New in This Desktop TCO Update

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1 Decision Framework, M. Silver Research Note 9 September 2003 Desktop TCO Update, 2003 Gartner's total cost of ownership update reinforces that switching operating systems generally results in minor changes to TCO. Enterprises should focus on improving manageability to achieve bigger TCO reductions. Core Topic Hardware Platforms: Client Platforms Key Issue How will desktop and mobile client platforms evolve during the next five years? Strategic Planning Assumption In an unmanaged environment, /XP will offer users a more stable environment, reducing total cost of ownership by as much as 11 percent and 4 percent compared to 98 and NT Workstation v.4, respectively, with most of the savings occurring in indirect, nonbudgeted costs (0.7 probability). However, a well-managed environment would reduce TCO by as much as 46 percent (considering the client only) compared to an unmanaged 98 or NTW4 environment (0.7 probability). The operating system (OS) and productivity applications are a primary driver of desktop total cost of ownership (TCO). Enterprises are feeling continued pressure to move off older versions of before Microsoft support becomes too distant a memory (see "Microsoft's New Client-OS Support Plan: Recommendations" and "Keep Longer, but Don't Skip XP" for a discussion of Microsoft support life cycles). As they decide when and how fast to move, they need to understand what the likely cost differences between their current and target platforms are. The bigger the expected benefits generated by the move, the easier it will be for them to build a business case and secure funding. In the case of Linux, for example, although it has received a lot of hype as a free OS to reduce TCO, we find that, while some costs will go down, others will remain the same or go up, and it's really the level of lockdown and management that are key to reducing TCO. We believe there are two components to an evaluation of the benefits. The first concerns how the enterprise will leverage the features of the new OS to create new applications that will allow the enterprise to do things that it previously could not do, reduce cycle time or otherwise gain competitive advantage. The second component evaluates traditional TCO cost elements to reveal ongoing savings inherent to operating the OS and the productivity applications that will run on the typical user's desktop. This second component is the territory of the Gartner TCO Manager software and the topic of this research. We discuss the background of the distributed computing TCO model in "Client Platform TCO: Back to Basics." New in This Desktop TCO Update Our base assumption for the desktop life cycle in this research is three years. Enterprises have been extending life Gartner Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

2 cycles, and we recommend four years for most desktop users. We explore the TCO of a four-, five-, and six-year life cycle for desktop PCs in "Desktop TCO for Years 4, 5 and 6: Someone Has to Pay." Hardware prices are updated in the profiles on an annual basis. The costs in this research are the latest and were updated during this revision based on current hardware recommendations (see "Enterprise Desktop Recommendations: 1H03 Update"). Desktop user profiles now include XP in addition to. Downtime has been separated from end-user operations costs to reflect lost productivity due to factors that are totally outside of the users' control. Disposal costs have been added. Recent legislation in the European Union has mandated greater attention to disposal issues. There is no formal legislation yet in the United States, although several bills have been proposed and the U.S. Environmental Protection Agency has been actively involved. Note 1 Stalking-Horses "Stalking-horses" are conceptual models used by Gartner analysts to stimulate dialogue with enterprises. Stalking-horses do not necessarily reflect the reality of any particular IS organization. We encourage enterprises to perform their own analyses using our models to determine the sitespecific impact of a particular change. Differences in end-user proficiency, installed-base size and implementation strategies can significantly affect an enterprise's TCO costs. Readers should avoid making direct comparisons with previously published TCO research because these numbers use a newer version of the TCO model and do not include network costs or the "futz factor," which were included in previous research. Note 2 Assumptions in TCO per User for Selected Desktop OSs User Type: 1 percent power users, 20 percent knowledge workers, 74 percent structured-task workers, 5 percent data entry workers All users are using desktop PCs Client costs only network and printer costs are not included The costs discussed here are for desktop PCs only. Notebook costs are discussed in "TCO Comparison of Desktops vs. Notebooks." This update supersedes the TCO numbers presented in our recent Linux TCO research. Minor adjustments were made to hardware pricing, and the cost of 95 has increased slightly to reflect its increasing support costs based on its age and lack of support for new applications and hardware. Our "stalking-horse" TCO model (see Note 1 and Note 2 and Table 1, Table 2, Table 3, Table 4 and Table 5) shows that, when an unmanaged /XP environment is compared with a similar 98 or NT Workstation v.4 (NTW4) implementation, the /XP environment will reduce TCO by 10 percent compared with 98 and by 4 percent compared with NTW4. However, most of the savings will occur in the area of indirect costs. Indirect costs include such categories as user self-help, peer support and the cost of downtime. These reductions in soft costs may be considered to be increased productivity. They do not appear in the IS budget and are difficult to measure. Although we believe these are important costs to consider, many IS managers are more concerned with real dollar savings in the IT budget and consider soft costs secondarily, if at all. Managers usually find the soft costs associated with highrevenue workers (for example, financial traders or call center order takers) most easy to use in a cost justification exercise. 9 September

3 Table 1 TCO Summary for Selected Unmanaged Desktops Win95 Win98 NTW4 XP XP/StarOffice Linux Linux Locked Hardware and Software $1,407 $1,406 $1,406 $1,406 $1,406 $1,333 $1,295 $1,280 Operations $664 $647 $664 $627 $626 $628 $627 $546 Administration $428 $428 $428 $428 $428 $428 $428 $423 Total Direct Costs $2,498 $2,481 $2,499 $2,462 $2,461 $2,389 $2,350 $2,249 End-User Operations $3,288 $3,162 $2,852 $2,710 $2,706 $3,552 $2,986 $2,205 Downtime $340 $291 $191 $153 $142 $142 $135 $92 Total Indirect Costs $3,628 $3,453 $3,043 $2,863 $2,848 $3,694 $3,121 $2,297 TCO $6,126 $5,934 $5,542 $5,325 $5,309 $6,083 $5,471 $4,546 Table 2 TCO Summary for Selected Typically Managed Desktops Win95 Win98 NTW4 XP XP/StarOffice Linux Hardware and Software $1,369 $1,369 $1,369 $1,368 $1,369 $1,298 $1,259 Operations $570 $555 $572 $538 $538 $539 $539 Administration $424 $422 $422 $422 $422 $423 $422 Total Direct Costs $2,363 $2,346 $2,363 $2,329 $2,329 $2,259 $2,220 End-User Operations $2,761 $2,663 $2,423 $2,324 $2,320 $2,480 $2,551 Downtime $246 $211 $139 $111 $103 $103 $98 Total Indirect Costs $3,007 $2,874 $2,562 $2,435 $2,423 $2,583 $2,649 TCO $5,370 $5,221 $4,925 $4,764 $4,751 $4,842 $4,869 Table 3 TCO Summary for Selected Well-Managed Desktops Win95 Win98 NTW4 XP XP/StarOffice Linux Hardware and Software $1,264 $1,264 $1,264 $1,264 $1,264 $1,205 $1,168 Operations $367 $359 $373 $349 $349 $349 $349 Administration $410 $408 $408 $408 $408 $408 $408 Total Direct Costs $2,042 $2,031 $2,045 $2,021 $2,021 $1,962 $1,925 End-User Operations $1,374 $1,344 $1,280 $1,283 $1,282 $1,346 $1,368 Downtime $78 $67 $44 $35 $33 $33 $31 Total Indirect Costs $1,452 $1,411 $1,324 $1,318 $1,315 $1,379 $1,399 TCO $3,493 $3,441 $3,370 $3,340 $3,335 $3,341 $3,325 9 September

4 Table 4 Unmanaged 98 vs. and XP Unmanaged 98 XP Direct Costs $ 2,481 $ 2,462 $ 2,461 Indirect Costs 3,453 2,863 2,848 TCO $ 5,934 $ 5,325 $ 5,309 Direct Cost Savings $ 20 $ 21 1% 1% Indirect Cost Savings $ 590 $ % 18% Total Savings $ 610 $ % 11% Table 5 Unmanaged NTW4 vs. and XP Unmanaged NTW4 XP Direct Costs $ 2,499 $ 2,462 $ 2,461 Indirect Costs 3,043 2,863 2,848 TCO $ 5,542 $ 5,325 $ 5,309 Direct Cost Savings $ 37 $ 38 1% 2% Indirect Cost Savings $ 180 $ 195 6% 6% Total Savings $ 217 $ 233 4% 4% Linux Added We have also recently added Linux desktop profiles to our distributed computing TCO model. In the unmanaged cost profiles, we provide two Linux profiles: one that is equivalent to the unmanaged desktops, where the users have the root password and can do whatever they wish; the other for an unmanaged but locked Linux desktop, where the users do not have the root password and are limited in their access to critical parts of the OS. If an enterprise has had trouble locking down because of political or technical issues, it may be forced to provide root passwords to Linux users. If technical issues prevented locking down, the enterprise may be more successful in keeping root access from Linux users. (These numbers include some minor updates to the Linux desktop TCO research presented in "Linux on the Desktop: The Whole Story" and the research referenced therein.) 9 September

5 Management Is Key to Cost Reduction A discussion of TCO between platforms cannot be complete without a discussion of how important managing the desktop environment is to decreasing TCO. Our TCO model shows that a typically managed /XP environment can be up to 11 percent less expensive and a well-managed desktop can be 37 percent less expensive than an unmanaged one. Furthermore, a managed /XP desktop can be 23 percent to 46 percent less expensive than an unmanaged 95 environment, and there can be some benefits in reduced direct costs when the desktop is managed up to 18 percent (see Table 6, Table 7 and Table 8). However, we believe that politics and culture play a greater role than technology in the enterprise's ability to manage desktops and that enterprises that previously were unsuccessful in deploying desktop management solutions will not be successful unless they analyze their previous failures and take corrective action. Also, here we only cover desktop TCO; an increase in manageability will probably require additional servers to operate, which will reduce overall benefits. 9 September

6 Table 6 Levels of Best Practices Assumed for Managed Environments Best Practice Level Assumed Typical Well-Managed Change Management Deployment (installs, adds, changes) Retirement and moves Change management technology Change management process Operational Management Virus protection Data management Performance monitoring and event management Security Standards compliance Repair and maintenance Asset Administration Hardware inventory management Software inventory management Life cycle management Procurement process Vendor management Customer Service Service desk technology Service desk process Marketing and relationship management Training End-user training IS training Technology Planning and Process Management Technology planning and process management (0 = no best practices; 10 = highest degree, fully implemented best practices integrated with appropriate tools, processes, policies and people) Table 7 Unmanaged XP vs. Managed XP XP Managed vs. Unmanaged XP Unmanaged Typically Managed XP Well-Managed Direct Costs $ 2,461 $ 2,329 $ 2,021 Indirect Costs 2,848 2,423 1,315 TCO $ 5,309 $ 4,751 $ 3,335 Direct Cost Savings $ 132 $ 440 5% 18% Indirect Cost Savings $ 425 $ 1,533 15% 54% Total Savings $ 557 $ 1,973 10% 37% 9 September

7 Table 8 Unmanaged 95 vs. Managed XP XP 95 Typically Unmanaged Managed Managed XP vs. Unmanaged 95 XP Well-Managed Direct Costs $ 2,498 $ 2,329 $ 2,021 Indirect Costs 3,628 2,423 1,315 TCO $ 6,126 $ 4,751 $ 3,335 Direct Cost Savings $ 169 $ 477 7% 19% Indirect Cost Savings $ 1,205 $ 2,313 33% 64% Total Savings $ 1,374 $ 2,790 22% 46% Acronym Key NTW4 OS TCO NT Workstation v.4 operating system total cost of ownership Bottom Line: In an unmanaged environment, /XP will offer users a more stable environment, reducing total cost of ownership by as much as 11 percent and 4 percent compared to 98 and NT Workstation v.4, respectively, with most of the savings occurring in indirect, nonbudgeted costs (0.7 probability). However, a well-managed environment would reduce TCO by as much as 46 percent (considering the client only) compared to an unmanaged 98 or NTW4 environment (0.7 probability). 9 September

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