The art of managing IT assets effectively
Having control over the real total cost of ownership of IT assets can produce significant cost savings.
It may be tempting to extend the refresh lifecycle of PCs and laptops, especially when trying to stretch the IT budgets. It may help businesses avoid new equipment acquisition costs, but older equipment costs more to maintain, so the total cost of ownership (TCO) may actually increase.
A Wipro survey recently gathered detailed data from 106 firms in North America and Europe, including representation from 15 different industries. Each firm had a minimum of 2,500 PCs, of which at least 25% were laptops.
The firms all managed elements of PC support with internal IT staff. The data shows that for most firms, the optimal PC refresh lifecycle for both laptop and desktop PCs is three years.
The analysis took into account the cost of PC acquisition, the cost of issue resolution and maintenance based on reported failure rates of PCs at different ages, and out of warranty repair costs. It found that, for PCs that are older than three years, the cost of maintenance and issue resolution increases such that it is cheaper to purchase a new system.
The research data demonstrated that support costs increase with age: a five-year-old PC costs twice as much to maintain than a new one. One of the maintenance cost drivers is the fact that older systems suffer from more security incidents – a four-year-old PC has 53% more security incidents than a PC in its first year.
According to the survey, if a company was to keep a PC for just one year, support costs are low, but the PC purchase cost makes the total cost of ownership expensive at $1,761 (about R25,000) per year. If the same company were to keep their PCs for two years, the total cost would be $2,630 (about R38,000) over two years, or $1,315 (R19,000) per year.
While support costs have increased somewhat, the fact that the firm can amortise the PC acquisition cost over two years significantly lowers the equivalent annual cost. The same holds true for the third year.
If a company were to keep its laptop PCs for four years, even though the PC acquisition cost is divided over the four-year period, support and warranty costs increase to a point where the equivalent annual cost is actually $60 (about R870) higher than if they kept the machines for just three years. Five year and longer life cycles see a corresponding increase in the cost of ownership and a higher equivalent annual cost.
A similar pattern holds true for desktops. A three-year refresh cycle shows the lowest total cost of ownership as support and out of warranty repair costs increase in years four and five to such an extent that they outweigh the benefit of amortising the acquisition cost over more years.
Effective IT asset management is an art, having control over the real total cost of ownership of IT assets can produce significant cost savings and also increase operational efficiencies.
There are many options and decisions that modern businesses face in the acquisition phase of their IT asset lifecycle. These could include aspects such as specific business requirements, budget constraints, a decision to lease or buy, support costs.
The first consideration is whether to lease or buy. Leasing requires lower initial capital outlay and normally includes maintenance support. However, there needs to be a balance because the longer the lease term, the more one would spend compared to purchasing the equipment outright.
Purchasing has the advantage of ownership and the associated tax benefits including the tax savings on the depreciation of equipment over their lifetime. However, owning IT assets means that businesses own the maintenance and repairs as well.
If one considers the total cost of ownership throughout a product’s refresh cycle, there is a significant difference between three and five years. This would typically include software upgrades, repairs, support, lost productivity when products are in for repairs, data loss and product upgrades.
Hanging on to older equipment may not be in the best interest of a company, especially in terms of operability. More importantly, this decision typically doesn’t present the cost savings that many businesses expect. It is crucial to consider the total life cycle costs and to integrate an asset management plan into the decision-making process.
Every company has its own unique factors and considerations during their IT acquisition decision-making process. By implementing a robust IT asset management plan, businesses will minimise maintenance costs and capture the maximum residual value of assets.
By employing a reputable IT Asset Disposal (ITAD) service provider, this residual value can be used to reduce the cost of new hardware acquisitions.