The Real Costs of Personal Computers

by Paul A. Strassmann

Computerworld
January 13, 1997

What are the real costs of personal computing?

The average costs of ownership of a personal computer have finally made the headlines. Recently, Fortune Magazine quoted the annual cost of PC ownership at more than $9,000, The Economist at $6,400, The New York Times at $13,000 and Business Week at $8,000. The most frequent source of these numbers is the Gartner Group, who will oblige with estimates ranging from $7,138 to $13,000.

Talking about large sums

The sudden interest is due to the prospects of a $500 network computer displacing a $2,500 personal computer.

For senior executives contemplating NCs and PCs, these conflicting numbers are bound to cause confusion. A typical Fortune 1000 corporation with an annual IT budget of $200 million is likely to have about 10,000 personal computers. If you take the highest Gartner numbers and the low-ball claims of $2,500 for the cost of ownership of an NC, you have a hypothetical cost reduction of $105 million. If you prefer The Economist, you could argue that there is only $34 million worth of savings.

Whatever number you choose, to deliver intranet-run NCs this company will need, by my estimate, at least $60 million worth of new development money to extricate yourself from a fully implemented client/server architecture. That represents one full year's development and maintenance cost.

Taking these average cost figures at face value can lead to fiscal disaster. Concocting hypothetical savings based on mythical costs are a sure-fire way for NC-minded CIOs to get into real trouble.

The fact is that PC ownership costs are driven by how people work and how they are managed. These factors make "average cost of ownership" a meaningless abstraction.

Learning about PC costs

I saw this in 1991, when I commissioned a study of 32 PC local area networks while I was CIO of the U.S. Department of Defense. I found the "average cost" per LAN ranged from $3,500 to more than $60,000 per seat. Clearly, there was no such thing as an average cost for personal computing.

Influences on PC Ownership

There are two major influences determining the costs of PC ownership: workload and management practices. Both are shaped by the customers, technology and applications.

Customers: The occupational profile of employees drives computing demand. Professionals devour computing capacity whereas craft labor hardly uses any. The penetration of computing will also vary. It is extremely high with engineers and the accounting types, much less with technicians and salespeople.
Mobile workers require less computing than sedentary number crunchers. Computer literacy also matters. Employee turnover places enormous burdens on the support staffs for hand-holding, training, error correction and equipment relocation. For instance, the Bank Administration Institute reports a 50% turnover rate among consumer credit officers. That staggering instability must surely increase the costs of all support.

Technology: Technology architecture and adherence to standards also influence costs. The choice of the identical versions of applications and operating systems greatly simplifies diagnostics and network maintenance. Liberal Internet access is a killer, especially on network capacity. Without central configuration controls over equipment and software, one can easily double the staff at the help desks. Most importantly, there are enormous economies of scale in central network administration costs. The statistics of queuing theory will always favor large networks over small ones.

Applications: The failure of application software is perhaps the most severe cause of all customer dissatisfaction. Some of it comes from poor design, insufficient testing of maintenance and excessive permissiveness for local operators to futz around with features and options. Removable disk drives that allow insertion of private software increase the workload for everyone. Strict enforcement of security procedures and controls may cost as much as $1,000 per PC per year.

Cost management

Though customer, technology and application characteristics can easily account for thousands of dollars of additional expense for a PC, poor management explains most of the difference between low and high costs. You don't need NCs to reduce desktop ownership costs. All it takes are users and technicians who are reasonably competent at what they are doing.

Sophisticated network management systems mean very little if nobody takes the time to assist a few chronically incompetent PC users. Tutoring and assistance are needed to reduce computing costs, not just technological fixes. Making users, as well as IS, accountable for costs is essential to offer the right inducements for cost reduction and continuous quality improvement.

Implications for CIOs

You can't manage PC costs by going after average costs. Average travel time doesn't tell much about traffic jams. Likewise, there is no such thing as an average cost benchmark for the cost of PC or NC ownership. The costs of PC networks will differ for every firm, since personal computing reflects the unique characteristics of how a firm manages its computers. I've counted 30 possible PC expense drivers, each of which can increase ownership costs if managed poorly. The only way to reduce costs is to uncover the primary causes of poor choices, neglectful practices and dysfunctional computing behavior.

Paul Strassmann works on a PC bought for $2,356. At his consulting rates, the monthly cost for recovering from crashes, hanging on the phone with vendor help desks and de-conflicting incompatible software exceeds the purchase cost.