META Trend: During 2003/04, client standardization and managed build/distribution processes will enable an adaptive and cost-effective end-user computing environment, with focus placed on certification rather than technology homogeneity. Through 2005/06, IT staff will face challenges in managing pervasive client devices. By 2007/08, client computing models centered on IT group device ownership will yield to managed subscription services across corporate and personal devices.
The ongoing focus on cost reduction in the end-user space has led to procurement practices (e.g., reverse auctions), which in turn are introducing multiple PC vendors into corporate environments. However, restricting the number of vendors within an IT environment is an important factor in controlling both upfront and operational costs. Organizations need to carefully examine the impacts vendor diversity will have on their overall cost of ownership. Although increasing commoditization has reduced the functional differences between vendor product lines, vendor processes and detailed product-support issues remain. How much impact the mixed-vendor environment will have on procurement costs, operational costs, and service levels will be dependent on numerous factors within the organization such as levels of outsourcing, management processes, and environmental complexity.
Having multiple PC vendors can be beneficial by reducing dependence on a single vendor’s ability to supply product. This can be critical in reducing exposures in large-scale time-sensitive rollouts. Currently, specific product shortages generally tend to be relatively rare and short-lived. In addition, when shortages do occur, the causes are frequently cross-vendor and impact several players at the same time.
The increased costs of the multivendor environment are broken into two groups: those resulting from having an additional vendor and those resulting from having to support additional product lines. On the vendor side, many of the costs will relate to procurement processes. Most organizations have well-established processes and systems for procuring computer equipment that are increasingly integrated with vendor systems (e.g., Dell’s Premier Pages). Each vendor will typically require variations to existing processes or even the development of new processes/systems. Procurement issues will weigh more heavily if different channels (e.g., indirect reseller channel versus direct vendor model) are involved.
In addition, splitting a single large bid lowers the overall value to any given vendor and diminishes the chances of getting a strong ongoing discount. The traditional belief that multiple PC vendors can also be positioned against each other to drive lower costs is giving way in the current competitive market to specially priced exclusive deals. Many vendors will provide additional discounts of up to 10% for exclusivity.
Furthermore, strong business relationships are hard to develop if too many vendors are included. For at least the first six months of any new partnership, care must be taken when scheduling time-sensitive business-critical projects. This will create overhead in the form of additional oversight, as well as more frequent status meetings. In addition, each negative event will require some level of follow-up ranging from a deskside visit to a formal postmortem review. It is not unusual to see up to 5% of system purchases have some form of error (e.g., missing cable, wrong image loaded, misdirected shipment) during the first six months of a relationship.
Product-related costs can be even more substantial. Although PCs and servers are frequently thought of as interchangeable commodity devices, there remain significant implementation differences between vendors’ product families. These differences manifest themselves in several areas, including the following:
Business Impact: Enforcement of standards is one of the most important tools available to IT groups in controlling end-user platform costs.
META Group originally published this article on 19 January 2004.