tco
WHITE PAPER
August 2012
TCO: RECAPTURING AND REDEPLOYING YOUR IT SPEND Delivering the promise of Digital Government on a declining budget demands innovation and discipline. Agencies are caught between mandates on security, modernization, mobility and their mission to better serve the people. In an environment where Federal IT must ensure each dollar is invested with precision and purpose, Federal IT’s readiness for transformation starts with evaluating the tools that power daily productivity, looking for ways to increase efficiency and reduce total cost of ownership (TCO). Only a comprehensive TCO mindset across all IT investments ensures decisions about provisioning these assets are fully informed and feasible. Rigorous end-to-end analysis starts with procurement costs and ends with the costs of taking that technology out of service. IT organizations must deploy rigorous return on investment (ROI) analysis across their entire portfolio, ensuring all technology purchases – from the personal computing systems to the data center – offer maximum value. This TCO guide provides a refresher for Federal Government IT decision makers interested in ensuring cost-effective technology purchases now and in the future.
WHITE PAPER
TCO: REDEFINING IT DECISIONS The Gartner group introduced TCO modeling in the late 1980s to measure ownership costs for PC hardware. Based largely on existing life cycle pricing processes and finely tuned for analyzing enterprise technology costs, it was first used to publish the 1987 “Total Cost of Desktop Ownership” study, data Gartner continues to refresh and publish. Regardless of the specific model used, TCO is always comprised of some broad categories covering both direct and indirect costs. Direct Costs • Procurement What does it cost to choose the right solution? This includes the price of research, bid and contract negotiations, compliance activities, and other acquisition and purchase costs. • D eployment What is the price of putting your technology to work? This figure includes inventory and setup work, required pre-load and configuration time, as well as training and documentation costs related to end-user education and the change management. • Operations How much does it cost to keep your technology productive? This includes IT staff time required to support it over its lifecycle, including upgrades, repair, as well as general facilities and energy costs. • D isposal Once the lifecycle is complete, where does your technology go? This category will include all cost associated with decommissioning the device and updating inventory, including sanitizing sensitive information and any costs incurred during compliant disposal. Indirect Costs While direct costs can be predicted, indirect costs are harder to predict and can quickly wreak havoc on your budget. Indirect costs include downtime and the resulting lack of productivity, as well as what’s typically called “user operations,” the cost of end user support, specifically peer to peer support, occurs with any change in technology.
Adding It Up After averaging costs, in the end TCO looks like this: • Y our direct purchase cost will be less than 20% of your total TCO • Your direct procurement, deployment, and operations costs will be about 20% of your total TCO • Unbudgeted and indirect end-user and downtime costs will be about 60% of your total TCO
TCO and Asset Lifecycle Generally, TCO grows with an asset’s age. Whether it’s out of warranty repair costs, decreased technical performance or increasingly difficult integration with new technology; older assets cost more.1 Ideally, organizations would refresh technology often enough to: • E mpower better productivity • Guarantee reliability • Lower purchase price
1 U sing Total Cost of Ownership to Determine Optimal PC Refresh Lifecycles - http://www.lenovo.com/shop/americas/ content/pdf/services_warranty/asset_recovery_services_for_business/IndustryWhitepaperUsingTCO.pdf
WHITE PAPER Refresh rates also impact your ability to leverage innovation when it occurs. If you’re only taking 1 out 3 devices out of service each year, your ability to quickly embrace new technologies and best practices is severely limited. IT must again balance the need for upgrade versus pressure to keep IT costs low.
It minimizes support costs and downtime while improving asset performance in the mobile workplace.
WIPRO’s recent study of TCO and asset lifecycle identified three years as the optimum refresh schedule for desktop assets. Where budget realities make this an unrealistic global standard, organizations must look for technology built with enough quality, innovation, and durability to deliver consistent performance above and beyond the call of duty. Only exceptional reliability can guarantee the extension of an asset’s term of service without incurring higher support costs and failure rates typically associated with longer lifecycles.
IMPACTING TCO Whether it’s the cost of the acquisition process or downtime related to reliability, a relentless and strategic focus on continuously reducing TCO guarantees identified cost savings can be implemented system-wide wherever possible. These savings, combined with best practices shared across all agencies, can free up precious dollars for investment elsewhere. According to a recent TBR study, companies evaluating new PCs are looking for three key things2: 1 R eductions in lifetime maintenance costs 2 Lower energy consumption 3 Increased end-user productivity via improved performance and multitasking capability Budget-conscious IT decision makers should look past purchase price and focus instead on reducing recurring costs across the entire asset lifecycle. This means purchasing assets more precisely and managing them with smarter processes. Ultimately TCO is not about merely cutting costs, it is about ensuring investments are efficient so that dollars go farther and necessary innovation elsewhere can be funded while increasingly proactive users enable those key initiatives.
THE LENOVO ADVANTAGE: BETTER TECHNOLOGY FOR LOWER TCO Technology selection and procurement costs significantly impact TCO, and long-term relationships with consistent suppliers can reduce these costs by 5-15% and speed up putting new technology into service. For organizations struggling to maximize their technology budget, Lenovo’s reputation for reliability and innovation make us the right choice to reduce TCO while achieving mission success. If purchase price is ultimately a minor contributor to TCO, then purchase decisions should focus more on features and performance. Beyond the standard product/feature comparison matrix, three key factors should be considered in evaluating TCO.
1 Readiness After the initial purchase of the hardware, a device must be readied for service. This includes entering the device into inventory, configuring it for its mission, and ensuring the necessary mobility and security framework is in place. Lenovo solutions and services ensure your technology is ready to work from day one. • L enovo’s Enhanced Experience 3 Performance upgrade and Windows 7 combine for better end-user experience, reducing indirect support costs and lost productivity waiting for boot and system start • Lenovo imaging and inventory services can offload time-consuming pre-deployment costs • Built-in security, antitheft, and remote data destruction services ensure secure mobile productivity • Lenovo’s innovative packaging methods speed up and simplify receiving and inventory
2 Large Enterprise Repair Rate Study, Apr/May 2011, TBR Industry Average includes Lenovo 3 Large Enterprise Repair Rate Study, Apr/May 2011, TBR Industry Average includes Lenovo
WHITE PAPER
2 Rugged Reliability Improving reliability impacts TCO significantly. It minimizes support costs and downtime while improving asset performance in the mobile workplace. The final result is more productivity for less money. An industry-wide survey of failure and repair rates3 of almost 7 million enterprise-deployed PCs and portables puts Lenovo well ahead of its competitors: • L enovo Notebooks are 15% more reliable than the industry average • ThinkCentre PCs are 28% more reliable Lenovo’s industry leading repair rates, guarantee less time dealing with down systems – increasing productivity and reducing costs. This reliability extends beyond the relative peace and quiet of the desktop and out into the real everywhere workplaces, making them the ideal answer to mandates generating an increasingly mobile workforce. In order to be able to ensure work can be done by Federal employees anytime, anywhere, the technology they are using to access information must be tough enough to withstand life outside of an office cubicle. All Lenovo’s federal products can do just that. In a testament to Lenovo’s commitment to innovation, the military found these systems meet 8 out of 9 MIL-STD specifications right out of the box. These TCO-reducing assets deliver no matter the mission.
Mean % of Systems Requiring Warranty Repairs
Corporate Notebook, Desktop & Workstation Stated Repair Rates (Lenovo vs. Competitors’ Averages)
Source: Large Enterprise Repair Rate Study, April/May 2011, TBR
14 12 10 8 6 4 2
This Year’s Models
1st Year
Notebook Competitors’ Average Desktop Competitors’ Average Workstation Competitors’ Average
2nd Year
3rd Year
ThinkPad Average ThinkCentre Average ThinkStation Average
3 Green and Sustainable Compliance is less about product and more about partnerships. Finding a technology provider with compliant products and experience in the government space is critical. This experience ensures faster, cost effecitive procurement and fewer expensive post-deployment surprises. • • • •
enovo products are ULE Gold, Energy Star, and EPEAT-certified L Lenovo leads industry in sustainable manufacturing, PCC use, and GHG reduction ThinkVantage software and other innovations can reduce device energy consumption by 80% Certified SmartWay transport for greener and more efficient shipping
WHITE PAPER
MANAGE SMARTER It makes sense and research supports it: effectively managed devices cost less. A Gartner study in 20084 compared TCO for unmanaged desktops to costs for similar devices with centrally-managed security and configuration settings. Their results showed a 42% reduction of costs across the board, with higher savings on devices that saw frequent mobile duty.
Find a Power Balance Ultimately, IT must help balance an organization’s need for control and simplicity and the end-user’s need for productivity and the appropriate autonomy. Mobile users who need flexibility to connect remotely, for example, need different permissions than a locked down desktop user that never leaves the network.
Simple is Better Good device management is all about simplification. Each change in application, OS, or network configuration creates a new complexity and thus a new risk. Smart device management restricts non-essential choices and options, eliminating the non-essential risks those choices can bring.
Their results showed a 42% reduction of costs across the board, with higher savings on devices that saw frequent mobile duty.
BEYOND TCO: BALANCING COST AND CAPABILITY While the TCO model focuses on costs, IT leadership is also responsible for representing end-users and advocating for their needs. Even with cost reduction as a first goal, good TCO data should be at the center of any conversation about new and continued investments into important solutions. Ultimately, precise TCO analysis ensures technology spending remains efficient and strategically aligned. The right ideas and solutions can generate critical cost savings and cost avoidance that persist well beyond a single asset’s lifecycle. Ideally, these dollars, recaptured through first understanding and then impacting TCO, can strengthen Federal IT’s ability to innovate and invest elsewhere. Lenovo’s relentless dedication to continuously increasing product reliability and innovation gives our customers the advantage of guaranteed lower TCO all the way from procurement to disposal. We maintain an unrelenting dedication to reduce our carbon footprint and provide energy efficient products and services at every step in order to ensure our customers reduce theirs. The Lenovo advantage is a fundamental component to Federal agencies determined to make each and every technology count.
4 http://www.gartner.com/it/page.jsp?id=636308
August 2012
TCO: RECAPTURING AND REDEPLOYING YOUR IT SPEND Delivering the promise of Digital Government on a declining budget demands innovation and discipline. Agencies are caught between mandates on security, modernization, mobility and their mission to better serve the people. In an environment where Federal IT must ensure each dollar is invested with precision and purpose, Federal IT’s readiness for transformation starts with evaluating the tools that power daily productivity, looking for ways to increase efficiency and reduce total cost of ownership (TCO). Only a comprehensive TCO mindset across all IT investments ensures decisions about provisioning these assets are fully informed and feasible. Rigorous end-to-end analysis starts with procurement costs and ends with the costs of taking that technology out of service. IT organizations must deploy rigorous return on investment (ROI) analysis across their entire portfolio, ensuring all technology purchases – from the personal computing systems to the data center – offer maximum value. This TCO guide provides a refresher for Federal Government IT decision makers interested in ensuring cost-effective technology purchases now and in the future.
WHITE PAPER
TCO: REDEFINING IT DECISIONS The Gartner group introduced TCO modeling in the late 1980s to measure ownership costs for PC hardware. Based largely on existing life cycle pricing processes and finely tuned for analyzing enterprise technology costs, it was first used to publish the 1987 “Total Cost of Desktop Ownership” study, data Gartner continues to refresh and publish. Regardless of the specific model used, TCO is always comprised of some broad categories covering both direct and indirect costs. Direct Costs • Procurement What does it cost to choose the right solution? This includes the price of research, bid and contract negotiations, compliance activities, and other acquisition and purchase costs. • D eployment What is the price of putting your technology to work? This figure includes inventory and setup work, required pre-load and configuration time, as well as training and documentation costs related to end-user education and the change management. • Operations How much does it cost to keep your technology productive? This includes IT staff time required to support it over its lifecycle, including upgrades, repair, as well as general facilities and energy costs. • D isposal Once the lifecycle is complete, where does your technology go? This category will include all cost associated with decommissioning the device and updating inventory, including sanitizing sensitive information and any costs incurred during compliant disposal. Indirect Costs While direct costs can be predicted, indirect costs are harder to predict and can quickly wreak havoc on your budget. Indirect costs include downtime and the resulting lack of productivity, as well as what’s typically called “user operations,” the cost of end user support, specifically peer to peer support, occurs with any change in technology.
Adding It Up After averaging costs, in the end TCO looks like this: • Y our direct purchase cost will be less than 20% of your total TCO • Your direct procurement, deployment, and operations costs will be about 20% of your total TCO • Unbudgeted and indirect end-user and downtime costs will be about 60% of your total TCO
TCO and Asset Lifecycle Generally, TCO grows with an asset’s age. Whether it’s out of warranty repair costs, decreased technical performance or increasingly difficult integration with new technology; older assets cost more.1 Ideally, organizations would refresh technology often enough to: • E mpower better productivity • Guarantee reliability • Lower purchase price
1 U sing Total Cost of Ownership to Determine Optimal PC Refresh Lifecycles - http://www.lenovo.com/shop/americas/ content/pdf/services_warranty/asset_recovery_services_for_business/IndustryWhitepaperUsingTCO.pdf
WHITE PAPER Refresh rates also impact your ability to leverage innovation when it occurs. If you’re only taking 1 out 3 devices out of service each year, your ability to quickly embrace new technologies and best practices is severely limited. IT must again balance the need for upgrade versus pressure to keep IT costs low.
It minimizes support costs and downtime while improving asset performance in the mobile workplace.
WIPRO’s recent study of TCO and asset lifecycle identified three years as the optimum refresh schedule for desktop assets. Where budget realities make this an unrealistic global standard, organizations must look for technology built with enough quality, innovation, and durability to deliver consistent performance above and beyond the call of duty. Only exceptional reliability can guarantee the extension of an asset’s term of service without incurring higher support costs and failure rates typically associated with longer lifecycles.
IMPACTING TCO Whether it’s the cost of the acquisition process or downtime related to reliability, a relentless and strategic focus on continuously reducing TCO guarantees identified cost savings can be implemented system-wide wherever possible. These savings, combined with best practices shared across all agencies, can free up precious dollars for investment elsewhere. According to a recent TBR study, companies evaluating new PCs are looking for three key things2: 1 R eductions in lifetime maintenance costs 2 Lower energy consumption 3 Increased end-user productivity via improved performance and multitasking capability Budget-conscious IT decision makers should look past purchase price and focus instead on reducing recurring costs across the entire asset lifecycle. This means purchasing assets more precisely and managing them with smarter processes. Ultimately TCO is not about merely cutting costs, it is about ensuring investments are efficient so that dollars go farther and necessary innovation elsewhere can be funded while increasingly proactive users enable those key initiatives.
THE LENOVO ADVANTAGE: BETTER TECHNOLOGY FOR LOWER TCO Technology selection and procurement costs significantly impact TCO, and long-term relationships with consistent suppliers can reduce these costs by 5-15% and speed up putting new technology into service. For organizations struggling to maximize their technology budget, Lenovo’s reputation for reliability and innovation make us the right choice to reduce TCO while achieving mission success. If purchase price is ultimately a minor contributor to TCO, then purchase decisions should focus more on features and performance. Beyond the standard product/feature comparison matrix, three key factors should be considered in evaluating TCO.
1 Readiness After the initial purchase of the hardware, a device must be readied for service. This includes entering the device into inventory, configuring it for its mission, and ensuring the necessary mobility and security framework is in place. Lenovo solutions and services ensure your technology is ready to work from day one. • L enovo’s Enhanced Experience 3 Performance upgrade and Windows 7 combine for better end-user experience, reducing indirect support costs and lost productivity waiting for boot and system start • Lenovo imaging and inventory services can offload time-consuming pre-deployment costs • Built-in security, antitheft, and remote data destruction services ensure secure mobile productivity • Lenovo’s innovative packaging methods speed up and simplify receiving and inventory
2 Large Enterprise Repair Rate Study, Apr/May 2011, TBR Industry Average includes Lenovo 3 Large Enterprise Repair Rate Study, Apr/May 2011, TBR Industry Average includes Lenovo
WHITE PAPER
2 Rugged Reliability Improving reliability impacts TCO significantly. It minimizes support costs and downtime while improving asset performance in the mobile workplace. The final result is more productivity for less money. An industry-wide survey of failure and repair rates3 of almost 7 million enterprise-deployed PCs and portables puts Lenovo well ahead of its competitors: • L enovo Notebooks are 15% more reliable than the industry average • ThinkCentre PCs are 28% more reliable Lenovo’s industry leading repair rates, guarantee less time dealing with down systems – increasing productivity and reducing costs. This reliability extends beyond the relative peace and quiet of the desktop and out into the real everywhere workplaces, making them the ideal answer to mandates generating an increasingly mobile workforce. In order to be able to ensure work can be done by Federal employees anytime, anywhere, the technology they are using to access information must be tough enough to withstand life outside of an office cubicle. All Lenovo’s federal products can do just that. In a testament to Lenovo’s commitment to innovation, the military found these systems meet 8 out of 9 MIL-STD specifications right out of the box. These TCO-reducing assets deliver no matter the mission.
Mean % of Systems Requiring Warranty Repairs
Corporate Notebook, Desktop & Workstation Stated Repair Rates (Lenovo vs. Competitors’ Averages)
Source: Large Enterprise Repair Rate Study, April/May 2011, TBR
14 12 10 8 6 4 2
This Year’s Models
1st Year
Notebook Competitors’ Average Desktop Competitors’ Average Workstation Competitors’ Average
2nd Year
3rd Year
ThinkPad Average ThinkCentre Average ThinkStation Average
3 Green and Sustainable Compliance is less about product and more about partnerships. Finding a technology provider with compliant products and experience in the government space is critical. This experience ensures faster, cost effecitive procurement and fewer expensive post-deployment surprises. • • • •
enovo products are ULE Gold, Energy Star, and EPEAT-certified L Lenovo leads industry in sustainable manufacturing, PCC use, and GHG reduction ThinkVantage software and other innovations can reduce device energy consumption by 80% Certified SmartWay transport for greener and more efficient shipping
WHITE PAPER
MANAGE SMARTER It makes sense and research supports it: effectively managed devices cost less. A Gartner study in 20084 compared TCO for unmanaged desktops to costs for similar devices with centrally-managed security and configuration settings. Their results showed a 42% reduction of costs across the board, with higher savings on devices that saw frequent mobile duty.
Find a Power Balance Ultimately, IT must help balance an organization’s need for control and simplicity and the end-user’s need for productivity and the appropriate autonomy. Mobile users who need flexibility to connect remotely, for example, need different permissions than a locked down desktop user that never leaves the network.
Simple is Better Good device management is all about simplification. Each change in application, OS, or network configuration creates a new complexity and thus a new risk. Smart device management restricts non-essential choices and options, eliminating the non-essential risks those choices can bring.
Their results showed a 42% reduction of costs across the board, with higher savings on devices that saw frequent mobile duty.
BEYOND TCO: BALANCING COST AND CAPABILITY While the TCO model focuses on costs, IT leadership is also responsible for representing end-users and advocating for their needs. Even with cost reduction as a first goal, good TCO data should be at the center of any conversation about new and continued investments into important solutions. Ultimately, precise TCO analysis ensures technology spending remains efficient and strategically aligned. The right ideas and solutions can generate critical cost savings and cost avoidance that persist well beyond a single asset’s lifecycle. Ideally, these dollars, recaptured through first understanding and then impacting TCO, can strengthen Federal IT’s ability to innovate and invest elsewhere. Lenovo’s relentless dedication to continuously increasing product reliability and innovation gives our customers the advantage of guaranteed lower TCO all the way from procurement to disposal. We maintain an unrelenting dedication to reduce our carbon footprint and provide energy efficient products and services at every step in order to ensure our customers reduce theirs. The Lenovo advantage is a fundamental component to Federal agencies determined to make each and every technology count.
4 http://www.gartner.com/it/page.jsp?id=636308
