Computer Costs, Benefits Concern For Businesses Large And Small
This article was published on Thursday, October 12, 2006 10:50 PM CDT in
Business
Wal-Mart Stores Inc. ran its entire data
center on 100 gigabytes of storage space in 1990. Today many personal
computers have more storage space than that on a local hard drive, said a
Wal-Mart vice president.
Information technology presents some challenges for businesses both large
and small. Computer hardware companies release new and improved products
every day, but a business has to have a better reason to upgrade than,
“It’ll play all the latest games.”
Holding off too long on updating old computers can cost a business real
money in lost productivity from downtime, increased maintenance costs and
sometimes lost opportunity to expand the business, said Carmi Levy, a senior
analyst for Info-Tech Research Group.
It can also affect employee moral. A majority of the work force in the
United States now uses a computer daily, according to a research report from
Houston-based Plunkett Research.
Sales of information technology products grew to $416 billion in the United
States in 2005, a 7 percent increase over 2004, the Plunkett report said.
TECHNOLOGY DAMPER
Some of that growth may be still be some companies catching up from lower
technology budgets in the lean years of 2000 and 2001.
“The truth of the matter is the bursting of the Internet (stock market)
bubble and 9/11 put a very big damper on corporate buying cycles for
technology,” Levy said.
Levy said many companies did make up some of that lost ground in 2002 when
Windows XP was released.
“They used the Windows XP release to replace some of that older hardware,
and we’ll probably see something similar next year when Windows Vista
arrives,” Levy said.
Some businesses are still using a few computers and some information
technology they invested in during the Y2K computer bug era, Levy said.
“But most of the front line machines have been upgraded since then,” he
said.
Gary Cooper, vice president of business solutions for Tyson Foods Inc., said
the company’s schedule for upgrading technology is based more on business
need and internal financial considerations than on external economic
factors.
He said the economic downturn in 2001 didn’t have a significant impact on
Tyson’s information technology spending.
UPDATE LIMITS
Gino Capito, one of the owners of Telecomp, a Bentonville-based
computer service, networking and telecommunications company, said he sees
customers everyday still using technology from 2000 or 2001.
But that’s not always a bad thing, Capito said, because a receptionist in a
small office may not need the latest and greatest machine.
Capito said Telecomp will often upgrade components of a computer for
customers instead of selling them a brand new machine. But there is a limit
to how much can be done.
Many customers find themselves upgrading because software updates require
better hardware specifications than what they have in their old machines,
Capito said.
If it costs $350 to add more random access memory, a new hard drive and
software, it might be wise to spend an extra $150 and get a brand new
computer, he said.
“But there are really no hard and fast rules,” Capito said. “You have to
look at it on a case by case basis.”
Some business have older software that fills a very specific niche in their
business. They can’t move to a new computer system if porting that old
software and data is going to be impossible, take months of down time or be
prohibitively expensive, Capito said. So they get stuck upgrading the older
computer rather than buying a new system.
WISE UPGRADES
Businesses should have a clear reason to invest in technology upgrades. For
Wal-Mart the holiday shopping season is one of those big business reasons.
“We are about to enter our busiest season of the year and have recently
upgraded several systems to ensure that our business runs for the entire
holiday season — Christmas, etc.,” said Tony Puckett, vice president
application enablement services for Wal-Mart.
Return on investment is the ultimate driver, Puckett said. “That return
could come through improved productivity, lower costs, increased sales or
revenue, etc.”
“We do not upgrade technology just for technology’s sake,” Puckett said.
One of the factors that business owners need to consider, especially small
businesses, is that the total cost of owning a machine typically goes up the
longer a business keeps it.
“It’s a question every business wrestles with,” Levy said. “What’s the
optimal point at which you’ve minimized your cost and optimized use of the
technology?”
But using 6- or 7-year-old computers can be a problem.
“The best analogy I can think of is the horse drawn carriage,” Levy said.
“You wouldn’t want to drive one down an interstate.”
GROWTH CHANGES
A company ultimately has to know that it will see a real benefit from
spending money on new equipment and software, Puckett said.
“Depending on the scale of the system and/or business, small changes can
create huge improvements across a business. A 1 percent productivity
improvement would be huge in many environments,” Puckett said.
Business growth is another way new technology is introduced into a business,
Puckett said. As the business grows, it needs more computers, larger storage
systems and databases. New computer systems generally cost less for the same
amount of storage and processing power.
For large companies with thousands of desktops and laptops, a standard
configuration of hardware and software can be important to maintaining
costs, Puckett said.
Different computer systems also have different technology cycles. A laptop
may last less than 36 months because they have a much harder life than a
personal computer that sits on a desktop. A desktop system may last three to
four years and server or other systems may last five or more years, Levy
said.
SECURITY MEASURES
Cooper said Tyson Foods looks first and foremost at business functionality
and return on investment when considering information technology upgrades.
They look at whether there are capabilities that need to be changed or added
and balance the costs to upgrade versus the cost to maintain the current
technology.
“We also try to maintain a small footprint of technology, meaning, we don’t
want our technologies to get spread out and lose economies of scale,” Cooper
said.
Both Cooper and Puckett said radio frequency identification devices have not
impacted overall information technology upgrades yet, but security and
regulatory compliance are driving some of the upgrades now.
“In addition to the mission critical systems, those related to security,
such as firewalls, remote access and intrusion detection are typically
replaced on a more frequent basis to keep up with advance in that area,”
Cooper said.
COMPUTING NUMBERS
* $2.1 trillion:
Worldwide market for information technology products and services in 2005,
according to International Data Products.
* 40 million:
“Knowledge workers” in United States now, according to report by Microsoft.
* 200 million:
Personal computers sold in 2005
Source: Plunkett Research, Limited.
fact box 2
Computer Tips For Small Businesses
* Check to make sure your current computer meets all the specifications when
updating software. Many software companies will not support their products
if you are running them on unsupported hardware.
* Don’t buy if you don’t have a business need. Take a good look at whether
or not there is a real return on the investment.
* Consider the cost of updating a computer with new memory, storage or
processor as opposed to buying a brand new system.
* Computer repair stores often sell refurbished computers significantly
cheaper than a new system. If you have a rough work environment, such as an
automotive repair shop or construction job site, consider a refurbished
system that will come with a limited warranty.
* If you’ve had to repair or upgrade an older computer three times in the
past six months, consider a new system. The downtime and repair costs can
cost more in the long run than purchasing a new computer.
Source: Gino Capito, president of Telecomp computer and telecommunications
firm. |
