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|In: Industry Commentary|Last Updated:

One of my favorite advertising slogans is “Don’t Blame Desinex”. It’s incredibly useful – no matter what problem someone is whining about, from problems with Windows/95 networking to crop failure, I can respond “Don’t Blame Desinex” and be pretty sure the conversation will change direction.

In poring through the awesome array of expenses toted up in the Gartner Group’s Total Cost of Ownership (TCO) model I have the same reaction: Don’t Blame Desinex. For that matter, don’t hang these costs on the personal computer, either.

Last week we saw that TCO calculations answer the wrong question, and even the right answer to the wrong question will mislead you. TCO answers the wrong question because it addresses cost instead of value, and because the PC has multiple uses with very different value equations.

That means we should be focusing on the costs … and benefits … of the various ways companies use PCs. We identified three last week: increased personal productivity and effectiveness; improved communication; and streamlined core company processes.

It’s certainly worth knowing the cost of increasing personal productivity and effectiveness, so long as we view our goal as being more effective at achieving even more benefits. It’s just as valid to understand what we’re paying to improve communications, looking for opportunities to keep on improving it while reducing the cost of doing so. As for company core processes – that translates to getting better at developing and deploying new, primarily client/server applications. Always a good idea.

But toting up all these costs into a total cost of ownership? You’ll end up like the sales manager who reduced the cost of travel in his sales force. He succeeded — travel costs dropped 25%. Of course, sales dropped 50% at the same time, but he got his travel costs down.

There is a legitimate issue hiding in all the confusion about TCO, and that’s the Personal Computer Overhead Cost (we’ll call it PCOC). It costs real money to provision a desktop with a personal computer, and you may want to know the amount.

Rather than quibble with the Gartner numbers I’ll use them, inflated as they are. Bottom line: PCOC comes to just over $3,000 per year. That includes all PC and LAN capital and administrative costs, plus the cost of supporting network operating systems.

PCOC excludes all costs that index with benefits, like training and support. It also excludes “end-user operations” which GG defines as “non-job-related PC activities that are necessary due to the presence of PCs.” Why? End-user operations include both costs unique to PCs (time wasted rebooting when the PC freezes up) and costs indexed to benefits – for example the cost of managing files, which is much lower on the PC than in a filing cabinet. The benefits probably outweigh the costs by a large multiple, but let’s be conservative and just net it all to zero.

PCOC also ignores all support and applications costs. The cost of buying, installing and supporting applications should be allocated to personal productivity and effectiveness, improving communication, and streamlining company core processes – not PCOC. More on this subject next week.

Now, lest I seem unbalanced … let me rephrase that: Lest my perspective appears to lack balance … I need to say something nice about the Gartner Group. (I hate this part!)

Once you get past the TCO cost analysis, which has received all of the publicity, the Gartner Group makes some reasonable recommendations on how to reduce costs without affecting benefits. Recommendations like centralizing administration. Using remote-control software to reduce the number of trips to the desktop. Installing automated tools to manage your networks better. Designing more effective training and support programs. And so on.

These are good things to do. End-user support is too often an afterthought in IS, and you probably need to pay more attention to it. Institute a continuous improvement program. Re-think it completely. Especially, make it a career opportunity.

PCOC adds about 5% to employee overhead. While knocking a few points off that number won’t change the world, it will certainly improve both your budget and image.

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|In: Industry Commentary|Last Updated:

My first professional contact with InfoWorld was in 1993. I’d just installed a user-friendly front end to CompuServe when along came the Gartner Group’s total cost of ownership (TCO) model — at the time, well over $8,000 per year for a single PC.

Inflamed with righteous anger and (more to the point) itching to use my new CompuServe software, I wrote a less-than-diplomatic guest column for InfoWorld that began, “Does anyone else find the Gartner Group annoying?” and finished, “The definition of an expert here in Minnesota is `a guy from the East Coast with slides’. So I’m expecting Gartner to win without even a chance to debate the issues.”

InfoWorld Opinions Editor Rachel Parker added a thoroughly inflammatory headline, and a few weeks later, the Gartner Group offered me, manager of a 1,000-node network, a chance to debate the issues after all — at its annual symposium, in front of about 600 CIOs and other assorted dignitaries.

Modesty forbids my reporting the one-sided results. Oh, OK. I used Gartner’s accounting methods to calculate the TCO for a day planner. As I recall, it came to well over $4,000 per year. The whole thing was hilarious and left no doubt in the minds of the 600 attendees who was on the side of truth and the American Way.

A week later our chief financial officer, unaware of my newfound status as industry pundit, asked if I’d seen the Wall Street Journal article showing that PCs really cost more than $8,000 per year.

A lot has changed since then. Rachel has become a good friend. I’m writing regularly for InfoWorld and have moved to the consulting side of the industry. And the TCO estimates have inflated even further. Earlier this year I promised to provide an alternative. Starting this week I’m going to do just that.

The most important step in arriving at the right answer, Albert Einstein once pointed out, is asking the right question. Most sources describe Einstein as a pretty bright guy, so we’re going to take his advice.

The question answered by TCO is the aggregate PC/LAN cost to an average company. Not only is this the wrong question, it’s wrong in two different dimensions.

Here’s the first: It measures cost. That’s not a very intelligent thing to measure, as you know if you invest. Do you worry about the cost? No, you worry about the avoidable costs.

Businesses don’t spend, they invest. They invest in salaries, benefits, office space, raw materials, and, yes, personal computers and LANs. Businesses expect a return on all of these investments better than what they’d earn by putting the same money in an indexed mutual fund (or some similar measure).

Companies — smart ones at least — don’t cut costs. They cut avoidable costs, just as you do. They cut costs that don’t deliver enough return, just as you sell stocks that don’t perform. And they find lower-cost methods, just like you move to a discount brokerage to reduce trading fees.

The other problem with the TCO question is more subtle. PCs and LANs are a means to multiple ends, and an incomplete means to most of them. TCO lumps together some, but not all, of the costs of three very different kinds of process:

  • Personal productivity and effectiveness: You use your PC to write memos, letters, and reports; develop financial models; do research; maintain your calendar; keep track of contacts; and file and retrieve all kinds of documents.
  • Communications: You use your PC to send and receive information to people both inside and outside your company.
  • Company core processes: PCs and LANs are part (but not all) of the computing platform on which you run production systems. These production systems define the work of many employees. This distinguishes them from word processors and spreadsheets – tools for which employees define the work.

The result of adding three partial costs isn’t a useful insight.

It’s just a number.

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