Three years optimal time to refresh hardware

Small businesses must evaluate when IT equipment inefficiency outweighs hardware renewal cost, which one vendor says is three years.
Written by Sol E. Solomon, Contributor

Because cash flow and access to capital are tight during the current economic uncertainty, extending the life of current hardware systems is a strategy that small and midsize businesses (SMBs) cannot afford to ignore. They cannot overlook the inevitability of a refresh as well.

According to Ronnie Lee, Lenovo's Singapore country general manager, the key lies in knowing how to keep hardware running at an optimal level right to the point at which a replacement becomes necessary.

In an e-mail interview, Lee noted that the majority of case studies determine that the optimal time to replace or refresh systems is at about three years.

Khoo Teng Guan, Dell Computer's SMB general manager, reiterated that it is important for SMBs to take a long-term view and carefully consider the consequences of ending up with inefficient equipment that can cost more to manage.

Look for SMB-centric services bundled with your hardware. A unique challenge for SMBs is the lack of dedicated IT staff to set up and manage their IT needs. Services are available that give SMBs similar functionality that IT departments in larger companies enjoy, and SMBs would do well to look into these when shopping around for technology."
Ronnie Lee, Lenovo

"Simply keeping the existing data center, desktops and portable PCs running way beyond their expected lifespan, may be thought to be the most logical way to save in these times. Yet, if not evaluated and acted upon properly, doing so will definitely impact power and cooling bills, business continuity and downtime," Khoo said in an e-mail interview.

In fact, as systems age, servicing them becomes too costly, he noted. "For every $1 spent on hardware, businesses are paying $4 on management and maintenance. That's when investing in new, higher-performing, more reliable and energy-efficient solutions starts to make sense," he explained.

Citing lifecycle costs of mobile computers, Saumer Phukan, Intel's Asia-Pacific platform marketing manager for business clients, said the cost of maintaining aging machines can cost the same as purchasing a new one.

Phukan referred to research published in April by J. Gold Associates, which found that wear-and-tear increases failure rates of notebooks by 50 percent of the initial failure rate at Year 3, 100 percent at Year 4, and 170 percent at Year 5 of the machine's lifespan.

This means that if the failure rate in the first year is 12 percent, this will increase to 18 percent when the machine reaches its third year of operation. By its fourth year, the laptop's failure rate is 24 percent, which is equivalent to 100 percent of its failure rate in its first year of opeartion.

"As a result, when looking at notebook PC lifecycle costs, the cost of maintaining aging machines is approximately equivalent to buying a new one," Phukan said in an e-mail.

Concentrate on business, not maintenance
At a point when the cost and time needed to maintain a machine are higher than the returned benefits, it is no longer beneficial to prolong its use, said AMI-Partners' research analyst, Vu-Thanh Nguyen.

"If the current system limits employee productivity, it is time to stop maintenance and get a new system," Nguyen said in an e-mail. "More importantly, when competitors are investing in new hardware and software that gives them a competitive edge, failure to invest in IT could lead to business failure."

Echoing the same sentiments, Dennis Mark, Hewlett-Packard's Asia-Pacific and Japan vice president and general manager of desktop systems unit, agreed. "Less time spent on maintaining IT and having the optimal infrastructure and network are mitigating factors in enabling SMBs to concentrate on their business, instead of spending a disproportionate amount of time managing IT," Mark said in an e-mail interview.

Seah Kwang Leng, HP's Asia-Pacific and Japan marketing manager for enterprise storage and servers, added: "SMBs must focus on gaining competitiveness through innovation by decreasing investments toward maintenance during these tough times, so that they will be on the forefront when the economy picks up again."

By making the most of their technology resources, Seah noted, SMBs can boost efficiency, reduce operating costs and still be able to respond to new business needs.

How to play it smart
Intel's Phukan said the J. Gold research showed that companies can save about US$150 per machine on failure costs over three years, by securing a three-year extended warranty, rather than just a one-year.

Lenovo's Lee added that PCs that come bundled with self-management tools can extend the returns companies get on their investments.

"Look for SMB-centric services bundled with your hardware," he said. "For example, a unique challenge for SMBs is the lack of dedicated IT staff to set up and manage their IT needs. Services are available that give SMBs similar functionality that IT departments in larger companies enjoy, and SMBs would do well to look into these when shopping around for technology."

He added that SMBs can buy notebooks suited up with software that help with everything, from data recovery to simplifying Internet connection.

In addition, HP's Mark suggested that smaller businesses consider replacing their old machines in phases. That said, such a replacement strategy needs to be consistent with meeting the SMB's specific business needs, and must also be aligned with its IT or PC depreciation policy, he added.

SMBs should always consider prioritizing IT investments that enable the business to reap cost reductions and help lay the groundwork to emerge stronger from the current environment, said Mark.

Lee noted that a phased replacement strategy allows companies to maximize the returns on each batch deployed and helps minimize collective downtime. Conversely, though, phased replacement means evaluating multiple batches of hardware for depreciation.

Dell's Khoo noted that having a well-thought out transition plan for hardware replacement offers SMBs financial flexibility as well as business continuity. "Replacing old machines with highly efficient equipment in phases prevents unnecessary strain in their budgets, while allowing them to avoid downtime that costs money," he said.

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