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It's the price, right? Wrong.

September 11, 2008

Posted by Stephen Hardy

We continually hear component and subsystem vendors complain about how often their customers grind them down on price. They can't maintain decent margins when systems houses refuse to pay a reasonable price for their wares or when their competitors agree to ship a few dollars out the door with each device they sell. It's all about how low your price is, one would conclude.

In our upcoming September issue, we report the results of our second annual survey of Lightwave readers who buy transceivers and transponders. The survey is designed to uncover the factors that go into the purchase decision, including attributes of the products themselves as well as the vendors who supply them. And, for the second year in a row, our readers tell us that price isn't the most important factor when it comes to choosing a transceiver or transponder. Reliability is #1, with performance second and cost coming in third.

So on the one hand, we hear constant grumbling from the component and subsystem vendors about price; on the other, we have their customers saying that price isn't the first, or even the second, most important factor in choosing a device for their application. What gives?

There could be several factors at play. First, engineers may choose the device, and someone else in the company may choose how much they're going to pay for it. Second, there may be even fewer points of differentiation among vendors when it comes to reliability and performance than one would think, meaning that the only way they can compete is on price. That's the way a commoditized market works -- and heaven help the industry if that's the case more often than not.


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The Lightwave editorial staff uses The Lightwave Blog to share their thoughts on optical communications and whatever else might be the current topic of conversation from cubicle to cubicle. Feel free to add your own opinions.

Stephen Hardy is editorial director and associate publisher of Lightwave, which makes him responsible for the editorial aspects of the Lightwave franchise. A technology journalist since 1982, he once had his job duties described as "gets paid to tick off advertisers ".

Meghan Fuller is senior editor of Lightwave. She has degrees from Franklin & Marshall College in Lancaster, PA, and the University of Delaware and is a card-carrying member of Red Sox Nation.