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Justifying the cost of PC upgrades |
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By Tom Pisello
09 Aug 2004 | SearchCIO-Midmarket.com
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Until recently, when IT budgets were tightened, companies saved money by extending the life cycle of PCs. Companies were replacing PCs every 36 months and replacing laptops every 24 months. Frugal corporations extended life cycles from three to four years, and, in some cases, up to five years, just to avoid large capital expenditures. With the advent of Internet applications, many companies reached excess capacity in these purchases. They were no longer forced to upgrade as frequently to support operating system or application upgrades.
Now, a wealth of Y2K PCs is fueling much of the upgrade action as the economy recovers. For many, the priority is to replace aging PCs again. Corporate IT spending is expected to increase 5% to 8% this year, according to IDC.
There's a strong business case for making upgrades today, which includes four major benefits:
Lower technology costs. Newer PCs can improve manageability and increase availability. Meta Group predicts that organizations can save $350 per PC in extended warranty and support savings by accelerating PC refresh cycles. With extended warranties averaging $200 annually per PC, this expense can easily be avoided by purchasing newer PCs with warranties included.
In addition, PCs older than 36 months and notebooks older than 24 months have been shown to generate additional support calls, averaging $21 per call. A recent study by Alinean, which examined support records from service providers, revealed that older PCs generate an average of 25% more calls in the fourth year, and 30% or more in the fifth year, causing consistently higher support costs.
For many companies, PC upgrades include operating system upgrades. Migrating from Windows 9x to 2003 typically yields a total cost of ownership (TCO) savings of 15% or more, and a 90% reduction in downtime.
When you add up the cost of extended warranties, support calls, administration and downtime, upgrading a workgroup of 50 PCs can yield TCO savings of more than $300,000 per year. This easily justifies the accelerated investment cycle.
Empower a mobile work force. With new mobile and wireless PCs, users can have access to valuable business resources such as e-mail and Internet access from home, office or while traveling. With these upgraded platforms, productivity is likely to increase as users extend their day by working at home, staying connected while traveling and collaborating in meetings.
In a study by Gartner Inc., professional wireless users with notebooks reported 41% higher productivity gains and efficiency savings -- an additional 7.5 hours per week -- than wired professionals with notebooks. More evidence: A study by Sage Research examined 20 North American companies and found that employees realized an additional eight hours of productivity when using mobile PCs and wireless LANs.
The mobile and wireless empowered worker often provides a quick and conservative payback. According to a 2002 Gartner study, it takes as little as one to three hours per week of additional work being performed (such as checking e-mail from home or processing orders from the road) to justify the additional cost associated with the purchase of a notebook. Upgrading the right workgroup of 20 users from standard desktops to mobile/wireless laptops can result in annual productivity benefits of $300,000.
Do more in less time. Upgrading to the latest PC can deliver significant performance improvements, leading to more productive employees. Industry-standard studies (Sysmark 2002) show that a new PC based on the Intel Pentium 4 processor at 2.80 GHz delivers six times the productivity performance gain of commonly installed systems that use the Pentium III processor at 500 MHz. By deploying the Pentium 4 processor with HT technology, users see an immediate performance impact and increased system responsiveness in today's multitasking environments -- up to 25%. Upgrading a group of 50 users who spend 40% of their time using PCs for critical job functions can lead to conservative productivity gains of $40,000 per year.
Secure the enterprise. Rising rates and increased severity of viruses, worms and Trojan attacks are forcing corporations to rethink security strategies and increase budgets to prevent attacks. The older PC is a weak link in the enterprise. It is particularly vulnerable to virus attacks because the latest security measures cannot be implemented without degrading performance and damaging productivity.
Today's operating systems and business software contain great new security features, but you need PC performance to run them like you want to, without disrupting your business. Take Microsoft's Encryption File System, for example. It's a powerful feature that can greatly improve data security by locking down files on your hard drive in real time. But it can cause a 300-MHz degradation in performance -- that's tough for an older PC to handle, especially if there's just 500 MHz or 733 MHz to begin with.
Real-time virus checks require similar performance capabilities. The typical 2,000-person organization experiences 2.1 virus attacks per year, resulting in $20,000 in respond-and-resolve labor costs and $150,000 in downtime costs.
Overall, the business case for PC upgrades and reducing the extended PC life cycle back to three years for PCs and two years for laptops is compelling. For a typical 50-user workgroup, empowering the mobile work force can mean more than $300,000 in annual TCO and security savings, and $350,000 in productivity enhancements. The risk-adjusted business case generates paybacks of less than six months and a 200% return on investment in three years for most organizations; all the more reason chief information officers should make PC upgrades a priority in 2004.
Tom Pisello is the CEO and founder of Orlando, Fla.-based Alinean, an ROI consultancy that helps vendors, CIOs and consultants assess and articulate the business value of IT investments. Tom can be reached at tpisello@alinean.com.
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