There’s an old joke about a farmer who loans his mule to a friend. The mule will work hard if treated well, he explains. All you have to do is speak gently and the mule will do what you need it to do.
His friend tries it out, but the mule won’t do anything – it just sits in its stall taking up space and food. When the owner comes back his friend complains that the mule wouldn’t work at all.
Puzzled, the owner picks up a two by four and starts whacking the mule about the head and shoulders.
“I thought all you had to do is to speak gently,” his friend said to him.
“Well sure, but first you have to get its attention,” explained the farmer.
The joke isn’t all that funny, but the punch line can be used in a wide variety of circumstances. It probably explains, for example, the exorbitant estimates bandied about for the Total Cost of Ownership (TCO) of a personal computer. The promoters of these ridiculous estimates are just trying to get your attention.
This is the last of our three-part series on the subject. The column two weeks ago showed that TCO asks the wrong question — TCO adds together part, but not all, of three independent statistics — costs associated with improvements to personal productivity and effectiveness, with improvements in communications, and with the automation of company core processes (that is, development and deployment of production application systems).
Last week’s column focused on the statistic you should care about the most: the fixed overhead costs (Personal Computer Overhead Costs, or PCOC) associated with LAN-attached personal computers. PCOC, it appears, comes to about $3,000 per year.
We’re going to wrap things up this week by looking at the number you may have thought TCO measured: The cost of personal computing. Personal computing is the term we’ll use to cover the use of word processors, electronic spreadsheets, personal information managers and stuff like that — software designed to enhance personal productivity and effectiveness.
It’s tempting to calculate a total cost for this category, but it would be a mistake for two reasons. First, the benefits, while huge, defy quantification. (The proof: PCs have completely transformed the workplace — not one PC-enabled job looks remotely like what equivalent employees did 15 years ago.) Comparing quantitative costs with qualitative benefits can tie your brain into knots.
Just as important, these are variable costs — they go up with usage. Your goal when dealing with variable costs should be to reduce unit cost, not total cost. And the cost we’re interested in isn’t the cost of personal computing itself — it’s the cost of the work supported by personal computing (since that’s where the benefit comes in). Let’s walk through an example.
Figure an average employee gets one day each year of formal training, another full day of support, and loses two full days each year just figuring out how to do stuff. Including the employee’s time and that of support staff at a standard rate of $40/hour (a reasonable fully loaded cost for a $50,000 per year employee), that comes to about $1,600 per year. Allocate a third of the PCOC cost to this category of benefit (the other two thirds goes to the other uses of a PC) and you come to a total annual cost of $2,600 per employee for improved personal productivity and effectiveness.
Let’s figure about half of the employee’s total work — about 1,000 hours per year — is improved through personal computing. That makes the unit cost of personal computing about $2.60 per hour. Expressed as a percentage it comes to an overhead cost of 6.5% of the work affected.
Here’s a wild guess: personal computing leads to improvements in productivity and effectiveness that vastly exceed 6.5%. Reduce your support costs? Sure — so long as it has no deleterious impact on the employees you support.