WITH the financial crisis affecting profit margins everywhere, businesses are increasingly asking ‘How Much Does It Cost?’ when any decision is made. However, the answer isn’t always obvious: CIOs need to consider both cost of deploying and more importantly sustaining products in a constantly evolving market.
This is known as the Total Cost of Ownership (TCO), and it’s the most rigorous way to see the costs of an IT investment.
When we look at evaluating a mobile workforce automation project, conducting a complete TCO analysis reveals the real difference between selecting a low-cost, non-enterprise class device versus an industrial mobile computing solution.
TCO is comprised of both direct and indirect expenses. Direct expenses are easier to identify and are often budgeted, tracked and catered for in subsequent years.
Indirect expenses are more difficult to quantify. They often fall outside the scope of the IT department and often add the greatest burden to a project. If a slightly higher but strategic investment is made on direct expense, the indirect expenses can be substantially lower.
When acquiring and deploying mobile computers and for sustaining operations, examples of direct expenses for acquisition and deployment include: hardware and accessories; software; services; operations and maintenance. Indirect expenses come in the form of downtime and IT support.
Enterprises that use low-cost, non-rugged mobile computers pay a high price in repairs, increased support needs and lost productivity. These costs exceed any purchase price savings within just two years according to a study by Venture Development Corporation (VDC). Over the life of the system, downtime for non-rugged devices typically costs approximately four to five times more than their purchase price.
Studies from leading analysts show that for every dollar spent on capital computing equipment, it costs four to six dollars of additional investment to cover sustaining and intangible (such as human capital) costs.
These costs have been documented at 10% to 40% higher for organisations using consumer-grade mobile computers, compared to those that use rugged devices for enterprise applications. For this reason, the majority of companies who consider total cost of ownership when planning a mobile deployment end up purchasing a rugged solution, according to VDC.
In fact, these tough mobile computers take just two years to provide a total cost of ownership advantage over consumer-grade devices.
Durability is a key reason: after two years, 35% of consumer grade devices had been replaced, compared to only two percent rugged; after year three 80% of the original consumer-grade devices had been replaced.
Meanwhile, ruggedized users could look forward to, on average another two full years of reliable performance. After five years, businesses with ruggedized PDAs saved an average of $1,610 per device compared to businesses with consumer models.
Product design is a major reason for the difference, and accounts for many of the TCO advantages. PDAs are designed for mass-market appeal and usually compete on their weight and ease of being carried in a pocket.
Rugged computers, however, are developed for specific enterprise worker and activity needs. For example, computers used on forklifts or trucks may have specially designed mountings that reduce vibration and therefore extend life.
Ultimately, choosing a mobile device comes down to being fit-for-purpose. If a device is going be used by a mobile workforce, day in, day out and under real world conditions, it needs to be built to last.
* Tony Repaci is MD of Intermec Australia and NZ.