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:
- Novatium Solutions Pvt. Ltd. of Chennai, India, is making the Nova
NetPC 1000 Priced at under $100 (monitor not included) this thin client
device connects to Windows, Unix and Linux servers. It uses the Linux
operating system and Mozilla browser. It comes with keyboard, mouse and
Webcam as standard equipment. Connection options include TCP/IP,
Bluetooth, 802.11b, USB. 10/100 Ethernet and DSL. - Advanced Micro Devices, Inc. of Sunnyvale, Calif., is making the
Personal Internet Communicator — AMD began selling this three-pound
device last year through ISPs in the Caribbean and India. It uses the AMD
Geode GX processor, integrated DDR memory, has a 10GB hard drive, four
USB ports and an internal 56K modem. The system runs on the Windows CE
operating system and comes with word processor, spreadsheet, email,
messaging, browser and other applications preinstalled. Prices are set by
the ISP, with Cable and Wireless selling it for $238 with a 15-inch
monitor or $185 without. - Encore Software Ltd. of Bangalore, India, has the Mobilis — Encore
has created three versions of this computer, at a price from about $230
to $450. There are two mobile versions, one with a built-in keyboard, and
both with 7-inch LCD touch screens for stylus input. One of them is
wireless. There also is a desktop model called SofComp. All models run on
Linux and have open source word processing, spreadsheet, scheduling,
email and other applications. - $100 Laptop Project — This project, started by MIT professor
Nicholas Negroponte, has the goal of manufacturing hundreds of millions
of Wi-Fi enabled Linux laptops for sale in bulk to education departments
for distribution to students. He is working with the Brazilian and
Chinese governments. AMD, Brightstar, Google, News Corp, and Red Hat are
supporting the project. The specifications call for a 500MHz processor,
1GB of storage and a 1-megapixel display, with software scaled down to
run on the system. Production is scheduled to begin in 2006.
When to Go Low
So, for corporate installations in developed countries, with high hourly
rates for tech workers, a few support calls cost more than the price of
better hardware. Don’t forget that doesn’t take into account the
productivity loss.
For a multi-national firm with employees in countries with much lower
wages, however, the lower on-site support costs may make it worthwhile to
buy these lower-cost machines. It also means these employees may be
getting home machines, and will want to get access to online employee
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