PC shipments to businesses are expected to be substantial in 2004, with a projected 12.7% increase compared with 2003, according to International Data Corp. This is good news for corporate users who have been waiting patiently to invest in much-needed PC upgrades.
With tight IT budgets, one of the easiest ways to save money has been to extend the life cycle of PCs. Until recently, companies were replacing PCs every 36 months and laptops every 24 months. Frugal corporations extended life cycles by three or four years and, in some cases, by five years, to avoid large capital expenditures. With the advent of Internet applications, many realized excess capacity in these purchases and were no longer forced to upgrade to support operating system or application upgrades.
Now, a wealth of Y2K PCs is fueling much of the upgrade action. As the economy recovers, and with corporate IT spending expected to increase by 5% to 8% this year, replacing aging PCs is again becoming a priority.
Many corporations are quickly realizing that extending PCs’ life cycles did not result in the expected savings, and that there’s a strong business case for investing in upgrades today. Upgrading can include 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 examining 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 Windows Server 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 — easily justifying 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 the Internet, plus data from meetings, conferences and home. With these upgraded platforms, productivity is likely to increase as users extend their day by working at home, staying connected while traveling, and collaborating during meetings.
In a study by Gartner Inc., professional wireless users with notebooks reported productivity gains of 41%, plus efficiency savings of about 7.5 hours per week, compared with wired professionals with notebooks. Additionally, 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 Gartner, 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 laptops can result in annual productivity benefits of $300,000.
Do more in less time
Upgrading to the latest PCs can deliver significant performance improvements, leading to more productive employees. Industry-standard studies show that a new PC based on the Intel Pentium 4 processor at 2.8 GHz delivers six times the 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 productivity gains of $40,000 per year, according to conservative estimates.
Secure the enterprise
The increased severity of attacks by viruses, worms and Trojans are forcing corporations to rethink security strategies and increase budgets to prevent such attacks. One of the weak links in today’s enterprise security is the aging PC. It’s 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. Consider Microsoft’s Encryption File System. 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 is compelling, as is the case for maintaining a three-year life cycle for PCs and a two-year life cycle for laptops. 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% ROI in three years for most organizations, making it a priority in 2004 for many CIOs.
An ROI analysis tool developed by Alinean and sponsored by Intel Corp. can help companies develop and verify their personal business cases for PC upgrades.
Tom Pisello is the CEO of Orlando-based Alinean, the ROI consultancy helping CIOs, consultants and vendors assess and articulate the business value of IT investments. He can be reached at tpisello@alinean.com
