Consumer vs Corporate pCs: Understanding a Very important difference

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January 2013

Consumer vs Corporate PCs: Understanding a Very Important Difference In the hundreds of conversations I’ve had with corporate IT customers over the last fifteen years, I am consistently asked what seems to be a very simple question: What is the difference between a consumer and commercial PC? While it’s always been a frequently-asked question, the continued Consumerization of IT has dramatically increased both the importance and complexity of the answer. The question is usually preceded by a story where the customer starts off by saying something like this:  I dislike Monday mornings. Inevitably on a Monday morning, some department manager walks into my “ office, throws down an ad from the Sunday paper, and tries to tell me how to do my job. ‘Look right here – I can buy that (consumer) PC for less than you’re charging my department for that (corporate) PC. In fact, I can get a lower price on this one PC than you are charging me – and you are buying thousands. The only conclusion I can reach is you don’t know what you’re doing or how to negotiate!’” While not pleasant, the exchange is revealing. Beyond their confusion and anger, the customer is seeking real answers – and assistance. While some may think there’s some clandestine conspiracy behind the scenes to justify higher prices, the reality is quite different.

WHITE PAPER After all, at a high level, consumers and corporations both buy PCs for one reason: applications. Whether it’s Facebook on the web or a thick legacy client for a crucial database application, PCs are built to perform tasks. In fact, assuming they share an OS, most PCs being produced today (consumer or corporate) are capable of running nearly any application. If technology has gotten this universally powerful and productive, how can organizations justifying higher prices for ‘corporate’ technology? • D  espite similar appearance and basic functionality, corporate PCs are built for the priorities of business: lower ongoing operating costs and sustainable ROI • Any short-term consumer PC cost savings quickly evaporates over time in an enterprise environment • Corporate PCs beat consumer PCs in four key functions that are either transparent or not quantified by consumers: manageability, reliability, productivity, and security • Organizations that focus only on direct Capex and Opex costs ignore high indirect operating and support costs that can be controlled with well-managed corporate PCs Corporations are in the business of generating profit and, as a result, they make financial decisions that maximize profitability. An individual consumer, however, can make a (non-financial) decision virtually without boundaries; considering a particular PC based upon purchase price, brand, visual appeal, magazine review, or the recommendation of a friend. With this distinction, it becomes clear that the key differences between consumer and corporate PCs are those features and/or functions designed to realize a better overall value (in financial return or ROI) for the given customer type. However, in today’s Consumerization of the IT world there’s an additional focus being put on issues like productivity and the retention and recruitment of new employees.

Ultimately, however, in a corporate environment, a corporate PC is going to deliver a much better ROI even if Capex is higher.

Ultimately, however, in a corporate environment, a corporate PC is going to deliver a much better ROI even if Capex is higher. Since total Opex costs, which significantly exceed Capex costs and make up most of a PC’s Total Cost of Ownership (TCO), any feature or function that lowers Opex has the potential to mitigate any difference in initial purchase price (Capex). The result is a better PC and higher ROI.

Beyond Purchase Price: The Importance of Total Cost of Ownership (TCO) Since corporations make financial decisions, it’s important to understand Total Cost of Ownership – the key metric for measuring the effectiveness of IT spending. In the PC world, this has long been the domain of Gartner, who developed the industry’s first TCO model over 20 years ago. While specific TCO depends on the technology, it always covers three major costs: • C  apex (Direct) – all hardware & software costs • Opex (Direct) – all the other direct costs but the majority is the labor costs associated with IT operations and administration • End-user Costs (Indirect Opex) – costs associated with lost user productivity such as downtime, training and peer-to-peer support

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TCO and Function Gartner drills down on TCO via specific use cases that capture how the technology is used. Average TCO for a “Day Extender” notebook that sees limited use out of the office ranges from $4,600 to $8,491. Similarly, TCO for a more mobile “Traveling-Worker” notebook can range from $6,895 to $9,793.1

TCO for Day-Extender Notebooks Unmanaged

Somewhat Managed

Moderately Managed

Well Managed

Capex (Direct, HW & SW)

$1,228

$1,209

$1,185

$1,137

Opex (Direct)

$1,213

$1,198

$1,106

$920

End-user costs (Indirect Opex)

$6,049

$5,174

$4,297

$2,544

TCO

$8,491

$7,581

$6,588

$4,600

Direct vs. Indirect Costs Capex refers to all capital expenses involved with acquiring a PC, including the cost of applications. Typically Capex has been only 15% to 20% of TCO, so a focus on only reducing Capex will leave any organization short of the potential to be highly efficient. Since most corporations only track direct costs (Capex/Opex), high indirect user-focused costs are also probably a surprise. Manageability, which we’ll explore a little later, also has a huge impact on containing TCO.

Delivering ROI: Where Corporate PCs Earn Their Keep Corporate PCs are specifically designed to lower costs and improve ROI by focusing on four critical factors: • • • •

 anageability M Quality & Reliability Productivity Security

Each of these factors impacts TCO significantly and Corporate PCs are designed to maximize each.

Manageability As described above, Opex accounts for the majority of an average PC’s total direct cost of ownership. Manageability technologies focus on reducing these costs by mitigating some of the challenges faced when bringing new PCs into a corporate IT environment. When an individual consumer purchases a new PC they take it out of the box, set it up, and turn it on. They next provision (set up) the PC manufacturer’s preloaded generic base image. Once this is done, they may install additional software before connecting to a home network and/or the Internet. The process is fairly simple and the consumer is willing to complete it with little concern over the cost of their own time.

Efficient Corporate Deployment On the other hand, deploying corporate PCs is infinitely more complex, costly, and time consuming. Deployments can involve hundreds or thousands of new machines, quickly multiplying the costs of unanticipated delays and errors and their associated downtime. Poorly managed deployments can quickly impact an organization’s bottom line. 3 1 Gartner Research; Notebook Total Cost of Ownership: 2011 Update

WHITE PAPER The challenges of manageability become clearer as the process continues. Nearly every corporation I’ve ever worked with looks at our base manufacturing image knowing that they will erase or “blow” the image out in favor of a unique corporate image. This standard corporate image is used to help create a Common Operating Environment (COE), designed to speed deployment and lower costs through simplification. Even creating the COE is a major challenge, since it must support a wide range of locations, hardware configurations, organization-specific policies, and security schemes. Once the image is created, it’s either sys prepped, Ghosted, and loaded onto each PC prior to leaving the manufacturer 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 disruptive to one that is streamlined and more automated. The costs of most labor intensive deployments range from $150 to $250 per PC, versus an automated process with costs ranging from $50 to $75 per PC. Additionally, automated deployments significantly reduce user downtime. So what’s in this process that’s important to a corporation but not an individual consumer PC? • C  onsistency of the systems (ensuring the hardware components are compatible or from an image perspective the same from PC to PC) as “sys prepping” requires the same HDD, system ID, etc. • PxE (Pre-boot execution Environment) BIOS capabilities to connect the bare metal system to the corporate network • Electrical asset tagging capability • Secure image deployment using Vpro technologies such as TXT (see below)

Manageability is about more than streamlining deployment and reducing setup costs.

Beyond Setup Manageability is about more than streamlining deployment and reducing setup costs. Once a PC is brought into a corporate IT environment, it must still be secured, administered, and maintained. Smarter management processes and technology found in most corporate PCs can help. Intel® VPro™ Remote Access and Management • Full remote keyboard, video, and mouse (KVM) control – even through reboot • Remote redirected boot. KVM remote control and remote encryption management capabilities reduces the number of desk-side visits • Out of band policy monitoring and alerts • Remote admin including without OS • Certificate based security outside of the OS • Trusted Execution Technology (TXT) to establish trust • Pre-boot authentication and security checking Wake On LAN • Enables an IT organization to apply remote fixes or patches to systems when users are not available for such BIOS controls • Remote flashing over the OS or operating system (Windows) • BIOS based port blocking Skeptics of the importance of corporate PCs need to look no further than remote BIOS flashing for a powerful and easily quantifiable example of the importance of enterprise-grade technology. Quickly calculate the cost and frustration of manual updating the configuration of every single PC across an organization versus a commercial PC where the IT organization can power-up systems remotely and do them all from a single console and the difference becomes abundantly clear – and very expensive. 4

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Quality & Reliability While everyone wants a higher quality system, reliability is absolutely critical for corporate technology. Unlike the consumer that is primarily irritated by the inconvenience, organizations pay dearly for downtime in lost revenue as well as labor costs associated with overtime required to make up for the downtime and any support costs related to diagnosing and fixing the problem. Unfortunately, what most corporations don’t know is how significant this can be. For example: • A study a few years ago by the Robert Francis Group (RFG) showed that a failure during the initial deployment (Defect On Arrival or DOA) was more disruptive or costly to an organization than one that occurred later during normal use.2 • Moreover, a failure which occurs to a mobile user or away from the corporate office results in longer down-times and more expensive repairs. In addition, usually these workers are more highly paid and also have a more direct impact upon the company’s revenue (e.g. out-bound sales).

Trading Cost for Durability While manufacturers don’t set out to design lower quality systems, many of the decisions made in pursuit of targeted market segments (e.g. consumers) will lower total quality, especially when compared to products made with the more demanding Corporate PC segment in mind. As they look at how different segments make technology decisions, PC makers adjust their products accordingly. For example, while consumers overwhelmingly focus on low purchase price, corporations focus on getting a competitive (but not necessarily the lowest) price from suppliers. The organizations decide to pay more to prioritize reliability that saves money and reduces the negative impact of downtime over the long run. Additionally, manufacturers understand that most consumers are not 24/7 power users. Lower usage patterns (2-4 vs. 8 hours a day) allow manufacturers to substitute components that might not be as reliable in high usage environments but meet consumer demands for a lower price.

The key takeaway is that, on average, a 4% failure rate difference between PCs can cost a company $330 per year per PC.

Reliability When it Counts In the end, the difference is in fact very important, since a consumer PC used in a corporate environment will 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.”3 The key takeaway is that, on average, a 4% failure rate difference between PCs can cost a company $330 per year per PC. 60% of this is estimated to be lost productivity, while 40% would come from direct costs or costs that would show up in IT support – that’s 396$ per user for a PC, assuming a three year lifecycle.

5 2 Robert Francis Group; Differentiating PC Vendors: The Quality Equation 3 TBR; Large Enterprise Repair Rate Study, Apr/May 2011

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Productivity As we discussed earlier, PCs are always bought for one reason: 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. Consumers have their own version of being productive, which typically means: • • • •

 rowsing the Internet B Online shopping Email/communication Tweet/Facebook other social networking

Unlike corporations, consumers don’t measure their productivity in dollars, mostly because their time is their own. And since the consumer typically prioritizes value over productivity, Consumer PCs are built with that compromise in mind.

Little Details, Big Impact So how do corporate PCs impact productivity? Obviously reliability is important, but so is functionality: • B  etter keyboard – clearly a touch typist typing 6 to 8 hours a day will place more value on the quality and responsiveness of a keyboard. Commercial PC manufacturers know this is important to virtually anyone (i.e., a corporate worker) who spends a considerable time working on a PC creating content. • Back-lit keyboards – for work in low light conditions • Fingerprint swipe & single sign-on – for faster, more secure access • Even adding peripherals can increase productivity ° Docking stations – quicker access to office peripherals and LAN connectivity ° An extra battery or portable charger to extend working hours Furthermore, consider the rapid adoption of Wi-Fi over the last ten years. Even though it drove higher Opex and Capex costs at first, it also drove higher productivity by freeing users from the tether of their desk or office. In the end, most organizations can easily justify the additional costs, and it’s now impossible to imagine a world without Wi-Fi.

Security Robust security is not only good corporate practice, regulations like HIIPA and Sarbanes Oxley make it the law for many organizations. Security breaches, especially those that involve lost customer data, can result in significant costs and immeasurable losses in revenue and reputation. In fact, the latest estimate from the Ponemon Institute shows the average total organizational cost of a data breach in the U.S. at $5,501,888.4

Security breaches, especially those that involve lost customer data, can result in significant costs and immeasurable losses in revenue and reputation.

Consumers are less driven by regulation than worries about identity theft and other threats. This doesn’t mean security is irrelevant, but typically not important enough to justify higher costs. This means the majority of enhanced security is the domain of corporate computing, where IT must mitigate significantly larger financial and regulatory risks.

Critical Technology Consumers find adequate security in anti-virus applications, strong Windows passwords, and on occasion the ability to wipe their data from a lost or stolen system remotely. Corporations go much further, requiring advanced security features not relevant or often found in a consumer PC. 6 4 Ponemon Institute, 2011 Cost of Data Breach Study

WHITE PAPER Trusted Platform Module (TPM) – provides a root of trust for each PC • Stronger authentication • Random number generation for cryptography • Protected storage of digital keys and certificates • Secure encryption • Boot process verification CompuTrace in BIOS – allows for persistent tracking code in BIOS Self-encrypting HDD (Opal and non-Opal) • Highest resistance to all current attack methodologies, including memory cooling • Allows for the fastest PC operation – offloads encrypting from main processor BIOS-based port blocking • Strong protection outside the OS to shut off ports • Prevents unauthorized copying Multifactor authentication • Includes fingerprint readers, smart cards, RSA or other hardware tokens • Two-factor authentication dramatically raises the security envelope over single factor and ID • Intel Identity Protection with public key infrastructure certificate

Summary When it comes to choosing a PC, consumers and corporations buy and behave very differently. Different priorities guide corporate buying decisions, and the technology they choose must deliver on manageability, reliability, productivity and security. While Consumer and Corporate PCs might appear nearly identical, the choice will impact ROI significantly. Consumer PCs, designed for lighter duty and lacking remote manageablility capabilities, are more susceptible to costly failures. Corporate PCs, designed to maximize TCO, will maximize your technology investment where it matters most. Consumer PC Manageability/Productivity

$2,561 $7,232

$2,389 $5,133

$172 $2,099

As the TBR study demonstrates, a failure rate difference of 4% can significantly impact TCO.5

Direct Indirect Security

Delta

For this comparison, unmanaged equals consumer PC and moderately managed equals corporate PC. This includes productivity features that reduce indirect costs.

Direct Indirect Quality/Reliability

Corporate PC

N/A N/A

N/A N/A

$396

This data represents latest average per capita cost from the Ponemon Institute.

Direct Indirect

N/A $194

N/A

 Direct Indirect

$2,561 $7,426

$2,389 $5,133

$194

Totals – ROI $568 $2,288

If the distinction seems clear on paper, it is often lost in conversation, especially 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.” As the table above clearly demonstrates, while a consumer PC may cost a few dollars less than a commercial PC, that cost savings is deceptive. Over the long term, operating in a modern mobile workplace, a corporate PC will yield a quick ROI, supercharge user productivity, and provide protection against critical threats and risks. 7 5 This represents 40% (the direct cost portion) of the total $990 cost of reliability as identified by the TBR study.

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About the author: RICHARD (Rich) W. CHESTON Chief Technical Architect, Distinguished Engineer & Master Inventor, Lenovo Rich Cheston is Lenovo Chief Technical Architect for Software & Peripherals. Past innovations include the creation of the now universal Wake on LAN standard and groundbreaking work on Gartner’s original Total Cost of Ownership (TCO) model. Rich is now responsible for Lenovo’s Cloud strategy, guiding technical development and working with our corporate customers all over the world to develop transformational cloud solutions.

To learn more, visit www.Lenovo.com

Copyright © 2013 Lenovo. All rights reserved. Lenovo makes every effort to ensure accuracy of all information but is not liable or responsible for any editorial, photographic or typographic errors. Lenovo, the Lenovo logo, For Those Who Do, are all trademarks or registered trademarks of Lenovo. Microsoft and Windows are registered trademarks of Microsoft Corporation in the U.S. or other countries. Intel, the Intel logo, Intel VPro, Ultrabook, Core Inside, and Intel Core are trademarks of Intel Corporation in the U.S. and other countries.

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