Low-Cost PCs for the Enterprise

Ink jet printers have long since passed the $100 barrier, and PCs are

headed in that direction.

What does this mean to corporate plans to buy new hardware? In a time

when budgets remain tight and finding a bargain is a critical step in the

purchasing process, can IT administrators and CIOs afford to look at

low-cost machines.

Or is the question: Can they not afford to?

The Dell Dimension PCs now start around $500, including a 17-inch

monitor, and the HP Compaq dx2000 microtower goes for $333 without a

monitor. But, unlike printers, PC makers can’t rely on a steady stream of

revenue from cartridge sales to make up for revenues lost on selling the

hardware at a lower price.

”Two things can lower PC prices — design decisions, which are related

to target market and expected usage mopels, and component pricing,” says

Steve Kleynhans, a Gartner, Inc. vice President for Client Platforms in

Toronto. ”As long as you are not sacrificing management capabilities or

product consistency, moving to a less expensive PC is probably fine.”

How low can prices go and still get you a valuable business resource?

As Kleynhans says, it depends on the target market and usage models, and

this yields two very different answers.

Mature Market Saturation

One answer applies to developed countries. North America, Europe, Japan

and certain other areas have very mature PC markets and a high user

expectancy. In these regions, the primary motives for PC sales are

replacing older machines with more powerful machines or gaining mobility.
According to IDC, an analyst and research firm based in Framingham,

Mass., the majority of U.S. PC sales are now laptops.

All of this means that cutting prices in half on desktops in developed

countries won’t drive a lot more market penetration.

And, of course, initial purchase price is a small factor for any hardware

purchase. So, while these very low priced machines come with an

attractive sticker price, support costs can quickly eat up any savings.

”Low-cost machines are limited in processing power, graphics, have

limited amount of RAM and disk size, and usually have no optical writing

capability,” says Jon Peddie, president of Jon Peddie Research in

Tiburon, Calif. ”They are good enough for a little Web surfing,

light-weight word processing and spreadsheets and order-entry type work.

However, if the user tries to do something that is beyond the means of

the machine, then IT usually gets the call.”

Where users have a limited number of job functions, these kind of low-end

computers could actually offer an advantage.

”You could even argue that the limited capabilities of low-cost machines

would discourage users from loading resource-intensive applications on it

and thereby avoid some support calls,” Peddie explains.

Kleynhans agrees that most users in a typical enterprise setting don’t

need a lot of power for their main job functions, such as word

processing, email, and accessing corporate applications. That means they

can get by without the latest processors or largest drives. But he does

advise paying attention to management functionality.

”You will want to add some management capabilities, which may slightly

increase the price of the machine, but is easily paid for assuming the

organization actually leverages the functionality,” he says.

He also says it is a false economy to skimp on memory.

”Buying 256MB to save a few dollars can pretty severely impair

performance and the cost to add the memory after the fact can be pretty

prohibitive he says.

In selecting a low-cost PC, Peddie recommends avoiding CPUs with

integrated graphics, buying less than 256MB of RAM and hard disks holding

less than 20GB. But don’t overspend on the CPU.

”CPU power is sold as an investment protection, pay more now and the

machine will last longer,” he says. ”It’s a false argument. PC prices

drop so fast and so predictably, it’s cheaper to change out a PC every

second or third year than it is to buy up and carry it for four or five

years.”

Shooting for 100

While for a U.S. company there isn’t much difference between buying a

$300 or a $400 PC, that doesn’t apply for the billions of people around

the world who can’t afford even that. Five and a half billion people, or

85 percent of the planet’s population, lack Internet access.

As Microsoft CEO Steve Ballmer told a Gartner Inc. Symposium in Orlando

last year, ”[I]t’s going to take innovations in the products to engineer

them to be lighter, smaller, cheaper, something. And not just the

software. The bigger issue probably is the software-hardware combo. There

needs to be the equivalent of a $100 computer — not just a $400 dollar

computer — if this stuff is really going to go down market in some of

these countries.”

Companies are taking several different approaches to addressing that

problem. They include: