NCs cheaper? No way, claims Intel visitor

Intel is promoting its own internal information technology changes as a way of proving PCs may be no more costly than network computers (NCs). 'We want to prove that you don't need to go to an NC to improve the bottom line,' says Ulmont Smith, who is in charge of Intel's architecture managers.

Intel is promoting its own internal information technology changes as a way of proving PCs may be no more costly than network computers (NCs).

"We want to prove that you don't need to go to an NC to improve the bottom line," says Ulmont Smith, who is in charge of Intel's architecture managers.

The changes at Intel began in 1995 when the company had an external consultant look at the total cost of ownership of its more than 20,000 PCs — one for every two employees — to compare it with Gartner numbers that indicated annual costs were around $US9000. "We got a shock," says Smith, who visited New Zealand last week. "Our costs were higher than the industry average." The killer part of the equation was the end-user cost of downtime — at around $US5000 annually.

Intel instituted a number of organisational changes that reduced cost of ownership by nearly a third, most of it coming from reduced end-user downtime. "Our first problem was that we had empowered employees to select their own vendor and configuration. We found we were supporting six vendors but the largest represented only 38% of our installed base. We were getting no benefits of economy of scale."

Intel sold a new deal to its employees on the grounds that all salaries were to be tied to profit and if the company were more profitable, salaries would likewise improve.

A decision was made to go with one vendor — Intel won't say whom — and by 1997 65% of all its client PCs were provided by that vendor. There is a 36-month depreciation cycle, so older PCs are still being phased out.

"We were running Windows 3.1. We chose to standardise on NT rather than Windows 95 because we thought the world would go to NT eventually and we wouldn't then face another transition. We also put in remote LAN management tools on the PCs."

It took 18 months and cost $US5 million in software and labour to upgrade all the clients. At the same time, Intel reviewed its helpdesk model, eliminating backdoor practices where people jumped the queue by calling friends.

The drop in cost of ownership was staggering — from $US9324 in 1995 to $US6310 in 1997, almost all of it in reduced end-user downtime. "A support telephone call used to cost $US135," says Smith. "We've reduced that to $US35 by turning the calls around quicker. Our first-call resolution has increased from 28% to 65%."

That translates into a 1997 saving of $US8 million — Intel now has more than 50,000 PCs, one per employee — and a projected saving this year of $US51 million.

There's nothing unique about Intel achieving those results, Smith says. It's a typical scenario that could apply to any large organisation such as a bank or telco.

The Gartner total cost of ownership numbers for an NC range from $US6256 to $US7200. "We see client-server as the way of the future, and you can have a fully robust PC rather than an NC."

The future for Intel is in the data centre, Smith says. He describes it as the last frontier to change. "We see NT becoming a robust operating system to play in that market.

"In 2000-2001, we think data will explode and people will want more power on their desktop so they can scrape off data, analyse it and put it back. "That's where the next 10 years is going — it's gong to be a real revolution in the back end of the industry."

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