Re: To many SB's

From: Keith Nybakke (
Date: Thu May 28 1998 - 04:18:57 EEST

> To all on the list.
As most of us know, on Tuesday at the RP&M Conference, Terry Wholers gave a
presentation about the state of the RP industry. In that presentation he
said one thing that I just can not understand.



I generally wouldn't respond to a quote out of context as the two above
are. I've known Terry for several years and have a hard time believing
there isn't something we're missing in his message by looking only at these
two quotes. But, as the owner of a small service bureau, I think I must
respond first and hope Terry's context will be clarified soon.

"There are too many Service Bureaus"


I am sure that this is true if you are speaking of the SBs built on the
business model from 1989 - 1993. This was a time when rapid prototyping was
limited in availability and at the same time had captured the attention of
most early adopters in the mechanical design field. Prices were high;
quality was variable. The business model from this time had two components
in it that are essentially gone today. One was the conversion of data from
2D to 3D (as a profit center, it is "easy money"). The other was the use of
pure R&D funds to pay for a lot of the prototypes (funds earmarked for
technological exploration, not project specific money). These two factors
combined to skew the business model in a way that led some SB owners to
think that how it was in 1992 was how it should always be.

As with many things where there is an apparent advantage for a few, the few
became many. All that was required to join the few was an RP machine. RP
machines sold via the 1992 business model were priced accordingly and the
prices per hour for a pure RP service bureau operation were set by the
revenue projections from the 1992 business experience. However, the law of
supply and demand required that obscenely high prices could not hold up
when the commodification of RP began.

The change of RP from a technological marvel into a commodity began the day
the second machine was installed and continues to this day. We are still
discovering the market price for RP services. We are looking for the
pricing that keeps our SB doors open and at the same time fits into the
customer's product development budget. That price is never a fixed target,
even if our costs are. This commodification of RP can easily lead one to
state, "There are too many Service Bureaus."

It is logical to think that fewer SBs would allow existing SBs to maintain
their operations according to 1992 business plans. Limiting the supply
would drive up prices. But, who is in favor of that approach, even if it
would be remotely possible? I can think of only one group, maybe two.

First, old-style stand-alone RP services bureaus, who want to return to the
pricing structure of 5 years ago. Sorry, we cannot turn back the clock.
End of story.

Secondly, RP machine manufacturers who want to sell over-priced new
machines based on inflated per-hour charges. Of course, ther's no logic in
this example. More machines = more SBs = lower per-hour pricing = lower
machine prices = more machine sales = more SBs, etc.

As a stand-alone service, buyers are looking at our price first. Secondly,
they look at our differentiating characteristics. If what differentiates us
from the low-ball bidder is not valuable enough to justify our higer cost,
then the low price gets the job -- every time. It is my job, and that of my
partners and colleagues, to make those differentiating factors so
compelling that our prospective customer goes with us. It's always been
this way in an open market. The seller has to help the buyer understand
that the price being charged contains the appropriate amount of value to
the buyer. Even with a pure commodity, such as oats, if the buyer believes
it has a higher value (preventing heart disease) the price can go up.

If my company fails or succeeds, it won't be because our SLA3500 made us
into a profitable or unprofitable firm. It will be because we either did or
didn't convince our prospective customers that we offer a great value at
the prices they pay for all our services, rapid prototyping included.

More SBs, fewer SBs -- what's the difference? There will always be some
opening up; there will always be a few closing down. None should get a free

Keith Nybakke

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