The cost equation
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The price of a standard PC may have come down to below 350; a rackable server tower may be less than 600; but unless the total cost of providing IT to the desktop is well understood, then IT managers have little hope of driving that overall cost downwards.
The price of a standard PC may have come down to below £350; a rackable server tower may be less than £600; but unless the total cost of providing IT to the desktop is well understood, then IT managers have little hope of driving that overall cost downwards - or plan for future infrastructure or desktop changes and assess their likely impact.
This is a problem for many IT departments as they try to rationalise diverse, non-standard and poorly managed estates. The solution for drinks retail chain Thresher Group was straightforward: to shift its head-office infrastructure to a managed service provided by IT services company Getronics. The move, designed to refresh the desktops of 500 users and replace an outdated Token Ring Network at its Welwyn Garden City headquarters, has released capital for investment elsewhere in the business. Equally important was the desire to make costs more predictable and transparent, so the company knew the real cost of desktop IT to the business as it planned for future change.
That lack of transparency is not unique to Thresher. "Many customers with relatively unmanaged IT infrastructures are not sure what their costs are," says Steve Murtagh, service development director at Getronics. "By putting it into a commercial agreement, they get that visibility."
In Thresher's case, as in others, the unveiling of the total cost per user highlights how either selective, à la carte 'out-tasking' or even wholesale managed service outsourcing can significantly reduce them.
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According to benchmarks from analyst group Gartner, the average cost of providing desktop services per user - measured across seven functions - should be $1,804 (£973) per annum (see table). But many companies are thought to be spending £600 to £700 more than that, especially when these are delivered by internal teams. Managed service providers like Dell, Computacenter, Unisys and Getronics confidently predict they can save such customers 25% to 40%.
Rod Arnot, services director at Dell UK, says improving the delivery of desktop services - which Dell reckons account for 76% of the overall cost - can have a far greater impact than any focus on hardware prices. "Organisations forget that services account for a much bigger chunk of cost than hardware, which is where they have tended to focus," he says. As well as the economies of scale that the managed service providers can pass on to customers, cost savings tend to come from three areas - standardising the desktop environment, reducing the amount of desk-side support through automation and establishing different service levels that address the demands of different sets of users.
Forrester analysts reckon a lack of standardisation can add 15% to 30% to the cost of support. Getronics' Murtagh cites the example of a multinational which consolidated five different email systems. This reduced inbound calls to the helpdesk, which lowered the resource required and therefore the price, he says.
One Dell customer, with 13,000 seats under management in the UK, cut calls to the helpdesk by 20% in the first two years of an outsourcing contract, representing an annual saving of around £3 million.
Shifting support to a remote location or introducing user self-service can also have a dramatic impact on costs - particularly in geographically diverse organisations, where Forrester analyst Robert McNeill estimates that costs are 20% to 25% higher. He points to the recent decision by tourism group TUI to outsource its desktop management to offshore services company Wipro as evidence that the rise of this "shift left" approach - from, inefficient, ineffective and costly in-person support to economically effective, remote support.
The third cost-reduction tactic - differentiating service levels - may have unwelcome consequences for some users, but can have a big impact. Forrester estimates that companies who do not establish different support levels for users inflate their costs by up to 40%. Users might be split into VIPs, front-line users and back-office users, with those facing customers requiring a quicker fix than those behind the scenes.
Ian Rutherford, partner for managed services at Unisys UK, says organisations often think they need higher levels of service than they do in practice - possibly due to patchy support in the past. "We take clients through a service level discovery stage to see what service levels they require," he outlines. "We then align these to the requirements of the business."
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One way to deliver that is through the virtualisation of the desktop set-up. By separating the machine and from the user's software 'image', users can switch to other machines in the case of hardware problems.
The overall returns, however, will depend on an ability to change the culture of the organisation. "We go through a number of transformational processes with the customer," says Neil Meddick, director of remote services at Computacenter. "If you drew a graph of cost against time, there would be a downwards slope with a spike every time a major transformation occurred at the customer."
As with many outsourced services, the element of cost that users often underestimate is the management of the contract. Forrester pegs that at around 3% to 6% of the overall deal price. With that in mind, analyst Robert McNeill advises large customers to retain their systems architect, to see how the managed service fits with the bigger IT picture, and their contract staff, who can ensure competition when the contract is up for renewal.
Providers are divided over how commoditised these service offerings can be. Some talk about infrastructure-in-a-box and packaged, common offerings, while others argue that the service has to be closely tailored to customer needs.
With desktop service prices at their lowest point in history, though, it's no surprise to see suppliers shying away from commodity deals. "There are a lot of suppliers running after deals," says McNeill. "It's a buyer's market." As PC services are increasingly delivered through servers - providing higher levels of virtualisation, user self-service and remote management - analysts predict prices will continue to fall. For IT executives that presents an ability to take cost out of the overall IT budget - but not at the expense of inflexibility and a reduction in service to the point where the business is negatively impacted. Over the course of a three-year or five-year contract, so much can change - technical innovations, acquisitions, user requirements - that savings should not be the only consideration.
