Creating an optimal refresh cycle policy — especially in tough economic times — is one of the most contentious issues facing today’s corporate IT departments.
Many companies have foregone the traditional three-year turnaround for desktops and laptops in favour of four- and even five-year cycles. But at Tuesday’s CIO Canada Frankly Speaking seminar, hosted by IT World Canada Inc., parent company of ITWorldCanada.com and publisher of CIO Canada, Deloitte Canada CIO Malcolm Campbell said his firm has crunched its own numbers and gone against the perceived wisdom deciding on a two-year refresh cycle.
“Year over year, I have been continually amazed,” he said, referring to how much prices have dropped year over year. In 2000 the company was leasing laptops for $120 per month. Its most recent contract is for $50 per laptop per month, itself representing a 38 per cent drop from the previous year. Campbell said he was expecting a four or five per cent drop, but the dollar’s recent strong showing has increased purchasing power.
Admittedly, Deloitte has several factors playing to its advantage. It leases over 3,000 laptops each year (half of its 6,500 computers are refreshed annually) so it has considerable buying power. Deloitte tried to create a global buying plan (thereby upping its leverage), “but it doesn’t seem to work,” Campbell said, and prices were substantially higher than he could get in Canada.
Additionally, the buy/lease argument never seemed to be solved. “You’d think that a professional accounting firm could agree,” he said to laughter. Also, in Canada Deloitte has specific leasing requirements: no money down, a direct return to the vendor at the two-year mark and a guaranteed monthly fee.
“We want to be able to turn them back and let somebody else manage the residual values,” Campbell said.
But Campbell said there are other factors that favour a shortened lease cycle, not all of which play to an accounting firm’s traditional reputation for counting pennies. “We just can’t be showing up at offices as professionals with older technology,” he said. “It is an image thing.”
Another reason for the short cycle is to attract and retain talented people, he said. “We just are willing to pay that premium,” Campbell said. Deloitte employees get to choose between a laptop and a desktop, and not surprisingly for such a mobile company, 90 per cent choose laptops.
Campbell said older technology is often incapable of effectively running the applications his users need. “I think [using old technology] is a false economy, I don’t think you really save money.”
Doug Copper, Canada country manager for Intel Corp., said a shortened cycle tends to also reduce the number of operating systems and hardware configurations in a company, which in turn reduces costs.
Though Cooper admitted reduced costs could be achieved with longer refresh cycles, this is difficult if a portion of PCs is recycled each year. “There is one company that had 200 hardware configurations,” he said. Updating applications on a variety of operating systems tends to increase the number of calls to helpdesks and decrease the likelihood that all applications are tested on all configurations, Cooper said.
No matter what path a company follows, Cooper said, “you need to have a policy for regular refresh.”
“In terms of refresh cycles, it is difficult to say one size fits all,” Campbell added.
Deloitte recently changed vendors for the first time in four years, Campbell said. In order for this to be economically viable, the savings needed to be at least five per cent since the cost of switching is between three and five per cent, he said.
In light of BMO Financial’s recent experience with its servers surfacing on eBay full of customer data, Campbell said Deloitte is careful to audit the data destruction for machines returned to the vendor, which is responsible for wiping the drives. On the other hand, Deloitte never lets its servers leave its possession with any data on board.