1 OF 17 INFORMATION TECHNOLOGY CAPITAL PLANNING FOR YOUR ENTERPRISE Steven Carpenter 14 October 2006

2 OF 17 Moore's Law is the empirical observation that the transistor density of integrated circuits, with respect to minimum component cost, doubles every 24 months But faster & better is not always affordable – nor is it always necessary.

3 OF 17 TABLE OF CONTENTS I.Purpose II.Facts Bearing on the Problem III.Analysis – PC Lease vs Purchase IV.Best Business Practices V.Recommendations IT CAPITAL PLANNING

4 OF 17 To provide an overview of Information Technology (IT) Capital Planning and provide recommendations for leveraging a strategy incorporating efficient business practices for an organization. IT CAPITAL PLANNING PURPOSE

5 OF 17 FACTS BEARING ON THE PROBLEM Information Technology (IT) hardware and software are essential in the performance of organizational work. Rapid changes in technology requires implementation of a systematic and cost effective plan for upgrading and replacing IT equipment and software. Reliable technology maximizes productivity (due to lower rates of down-time), and minimize calls for IT staff assistance in responding to problems. When IT equipment begins to fail, it requires more intervention of IT support staff, greater costs of parts and labor to repair, and the loss of productivity of program staff during down time. The most forceful driver – upon which government can exert the least control – is the prevailing industry software cycle. Faster & better is not always affordable. IT CAPITAL PLANNING

6 OF 17 Desktop software is produced or upgraded on an 18-month cycle. One software upgrade can usually be skipped without suffering productivity or support issues. Over time software on all the organization’s equipment must be upgraded to keep pace with vendor support, and compatibility within and among activities and other partners. It is frequently impossible to continue using an older version, because incompatibility with other systems eventually forces an upgrade. Once one workgroup upgrades, everyone in the agency needs to upgrade to maintain compatibility, or else document compatibility and information- sharing issues become prominent, and support costs increase with the complexity of multiple versions. The software drives the hardware needs by requiring more memory, storage capacity, and faster processing speeds. FACTS BEARING ON THE PROBLEM IT CAPITAL PLANNING

7 OF 17 AR 25-1: Life-cycle depreciation. In planning life-cycle requirements and calculating economic benefits of automation IT, 3 years from the initial date of installation will be used as the metric for obsolescence of common-use IT. Serviceability, maintainability, and utility will also be used as factors to consider in specific life-cycle replacement decisions. This metric may vary according to mission requirements. System planning should include provisions for product upgrades during the projected life span to cover potential obsolescence, lack of vendor support, support of information assurance and requirements, and incorporation of alternative products or technologies when such changes are justifiable and cost effective. FACTS BEARING ON THE PROBLEM DEPRECIATION IN THE US ARMY IT CAPITAL PLANNING

8 OF 17 FACTS BEARING ON THE PROBLEM DEPRECIATION Four (4) years is the life cycle planning factor to replace computers in most colleges. Computers can be purchased with warranties that will help reduce your risk … most computer warranties are good for a three-year warranty. Keeping computers for a fourth year assumes risk in repairs/replacement of parts. IT CAPITAL PLANNING

9 OF 17 LEASE vs. BUY Purchasing Desktop Computers provides the best value. COST OF 50 COMPUTERS LEASE vs. PURCHASE LAPTOP vs. DESKTOP COMPUTER

10 OF 17 LEASE vs BUY 50 COMPUTERS BY TYPE Purchasing Desktop Computers provides the best value. COST OF 50 COMPUTERS LEASE vs. PURCHASE LAPTOP vs. DESKTOP COMPUTER

11 OF 17 A 4-year life cycle is policy means that one-fourth of the organization’s PCs will be scheduled for replacement each year. Best Value but assumes risk in the 4 th year

12 OF 17 Implement a phased approach to IT equipment life cycle replacement as a means to standardize PC hardware budgets. –Minimize the percentage of end users affected by an infrastructure change by planning upgrades in small groups rather than attempting to change the enterprise at one time. –A 4-year life cycle is policy means that one-fourth of the organization’s PCs will be scheduled for replacement each year. – This 4-year replacement cycle means an “average” 4-year replacement process for Personal Computers (PCs). Some PCs will be replaced sooner, some later. Budget constraints may sometimes require the average replacement time frame to be stretched to 5 years or longer. – If an item of equipment becomes unusable and irreparable or when the cost to repair the item approaches the cost to replace the item prior to the end of its scheduled life-cycle, the item should be replaced. IT CAPITAL PLANNING BEST BUSINESS PRACTICES

13 OF 17 CASE STUDY COMPUTER DEPRECIATION PROJECTION (4 YRS) Recommended Replacement Date (4 Yrs)DesktopsLaptops Grand Total 2/20/ /25/ /15/ /23/ /24/ /30/ /6/ /25/ Grand Total IT CAPITAL PLANNING

14 OF 17 CASE STUDY COMPUTER DEPRECIATION PROJECTION (4 YRS) IT CAPITAL PLANNING

15 OF 17 COMPUTER DEPRECIATION MITIGATION WITH 2005 YEAR END PURCHASE PURCHASED 31 COMPUTERS WITH 2005 YEAR END FUNDS Retiring 31 Computers 1 year early Computers purchased in 2006 will be retired in

16 OF 17 ITEM SUGGESTED LIFE CYCLE (YRS) INKJET PRINTER4 YEARS COLOR LASERJET PRINTERS5 YEARS DESKTOP COMPUTER4 YEARS DIGITAL SENDING UNIT6 YEARS FACSIMLE MACHINE5 YEARS LAPTOP COMPUTER4 YEARS LASERJET PRINTER5 YEARS PERSONAL DIGITAL ASSISTANT (PDA)4 YEARS PLASMA MONITOR4 YEARS PROJECTOR6 YEARS SUGGESTED EQUIPMENT LIFE CYCLE IT CAPITAL PLANNING

17 OF 17 RECOMMENDATIONS Implement predictability for PC replacement at your organization by implementing a four year depreciation schedule for your PCs. Implement a phased approach to PC replacement – ¼ of all PCs replaced annually. Purchase PCs using the Army Small Computer Program (ASCP) – leasing is more costly. Define the optimal mix of laptop vs desktop computers keeping in mind that desktop computers are the better value for the money. Develop and implement a Computer Replacement SOP in your organization. Get visibility of your organizational IT equipment life-cycle and program it for replacement on a schedule. Buying may be less expensive than leasing. IT CAPITAL PLANNING