The High Cost of Handhelds

Gartner Inc. has a reputation for IT cost models that many IT managers find excessively high. But Gartner's most recent numbers for the total cost of ownership (TCO) of handheld computers could take some IT managers' breath away.

The Stamford, Conn.-based research firm says the average handheld TCO is a whopping $3,000 per user per year, going up to $4,554 if you add a separate wireless modem. How can this be, given that many pocket-size personal digital assistants (PDA) cost as little as $300 off the shelf?

"What adds up are the number of line items, which many people don't think of on their own," says Gartner analyst Phillip Redman, referring to hidden costs such as training and IT support. It's "death by a thousand paper cuts," he says.

Redman acknowledges that his TCO calculations cause many IT managers to shake their heads in disbelief. But Gartner looks at 86 different kinds of costs in its distributed computing "chart of accounts," including hardware and software—both on the device and in the network—as well as training, IT support and network airtime for wireless implementations.

Even Gartner's calculations don't include lost revenue from glitches that result in downtime. If lost revenue was included, the TCO might soar even higher, because many top salespeople and CEOs are relying more heavily on handhelds and could lose out on a sale because of downtime.

But Gartner's estimate does include lost productivity, which is a calculation of the time an end user spends to figure out a technical problem as a portion of his salary. Of several IT managers Computerworld interviewed, none counted that sort of lost productivity in their own TCO calculations.

Gartner describes four general areas of cost: capital costs, including software and hardware; operations, including wireless air rates; administration; and end-user operations. To give an indication of how variable costs can be, Gartner says that a wireless "enhanced phone"—basically a wireless phone with Internet access—can cost $1,369 annually, with 60% going to capital costs. But a "communicator device"—a converged PDA and cell phone—has an annual TCO of $3,547, with 45% for capital costs.

These handheld TCO figures actually compare favorably with Gartner's TCO figures for laptop and desktop PCs. The company says the TCO for a desktop running Windows 2000 is just above $5,000 per year, whereas the TCO for a fully functioning laptop running Windows 2000 is nearly $8,000 per year.

By that measure, handheld TCO seems cheap, especially if the device replaces a laptop. However, Gartner and other analyst firms say they fully expect many mobile workers to continue to need a laptop (which often uses a docking station to become a workstation) as well as a handheld and a cell phone or smart phone for several years to come.

That would put a mobile worker's technology cost at $12,000 annually.

Unforeseen Expenses

Analyst Tim Scannell at Shoreline Research in Quincy, Mass., says handhelds could cost an organization more than desktops do in some cases. If a company connects handhelds wirelessly to a back-end system such as a parts-inventory database, the overall costs could "escalate dramatically," he says.

"A handheld has a whole new set of peculiar problems that a notebook user might not deal with," he adds, such as unexpected training costs. For example, if handhelds replace paper and handwritten systems for field workers who have never used a laptop, then end-user training could be prolonged and expensive, Scannell says.

Despite the great promise of handheld deployments, most companies still have no set policies about standard machines or even whether the help desk should offer support. "Most user communities have no clue as to what handhelds cost [overall]," says Jack Gold, an analyst at Meta Group Inc. in Stamford, Conn.

"IT organizations are not planning effectively for PDAs and for getting data to pervasive devices, and that's a substantial cost," Gold says. Although he says Gartner's TCO estimate of $3,000 to $4,000 is too high, Gold says it's easy to see how a wireless messaging device such as the BlackBerry from Research In Motion Ltd. (RIM) could cost at least $1,200 per device per year. And that really adds up to a substantial cost for a large deployment of hundreds or thousands of BlackBerries.

The TCO Guessing Game

Several IT managers who have deployed handheld devices say their TCO costs are far below Gartner's figure of $3,000 per user per year, but most of the IT managers also say they don't enumerate costs beyond hardware, software and wireless airtime.

For Thomson Financial in New York, handheld costs are fixed at $1,000 per year per user under an outsourcing contract, says Greg Agahigian, director of enterprise systems.

Thomson gets 100 handhelds and support services from Good Technology Inc. in Sunnyvale, Calif. The agreement includes client software, help desk support and back-end maintenance. "That's very affordable for an e-mail machine" that's also used for calendaring and contacts, Agahigian says.

At ADC Telecommunications Inc. in Eden Prairie, Minn., salespeople and IT staffers have been using 250 Samsung SPH-I300 smart phones since May, says CIO Kamalesh Dwivedi. He says Gartner's handheld TCO numbers are too high and estimates ADC's annual costs per user at only $400—that's $300 for hardware, $40 for training and $60 for deployment and software costs.

Dwivedi won't disclose how much he's paying for airtime, but he says users were running up costs by making cell phone calls prior to receiving the smart phones anyway. And by pooling airtime minutes, he has cut those costs by 30%.

Plus, Dwivedi lowered deployment and help desk costs by paying for the services of four different outsourcers. "Instead of waiting another two years for support-software maturity, we found all these companies," he says.

Salespeople get e-mail, calendaring and contacts via Microsoft Exchange and can get a customer's order status or other information through an ADC server, using software from Air2Web Inc. in Atlanta.

Siebel Systems Inc. in San Mateo, Calif., plans to give more than 2,000 handhelds to its workers over the next 12 months and has already deployed some RIM BlackBerries, says CIO Mark Sunday.

Looking at his costs so far, Sunday says, "I don't know how you'd come up with the $3,000 to $4,000 [figures] of Gartner." But he does agree that handheld costs could be higher than many CIOs think.

"My expectation is that for the average enterprise, this cost is a nightmare, and IT organizations haven't [considered those costs] and don't have a good process in place," he says.

TCO Tips
Suggestions for reducing the total cost of owning wireless and handheld devices:

1. Match an end user’s needs to a device. Some users don’t need always-on wireless connections. 2. Use mobile management tools for uploading software, monitoring improper use and controlling security. 3. Use a middleware gateway that assists in profiling users. 4. Establish upfront training programs that reduce support costs down the line. 5. Standardize on infrastructure and hardware. 6. Limit the number of service provider relationships. 7. Support end users who really are mobile, not everyone. 8. Design by application, not by throughput. In other words, don’t design to the fastest network if a slower one will work for the application.

Source: Gartner Inc., Stamford, Conn.
The ‘Wireless Penalty’
When assessing the total costs of wireless mobile products, the more capable the device, the higher its costs. The more processing power it has, the more applications it can store and the higher the capital costs. Beyond typical costs for a mobile device—such as a PDA or a notebook, which may be mobile but not wireless—there’s an additional cost element added for wireless connectivity that Gartner calls the “wireless penalty.”
For example, the TCO for a PDA is about $3,000. Adding a wireless modem with a TCO of $1,392 will bring that cost to $4,554. The TCO for an integrated wireless PDA is somewhat lower, at $4,392. Although capital costs for a wireless PDA are higher, support costs due to downtime are lower for a more dependable, integrated unit.
Total Cost of Ownership (per user per year)

Enhanced phone (cell phone with Internet access): $1,369 Example: Nokia 6385

Enhanced phone (cell phone with Internet access): $1,369
Example: Nokia 6385
Messenger (e-mail device): $2,511 Example: RIM BlackBerry

Messenger (e-mail device): $2,511
Example: RIM BlackBerry Communicator (converged PDA/phone): $3,437
Wireless PDA: $4,392 Example: Handspring Treo 300

Wireless PDA: $4,392
Example: Handspring Treo 300 PDA and modem: $4,554 Wireless notebook: $11,062
Source: Gartner Inc., Stamford, Conn., May 2002
TCO Breakdown
An “enhanced phone”—a cell phone with Internet access—costs much less to support than a “communicator device,” which is basically a converged PDA/phone. This is because an enhanced phone can’t execute applications and relies on access to the network for information. A communicator, on the other hand, will run office applications such as word processing, e-mail and Internet access, so it costs more to support than an average cell phone.

TCO Breakdown

Source: Gartner Inc., Stamford, Conn., May 2002

Special Report

Tiny Gadgets, Huge Costs

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Copyright © 2002 IDG Communications, Inc.

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