Don’t pinch pennies when buying company PCs, says Intel executive

Organizations actually shorten the useful life of their technology assets by buying laptops and PCs with inferior computing capacity, according to an executive from PC chip maker Intel Corp.

Such a cost-cutting approach could be costlier in the long run, as it may increase security risks, reduce productivity, and require more frequent refresh cycles, according to Ronald Miller, IT technical and operations manager, IT@Intel, a resource site for IT professionals run by the Santa Clara, Calif-based chip maker.

While Miller says the optimal refresh period is three years, at least one Canadian has a different perspective.

Recent improvements in PC performance are enabling SMBs to hold on to their desktops and laptops longer than the three years recommended by Miller, notes Michelle Warren, a senior analyst at Info-Tech Research Group Inc. in London, Ont.

“Users now keep their machines for up to five years as opposed to two to three years in the 1990s,” she said, attributing this change to better performing PCs, as well as “typical Canadian SMB behaviour”.

The Intel exec, however, said his company adopted its current PC purchasing and maintenance strategies after some difficult experiences.

“We started out by buying low-end PC units to cut cost. We ended up taking a capital hit of about US$40 million.”

He said as a result of this experience, Intel made dramatic changes to its purchasing strategies.

While the approach the group later developed might not be applicable to all businesses, the lessons learned are relevant to organizations interested in ensuring security and keeping support costs down through consistent technology deployment, Miller said.

He said from 1995 to 1998 Intel’s PC client policy was based on the assumption of a four-year depreciation cycle, and that lower-cost value PCs for general use was the most economical purchasing strategy.

Intel concentrated on so-called value PCs that had low RAM, minimal hard drive space and limited CPU power, Miller said.

By the year 2000, when Microsoft came out with its Windows 2000 operating system (OS) and a new MS Office suite, Intel found itself stuck with about 20,000 PC units that couldn’t run the new software effectively.

He said buying low actually shortened the useful life of their assets and reduced return of investment (ROI).

The fiasco resulted in a shift of perspective that placed greater importance on meeting line-of-business requirements, the Intel exec said.

Moving forward, he said, the company focused on buying PC units that enhanced security, improved productivity of users – an approach that eventually resulted in lower total cost of ownership (TCO) per machine.

He said Intel also centralized IT purchases to achieve tighter control on its units, consolidated vendors and support sources to reduce asset maintenance complexities, and standardized software and hardware configuration across departments to lower IT support costs and speed up fixes.

“By keeping the system image consistent we made it easier for IT teams to manage, security, OS settings, firewalls and browsers.”

The Intel specialist, however, cautioned that “buying too high can also result user dissatisfaction down the road.”

“You might be able to keep high-end PCs longer but as the years pile on users will increasingly complain of performance issues.”

According to Miller, Intel’s study indicated that the company’s optimal refresh period was three years.

For instance, the TCO for a PC kept for one year was estimated at around US$1,023. In the second year, that cost went down to US$863, in the third year it was estimated at US$803.

Costs went up to US$815 in the fourth year and US$862 in the fifth, largely due to downtime from reduced performance or repairs.

Intel’s experience also moved the company towards greater mobility, Miller said.

“We found additional value and greater ROI in using laptops.”

Even before the widespread implementation of WiFi networks, laptops increased the productivity of Intel employees by as much as three to eight hours a day, he said.

In recent years, laptop prices have also gone down at a much faster rate that those of desktop PC making them a better bargain, he said.

He said laptops also enhance the company’s ability to deal with business continuity issues because most employees could get their job done from any location. Today, he said, only 20 per cent of the company’s employees are using desktop units.

According to Info-Tech’s Warren, today “small and medium scale businesses are opting for value over price.”

She said SMBs look for performance and features first and often purchase from two vendors for greater product flexibility and to reduce risk.

Comment: [email protected]

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Jim Love, Chief Content Officer, IT World Canada

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