Real Options & Flexible Planning

Kieron Bradley, one of my colleagues at Sun, during a piece of client consulting recently had reason to use financial option theory & language to justify why CPU’s in Sun’s large systems are more expensive to buy than those in the smaller ones. He and the customer had examined all the TCOO factors they thought were relevant and the fact remained that if one wanted to take a utility view of CPU supply, it was cheaper to buy and run smaller systems rather than larger ones. (This particular analysis did not perform a variable utilisation analysis. It was assumed, (or defined as policy) that all CPUs would run at a given % utilisation. Contradicting this assumption, it is a fact that large (and flexibly partitioned) systems are easier to keep busy.) …