been something like a 30-40% real savings, in fact I think they lost money that year (now THERE'S a surprise). I'm not a CPA and I don't play one on TV! john