Today, companies can purchase a Compaq desktop PC for less than #600. The market for desktop PCs is so competitive that tier-one suppliers are falling over themselves to offer the best deal to corporates. As the debate over total cost of ownership rages on, whatever the outcome, all costs associated with acquiring and owning PC desktops are set to drop significantly.
Chris Herbert, research director at market analyst, Romtec, believes that the more desktop PCs have been commoditised, the more end-user companies are prepared to pay for added value. In the corporate market, on-site support and reliability are key concerns.
David Bernard, network manager at Liberty International, upgrades PCs every two and a half years, and has standardised on Elonex as a supplier.
Liberty has 300 or so PCs, running a mix of Windows 95 and NT Workstation.
Software ranges from standard office productivity suites, Reuters, and Bloomberg financial services to bespoke applications. The desktop PCs are based on 200MHz Pentiums with 64Mb RAM and 2.5-to-3.5Gb hard disks.
"By and large, we have found the Elonex PCs very reliable," said Bernard.
An important factor for him is that Elonex has a good account manager assigned to look after Liberty International.
So what do PC manufacturers offer end-user companies when it comes to purchasing new PC equipment?
Bordan Tkachuk, chief executive of Viglen Technology, commented: "The corporate market today needs more than just a constant source of competitively priced personal computers. The increasing complexity of IT, when combined with the huge responsibilities now placed on the IT function, means that the corporate market must have confidence in every aspect of IT sourcing." Tkachuk added that as well as cost, reliability, state-of-the-art technology in a fast moving world, speed of delivery and certainty of long term production are also key factors in PC purchasing decisions.
An area of corporate IT which is receiving a lot of attention from resellers and manufacturers selling direct alike, is in the market for pre-configured PC. Here, the manufacturer or reseller works closely with the corporate IT department to deliver PCs pre-installed and pre-configured with application software, network software and operating system. On delivery, the machine is simply plugged in and is ready to use.
Dell is well known for its build-to-order service. The advantage of this is that Dell is able to reduce the amount of inventory it keeps, which helps to cut costs. Ray Badmington, desktop marketing manager at Dell, said that build-to-order allows the company to react quickly to changes in the prices of PC components and peripherals. When these fall in price, Badmington said that the saving can quickly be passed onto a customer.
Badmington said that many other PC manufacturers typically sell through resellers. In the reseller market there is a level of price protection and so if a supplier drops the price of a machine, it needs to notify all resellers of the change. Therefore, a price change takes longer to be adopted, and so end-users have to wait longer to benefit from the price saving. Dell's business is based on "just-in-time" manufacturing where components and peripherals are kept in the factory for seven to eight days before being used.
Turnaround on a new machine, according to Badmington, is about three days to manufacture. There is no reseller to go through. "As component pricing changes, we can pass on the saving to customers," he said.
Along with the ability to react quickly to changes in the market, Dell claims that, through just-in-time manufacturing, it is also able to bring technology to customers quicker. "If a new peripheral or processor is released we can get it to customers quicker than other manufacturers," Badmington said.
By dealing direct with customers, Dell also said it can offer a superior level of support: "When corporates want a high level of support, it is quicker to go direct to the manufacturer."
Unlike Dell, which deals directly with customers, Compaq's primary focus is indirect, using resellers to deal directly with customers. Compaq's cheapest desktop PC family is the DeskPro 2000, with machines ranging in price from #599 to #2,500. At the bottom of the price range, the DeskPro 2000 is configured with a 166MHz Pentium MMX, 16Mb RAM and 2Gb hard disk.
James Griffith, senior product manager for commercial desktops at Compaq, said: "What we offer is a consistent platform, that is, (Compaq can provide) the same platform this week as next week." Inconsistency can creep in when a manufacturer upgrades BIOS chips during the lifecycle of a single product, or changes the chipset. The problem here, is that a standard PC configuration which is being rolled out to thousands of desktops, may fail if some machines are using different chipsets or versions of a BIOS.
As far as supporting customers goes, Griffith said: "We can offer a good level of support due to our indirect model." The theory here is that a reseller can provide all customer contact and so will be able to gain a better understanding of customers' particular PC configuration and infrastructure.
IT reseller, Tplc, is seeing that customers are no longer paying a premium for PC brands like Compaq, Dell, Hewlett-Packard, IBM, Fujitsu and Packard-Bell. In fact, according to Tplc, in 1997, 90% of PCs shipped to its customers were from tier one suppliers. Most of Tplc's customers standardise on one main computer supplier. Some may have a secondary supplier, but in Tplc's experience, these machines typically end up in low-usage and non-critical application areas.
Given the choice in leading PC brands, the question is: what are corporates actually buying? Eric Roth, manager for market intelligence at Tplc, said: "Most corporate customers are not skimping on (PC) configurations."
He added: "Customers who used to buy minimum spec'd PCs are now buying desktop PCs that will last a couple of years." While Tplc's customers may not necessarily be looking to pay a premium for leading-edge PCs, Roth said that they are looking for good configurations rather than minimal.
The reason concerns the cost of ownership. People are now buying for the future. Rather than replace desktops every year, which would have been the case when purchasing a lowly configured PC, corporates now buy reasonably specified PCs that can last maybe two or more years. "It pays to give people plenty of disk space and a good processor," said Roth.
A "good spec" for Roth is a 266MHz Pentium II-based PC with 32Mb RAM and 3Gb hard disk. Windows 95 can run comfortably in such a machine. However, Roth notes that a lot of companies are going to NT. Inevitably, this will mean they have to purchase more memory.
In terms of practicality, a 32Mb PC in a configuration where one memory slot is taken by a single 32Mb SIMM, offers more flexibility for upgrading than one where two or more slots are used up. On an NT machine, the memory configuration of Roth's "good spec" PC would need to be increased from 32Mb to 48Mb or 64Mb. Thus, the more free memory slots available, the more a PC purchase is future proofed.
Disk storage is another area where diligent planning can help companies reduce unnecessary upgrade costs in the future. Hard disks are quite cheap when purchased with a PC, so it is always best to buy more storage rather than go for the exact storage requirements for today's applications and data. For instance, Maxtor has just introduced the Diamond Max 2880, an 11.5Gb disk, which costs just #399. This works out at 3 pence per Mb.
Tomorrow, a new "must have" application may come along which will consume vast amounts of disk space. If there is not enough space available, companies either have to buy a new hard disk and retrofit it with the existing disk or replace the existing disk with the new one. Both of these take time and cost money. It is better to buy a large disk in the first place, and live with acres of free space, than have to go through the not insignificant effort involved in installing a larger disk.
A factor often overlooked when purchasing PCs is recycling. Manufacturers need to sell and dispose old PCs in line with UK and European Commission (EC) regulations. Users used to cascade PCs through companies. So someone's "new" PC would be someone else's hand-me-down. Roth does not see this as a good way to reuse IT in a company: "The handed down PC typically won't cope with modern software and, in our experience, causes more calls to helpdesks."
If handing down is proving costly, one way to offset costs is not to buy PCs at all. Rather than purchase PCs outright, companies can instead opt for a leasing contract. Leasing reduces initial capital outlays, reduces administration and management costs and can potentially work out cheaper than actual acquisition costs when hidden costs, such as the cost of recycling, are taken into account.
In a paper on desktop PC leasing that looks at two leasing contacts which run over three years, Jonathan Steel, an analyst at the Bathwick Group, notes that few people can claim to know with any accuracy what the next three years will hold. Leasing is able to provide companies with a one-stop-shop for acquiring, using, administering, managing and disposing desktop PCs. What's more, companies can pay quarterly or monthly leasing bills which include IT services such as maintenance, support and audit and asset management.
An example of PC leasing is Portfolio Plus, a joint venture between IT services firm, Computacenter and Dresdner Kleinwort Benson Finance. Portfolio Plus is designed to encompass the entire IT lifecycle from supply and installation of equipment through to disposal of redundant systems. It enables customers to replace PCs or notebooks on a regular basis, such as every 18 months. Replaced PCs are then handed down to users who do not need the latest technology. Computacenter can also provide installation, project management, user support, networking services, training and maintenance as value added services.
Clearly, IT managers no longer need to scrape the proverbial bottom of the barrel to find a bargain budget PC. Most of the major player have products which clearly target the price-conscious buyer. When purchase price is an issue, corporates can look at leasing as a way to reduce acquisition cost. In large PC installations, corporate PC buyers have more scope for negotiation. So, if all else fails, it is always worth haggling.
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