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.

One of our best excuses is that we’re responding to business requirements.

It excuses nearly everything. Why do we need more staff? We’re just responding to demand. Why are we building this system? Hey, we don’t define requirements, we just respond to them. Why is our project three years late? Users keep changing the specifications — it’s hard to hit a moving target.

Now that I have your attention I’ll back off a bit. Responding to requirements is important. It’s the tail, though, not the dog. You should wag it, not the other way around.

Businesses decide whether and where to invest in technology based on business considerations. But business users don’t keep track of technology, so they’re in a poor position to understand the opportunities.

That’s an opportunity for you, but only if you keep track of both technology and business trends. Last week we talked about the trends of the recent past: product quality and enhanced service. Product quality matters, of course, because if your product stinks people won’t buy it. Enhanced service matters because exceptional service means your customers will come back.

Quality and service are vital. They just aren’t enough anymore — they’re yesterday’s news. To understand the future you need to understand that people don’t buy products — they buy the anticipated results of owning the products. You don’t buy a car, you buy transportation. It may be luxury transportation, reliable transportation, fun transportation (supply your own adjective), but that’s what you’re buying.

The trends of the future grow out of this reality. Three stand out: entertainment, “molecularization,” and affinity. You’re going to have to support these through technology, so let’s take a look at them.

Entertainment matters to consumers, but business buyers aren’t immune. It isn’t always obvious how to add an entertainment dimension to your company’s business, but opportunities abound. Here in Minnesota we have the Mall of America, complete with an indoor amusement park to attract shoppers. McDonald’s has Happy Meals — not only a product, but a generator of consumer loyalty and repeat business. McDonald’s isn’t selling food. It’s selling a result: smiling children. Your job: figure out how technology (data warehousing and data mining, for example) can make your company’s entertainment program more effective.

Molecularization (a 20 buck word if ever there was one!) lets you break up your products and services into their component “molecules” so you can mix, match, and recombine them to create customized packages for each customer. You run across molecularization every time you buy a new personal computer: You choose how much RAM and hard disk you need, whether to install a tape drive, how big a monitor you want, and what kind of printer to attach. The installation glitches we all face testify to the difficulty of supporting molecularization.

Affinity is my favorite. Affinity drives customer loyalty programs to their logical conclusion. Frequent flier programs generate loyalty, but don’t create a bond between airline and traveler — airport “clubs” do that. User groups — independent of but supported and encouraged by providers — also create this kind of bond. And then there’s DNRC, or Dogbert’s New Ruling Class — a clublike enhancement to the already strong link between Dilbert readers and the characters in the comic strip. Members who visit the Dilbert Zone Web site (http://www.unitedmedia.com/comics/dilbert/) are a click away from a catalog of Dilbert calendars, mouse pads and so on: a perfect example of using affinity to sell product (and a great Web business strategy). The customer result here is a feeling of exclusivity, a sense of being special in a world of 5 billion people.

These three capabilities — entertainment, molecularization, and affinity — will drive the strategies of many businesses in the next decade. Not one of them can succeed without a lot of technology to support it — and that’s good, because it means I’m not going to run out of topics for future columns any time soon.

It also means you’d better start getting ready. You want to lead this parade, not slow it down.