By Lenovo Guest Blog 2

Without a doubt over the last 15 years during hundreds of corporate customer briefings, where typically I get the opportunity to speak to three to five IT people from corporations all over the world,  no question has been raised by more customers, than “what’s the difference between a commercial PC and a consumer PC?”  With the Consumerization of IT this question is taking on greater importance.

The question is usually preceded by a consistent story where the customer starts off by saying something like:

Well, as you can imagine, the customer is now asking me for an explanation – or help.  While some may think there’s some clandestine strategy going on behind the scenes to justify higher prices, the reality is not the case.

To understand the reason or rational behind price differences in consumer PCs and corporate PCs and what drove these differences, requires one to first understand and accept that consumers or individuals are distinct and different than a corporation.

While it may be hard to think of a corporation as an organization or entity that consistently acts in a certain way, this is exactly what happens when corporations spend money.  In contrast, what’s important to an individual is not the metric of success for a corporation.

For example, corporations are in the business of making money or profit and as a result over time they will make financial decisions that deliver profitability or they will cease to exist as an organization.  On the other hand an individual can make a (non-financial) decision virtually without boundaries; but, usually they will consider a particular PC based upon purchase price, manufacturer’s brand, visual appeal of the PC, channel, or magazine review, friend’s recommendation or the like.

What then drives differences in consumer PCs and commercial PCs are features and/or functions in a PC that enable a corporation to realize a better overall value (a financial return or ROI) from a commercial PC over a consumer PC.  While I am sure this is not clear yet, hopefully it will become very clear.   As I researched this topic to see what others had written about this subject, I was shocked to see such little real or meaningful insight.

At a high-level, probably both consumers and corporations buy PCs for the same reason: to run applications.  While clearly these applications are going to be different; i.e., Facebook, games, etc. versus SAP, CRM app, Office,  etc.,  both types of PCs can run either of these applications.  Moreover, since probably any consumer or commercial PC can run any application as long as we are talking about a common OS or operating system, then why chose one over the other.  Specifically, I’m refering to a consumer PC versus a corporate PC.  The answer is, in a corporate environment a corporate PC is going to deliver a much better ROI.  But how can this be, particularly if the consumer PCs cost less?

TCO

Since corporations make financial decisions, it’s important to understand the key metric for determining effective IT spending.  In the PC world this has long been the domain of Gartner who developed the industry’s first TCO or Total Cost of Ownership model some 20 years ago.  At a high level the TCO model is broken down into 3 major categories:

So the answer lies in the fact that there are other areas of cost besides capex that effect a company’s ROI like opex.  In addition, as you’ll see Opex cost are the majority of the costs of owning a PC (TCO) and they significantly exceed Capex costs,  so any feature or function that lowers Opex, has the potential to reduce the difference in purchase prices (Capex) to yield a better overall ROI.

According to the latest Gartner estimates, just looking at a notebook’s TCO, and one use case or classification of worker, the “Day-Extender Notebooks,” the TCO can range from $4,600 to as high as $8,491. A look at the other use case, “Traveling-Worker Notebooks” can range from $6,895 to as high as $9,793.

Of the 4 types of workers, these numbers are a blend of 3 of them:

Day-Extender Notebooks

While most corporations may find this startling, since generally they only track direct costs – Capex & Opex – there is an impact of a worker who is not working in a corporation which can be measured.  It is precisely because this metric does not exist for consumers that certain features, functions or improvements in quality matter more in a corporation than an individual consumer or home user. Indirect costs in a corporation can or will have an impact upon a corporation’s bottom line and, therefore, features, functions or differences in quality & reliability should be considered in the purchase decision in addition to purchase price.

Capex is all capital expenses to acquire a PC including the cost of applications.  Typically Capex has been only 15% to 20% of the total cost.  So any focus purely on reducing Capex will leave any organization short of the potential to be highly efficient.

What Are The Differences

So what are the categories that drive a better ROI or a lower TCO for a corporation?   What are these categories of features or functions?  Well, they probably can be broken down into four major categories:

Manageability

As described above, the majority of costs of owning a PC in a corporate environment are Opex costs.  Manageability technologies are clearly focused on reducing these costs, tailored and specifically developed for the unique differences between a consumer environment and a corporate environment.  For example, when an individual consumer purchases a new PC, they take it out of the box and turn it on once the power & peripherals are attached.  Then they go through a provisioning (setup) of their new PC based upon the PC manufacturer’s preloaded generic base image.  Next maybe connect it to their home network and when this is complete they will add certain applications like Microsoft Office.

This is a fairly simple process and one the consumer is willing to do on their own with no concept of what does this cost them as it’s their own time.

On the other hand, the deployment of a corporate PC is very complex, time consuming and costly as usually thousands of PCs are involved.  Moreover, if it goes poorly, users will be without their PC and downtime will become a real issue which can or will impact their company’s bottom line.

So let’s keep going on this process to make the point.  Every corporation I’ve ever met, with the exception of perhaps one or two, will look at our base manufacturing image knowing that they will erase or “blow” the image off in exchange for loading their own company’s unique image.   An image that is usually described as “our standard” corporate image but also termed by some as a COE image or Common Operating Environment.    For most corporations just creating this COE image is time consuming and troubling as it can vary by organization, location and user rights to name just a few elements.

Once the image is created, it’s usually “sys prepped,” “Ghosted” and loaded on each PC prior to leaving the PC manufacturer’s site or loaded at the customer’s location using PxE boot technology to connect prior to the OS loading to an image server.  Obviously, none of this is important to a consumer but in a corporate environment it’s often the difference between a deployment process that’s labor intensive and user disruptive to one that is automated or nearly automated.

Just looking at the cost of most labor intensive deployments they range from $150 to $250 per PC versus an automated process where the cost usually ranges from $50 to $75 per PC and the impact to the user is significantly less resulting in less downtime.

So what’s in this process that’s important to a corporation but not an individual consumer PC?

This is just one example of the difference between a consumer PC and commercial PC around manageability.  Others include:

Quality & Reliability

While everyone wants a more reliable and higher quality system, in a corporate environment the impact of poor quality – or said differently – downtime can be measured and it affects their company’s bottom line.  For a consumer, it’s irritating but unless they are also a financial entity, there’s no bottom line that’s impacted.   This is the start and just one reason why quality and reliability are very important in a corporation.  Downtime can be measured in lost revenue,  cost of paying for overtime trying to make up for the downtime and/or support costs trying to diagnose the cause of downtime and the fix.

Unfortunately what most corporations don’t know is how significant this can be depending upon several factors:

While probably no company sets out to design lower quality systems, the facts are that certain target segments – i.e., consumer users – drive manufacturers to make decisions that often lead to systems that are less reliable than other targeted segments, like commercial PCs.    As manufacturers look at the attributes that make these segments, segments in the first place, decisions tend to follow.  For example, consumers overwhelmingly focus on low purchase prices whereas a corporation will focus on getting a competitive price between suppliers but often not the lowest possible price and they understand the impact upon their business from system failures and therefore place more importance on higher reliability.   These factors combined with knowing that consumers generally are not 24/7 users but more occasional usage or 2 to 4 hours a day versus 8 plus hours a day, allows manufacturers to substitute components that might not be as reliable in high usage environments.

The end results, a consumer PC used in a corporate environment will more than likely fail more often.  A study from industry consultant, Technology Business Research (TBR) calculated the cost of a potential failure:

“TBR estimates show that choosing a laptop model with a very low 1% failure rate compared to a laptop with a higher, 5% failure rate can generate significant savings.   We estimate that a company operating 1,000 laptops with failure rates in the range of 1% could save over $330,000 in a year compared to a business operating laptops with failure rates in the range of 5%.

The company’s savings would come from eliminating the loss of data and employee productivity caused by downtime, in addition to eliminating the need to fund additional desk-side visits by its IT department.

So what TBR’s study showed is that on average a 4% failure rate difference between PCs can cost a company $330 per year for each Pc.  My belief is that most (60%) of this is lost productivity, but 40% or $132 per year or $396 per user for 3 years would be in direct costs or costs that would show up in IT support.

Productivity

It should go without saying that the reason a corporation buys a PC in the first place is to increase productivity.  After all, if this was not the case then the quickest way to reduce cost or TCO would be to stop buying PCs altogether.  On the other hand when you look at the reasons consumers buy PCs, it’s not about productivity but about enabling certain capabilities:

So here we have another reason (usage) or difference that is driving different requirements for consumer and commercial PCs.  While there will also be overlaps in functions, it’s the differences and the way they are manifest in the PC’s makeup that creates another area of difference.  Some examples:

Better keyboard – clearly a touch typist typing 6 to 8 hours a day will place more value on the quality and responsiveness of a keyboard.  But not only a touch typist but virtually anyone (ie., a corporate worker) who spends a considerable time working on a PC and who is “creating content.”

If you don’t believe productivity is important, here’s an example that may make the point.  Probably the biggest example over the last ten years of a technology that clearly took off because of productivity gains even though it drove cost (TCO) higher has been wireless access or specifically WiFi.   WiFi drove higher Capex and Opex but for users, but it set them free from being tethered to their office and it became clear that the productivity gains would justify higher costs.  It would be impossible today to imagine a world without WiFi.

Security

Security is not only a good practice for corporations, it’s the law through many regulations like HIIPA, Sarbanes Oxley, etc..   In addition, a security breach in the form of lost customer data can result in significant costs and immeasurable lost business (revenue).  In fact, the latest estimate from the Ponemon Institute shows the average total organizational cost of a data breach in the U.S. at $5,501,888.

On the consumer side, regulations don’t apply and therefore the expense is not relevant.  This doesn’t mean all security is irrelevant to consumers but the majority of enhanced security is the domain of corporate computing due to significantly larger financial and regulatory risks.

Consumers find adequate security in anti-virus program, Windows password, and occasionally the capability of shutting down or wiping their data from a lost or stolen system remotely.

Corporations go much further.    Here’s a list of some of the security features found in a corporate PC not relevant or often found in a consumer PC.

Summary

Consumers and corporations do not make purchase decisions alike nor should they as shown throughout this whitepaper.  As a result, differences in PCs have evolved over the years to meet these very real differences.  While at a high level or from a novice’s perspective they both appear identical, they aren’t.   There’s probably no disagreement with this statement but where it starts to create friction is when an employee of a corporation challenges their IT organization on why they are spending more money for a “corporate PC” versus a “consumer PC.”

To conclude this paper and to fully understand if a corporate PC cost “more” than a consumer PC, let’s add up the differences in all areas of TCO between the two types of PCs.

The bottom line, while a consumer PC may cost a few dollars less than a commercial PC, to a corporation a corporate PC will yield a quick ROI and mitigate future security breaches and enable users to be more productive.

Rich Cheston has deep roots in the PC business and has even earned the status of Master Inventor at Lenovo. Monthly guest blogs such as this one are part of The VAR Guy's annual platinum sponsorship.