Corporate PCs Total cost of ownership

Corporate PCs Total cost of ownership

TCO figures are widely quoted by vendors to show how you can cut costs, but how applicable are they to your company?

 THE PCS YOUR COMPANY BUYS COST FAR more than their initial purchase price alone. Simply raising a purchase order will cost you something, and most PCs usually have associated ongoing costs, from training users for new operating systems and applications, to regular scheduled maintenance.

The problem is in trying to quantify how much these costs add to the PC's initial price. They all--from the time you order the system, to the time it ends up in a skip after it's been written off the books--come under the heading of total cost of ownership (TCO).

Over the last few years, TCO has become an industry buzzword and is seen as a new means of differentiation between products. Both hardware and software vendors have come to rely heavily on TCO figures that seem to favour their products over competitors'.

Concentrating on reducing costs to end users must be a good thing for buyers, but whose TCO figures do you believe? One company at the forefront of the debate is the Gartner Group. Its TCO model originated in 1987, and has been continually refined since then using feedback from its clients.

Rather than a fixed comparison of costs, the model is really a spreadsheet. At its most basic, it compares six operating systems--DOS, Windows 3.x, 95 and NT, OS/2 and MacOS 7.5--across four categories: capital expenditure, technical support, administration and end-user operations, each broken down into items like costs of labour and training. Obviously, something as simple as the country you're based in and the associated labour costs will have a major effect on your costs. Summing these categories gives your TCO.

This base model, so often quoted by vendors, uses averages of figures from some of Gartner's US customers, so obviously can't be taken as applying to your organisation. In fact, the real costs can range from between ­32 per cent and 180 per cent of operating costs. The Gartner base TCO model can give you a very rough idea of comparative costs between platforms, but for your organisation these are unlikely to be valid. For example, if you have a workforce who are experienced with and dedicated to Apple Macintoshes, then moving to NT 4.0 might cost far more in the short term than the savings suggested by Microsoft.

A good example of the uses made of Gartner's TCO model were the press briefings given by Microsoft, Tektronix and HDS towards the end of 1996. Microsoft used the figures to 'prove' that a PC was cheaper than a Network Computer (NC), while Tektronix and HDS used the same figures to 'prove' the opposite.

So just who's telling the truth? The simple answer is that any vendor suggesting that your organisation can make the quoted TCO savings simply by buying its products is lying. They have no idea of your costs, or even if your organisation matches any of the assumptions made in the TCO model. At best, quoted TCO figures can only be a very rough guide.

Another factor that vendors seem less willing to quote is that, according to the Gartner Group, 'a well-managed distributed environment can reduce TCO by 20 to 30 per cent, even with Windows 3.x'. This means that if your IT resources are loosely managed, then you could save roughly 25 per cent of TCO costs just by running a tighter ship.

The only way you can discover if quoted TCO savings have any meaning for you is by calculating your own TCO.

 Mark Child