Desktop Total Cost of Ownership: 2011 Update
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- Lester Jennings
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1 Desktop Total Cost of Ownership: 2011 Update Gartner RAS Core Research Note G , Federica Troni, Mark A. Margevicius, Michael A. Silver, 16 November 2010, RV2A Declining hardware and software costs have an impact on total cost of ownership (TCO), but how desktop PCs are managed remains the most critical factor in reducing TCO. Key Findings Hardware and software costs have declined over the past two years, reducing TCO, but rising labor costs have partially offset this. A locked and well-managed desktop PC can cost 43% less to keep than an unmanaged one. Reducing the number of applications installed locally on the PC reduces the amount of support required. Electricity is a relatively minor part of TCO; however, in a well-managed scenario, electricity costs can be reduced by 35%. Recommendations Move your PC deployment to a higher management level to achieve lower TCO and improved user productivity. Fully implement your management tools and processes a somewhat managed desktop can lead to higher costs, because desktops are not well-managed, while money is being wasted on underimplemented management systems. Examine your application mix to see if there are opportunities to increase the use of server-based or browser-based applications. Consider PC life cycle management tools that include power management capabilities. ANALYSIS This document was revised on 3 February For more information, see the Corrections page. What s New in Desktop TCO in 2011 To our TCO model, which was completely redesigned in 2008, we have implemented only minor changes for this update.
2 2 Hardware, Software and Facilities Firstly, we use our own forecast data to determine changes in the average selling price of desktop PCs. We have accounted for a decline in average selling prices since 2008, even though this decline slowed in 2010, compared with previous years, as a number of shortages in several components have increased the bills of material of PCs. As usual, we include desktop list prices, without volume discounts. We continue to assume a four-year life cycle for desktops, as this seems to be what most organizations use. We have also revised the prices of a typical software load for a business user. We allocate some expenses to data center facilities, which in the case of a traditional distributed PC deployment is limited to the servers used for life cycle management tools. Electricity costs for PCs are now also included in our TCO, as they are increasingly monitored by organizations in an effort to consume less power and/or limit the environmental footprint. Electricity consumption declines as management is applied. As organizations mature and improve their processes, policies will encourage users to switch off or put their PCs in standby during nonworking hours, and management tools will be able to wake up PCs to perform management tasks when needed. IT Operations We have revised IT labor costs, with a 6% increase in the base salaries we use for our scenarios (see Figure 1). These salaries are typical of the high costs in mature markets, and should reflect the reality of North America and several western European countries. The model also accounts for a 33% burden rate. Of course, IT labor cost has a major impact on TCO, so we invite clients operating in markets with substantially lower salaries and/or very different burden rates to recalculate this portion of the TCO. Figure 1. Salaries for IT Personnel in Mature Markets Whereas the rise in labor cost drives up TCO, the second change we have applied operates in the opposite sense, reducing IT operation costs. In this iteration, we assume that organizations have increased the number of hosted (browser-based, serverbased) applications, reducing complexity in management. We now assume that 35% of the applications in use in our model organization are browser-based, thin or hosted, up from 20% in the last iteration. This reflects our findings that organizations are deploying more thin applications. In 2008, we added the cost for the server infrastructure required to manage servers running PC life cycle management tools in managed scenarios. A further change for this iteration has been the addition of labor costs required to manage those servers. We assume that 1.7 full-time equivalents (FTEs) will be required for five management servers, for 2,500 users. End Users Costs We have also revised end-user salaries, increasing them by 6%, as shown in Figure 2. Again, salaries significantly affect all end-user costs, so we invite organizations that have significantly different salaries to recalculate these costs items, or to contact us to be guided through the inquiry process. Figure 2. Salaries for End Users in Mature Markets 2011 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. This publication may not be reproduced or distributed in any form without Gartner s prior written permission. The information contained in this publication has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information and shall have no liability for errors, omissions or inadequacies in such information. This publication consists of the opinions of Gartner s research organization and should not be construed as statements of fact. The opinions expressed herein are subject to change without notice. Although Gartner research may include a discussion of related legal issues, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner is a public company, and its shareholders may include firms and funds that have financial interests in entities covered in Gartner research. Gartner s Board of Directors may include senior managers of these firms or funds. Gartner research is produced independently by its research organization without input or influence from these firms, funds or their managers. For further information on the independence and integrity of Gartner research, see Guiding Principles on Independence and Objectivity on its website,
3 Other Assumptions As in previous desktop TCO research, we model a deployment of 2,500 desktop users, all in one location, with a centralized IT organization. We assume that the cost of a desktop will be $972 (monitor included) with a four-year life cycle. We have created the following four scenarios, which assume different levels of manageability applied: Unmanaged Users can install applications and change settings; little to no management tools are being used. Somewhat managed Some management tools are implemented, but processes and policies are not fully developed Moderately managed There are tools and good processes and policies in place; users can install software and change at least some settings. Locked and well managed There are tools, processes and policies; users cannot install software or change critical settings. Figure 3 summarizes the user mix we have used for these scenarios. Figure 3. User Mix for Scenarios Once again, we do not take into consideration OS versions, as differences among OS versions per se are typically not sufficient to cost justify a migration, unless other management factors are considered. We assume that the organization will have 250 applications, and that 65% of applications are installed locally on the desktop, while 35% are server-based or browser-based, or otherwise clientless applications. In locked and well-managed PC scenarios, we assume the number of applications will be reduced by half, to 125 applications total. We haven t yet included any significant use of virtualized applications. While this would have some positive reflection on TCO, we don t perceive them as mainstream. For the managed scenarios, we assume that five servers will be required to host the management tool. To these costs, we add the cost of personnel dedicated to the management tools. Figure 4 presents desktop TCO numbers per users, per year. Direct costs are the sum of hardware, software and facility costs, IT operation costs and administration costs, and represent the portion of TCO that appears in budgets. End-user costs, conversely, are often hidden. Overall desktop TCO continues to decline gradually: 0.7% to 3% depending on the scenario over 2008 numbers (see Figure 5). The most obvious variations are in hardware, software and facility costs, which continue to decline sharply despite the addition of electricity costs. Operating costs, conversely, increase and partly offset the capital cost decline, because we have increased IT labor salaries. Note that despite the substantial increase in labor costs in the managed scenarios, direct costs and overall TCO still decline. This should reinforce the need to focus on manageability as a means to reduce the labor costs related with IT. Somewhat managed scenarios show only a very modest direct cost decline, as establishing processes and policies are as important as implementing tools in gaining efficiencies. In fact in some scenarios, without policy and process improvements, direct costs are actually lower if tools are not used at all. To gain value from the tool and reduce direct costs, organizations must move past our definition of a somewhat managed environment, and achieve at least a moderately managed environment. If you assume that a tool infrastructure has been deployed, then an underused implementation means you are paying to run the tool, while still managing the environment manually without the tool. End-user costs, which are our estimate of the lost productivity (in terms of salary loss, not business loss) of users due to downtime, formal and informal training and fixing, increase as we have revised end-user salaries. Figure 6 shows in detail the staffing requirements of each management scenario and how IT labor requirements decline in more-managed scenarios. Although IT operation costs increase, as we have updated IT salaries, compared with 2008, we have an actual decline in staffing requirements of about 9%. It is spread across all cost items, and reflects the higher percentage of hosted or otherwise clientless applications (35% in 2011 versus 20% in 2008). Reducing the footprint of the PC reduces also the amount of support required. 3
4 4 Figure 4. Desktop TCO for 2011
5 Figure 5. Overall Desktop TCO Change, From Figure 6. Staffing Requirements: Total FTEs Required and Ratio of Users to One FTE
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