Total Cost of Ownership Rugged vs. Commercial Grade Mobile Computers

Transcription

1 Total Cost of Ownership Rugged vs. Commercial Grade Mobile Computers March 4, 2004 Kristi Urich Director, Field Service Industry Marketing

2 Outline Conclusions What is TCO Why do TCO analysis VDC TCO Study Results Who conducts TCO What is the TCO analysis of rugged vs. commercial grade for field service What about handsets (phones)? Why not pilot with commercial-grade devices? How does Intermec help you reduce your TCO Extra s

3 Conclusions After conducting extensive research consisting of structured interviews and secondary research, VDC concluded that in "Industrial and Harsh Commercial Environments" rugged devices have substantially lower TCOs than commercial grade devices with similar functionality. Many companies are not considering TCO, and those who do, are not identifying costs beyond deployment. Many companies may be overlooking the hidden costs of downtime and its impact on productivity, customer service levels and bottom-line profitability VDC, Frontline Magazine Gartner recommends enterprises deploy rugged devices 1 Initial device acquisition costs represent <25% of the total cost of ownership (Gartner, VDC) Intermec leads the industry in rugged PDAs 2 and offers a comprehensive strategy to lower customer TCO 1 Ken Dulany, Gartner, Frontline Computing: Mobile Devices on the Rise, Intermec ranked #1 rugged PDA in field service by VDC in 2003.

4 Defining Total Cost of Ownership IT costs over time throughout the asset s life cycle Encompassing the costs associated with capital investment, license fees, leasing costs and service fees, as well as direct (budgeted) and indirect (unbudgeted) labor expenses. Costs are accounted for during planning and acquisition, deployment, management and support, and retirement/replacement.

5 TCO is part of the complete picture Total Cost of Ownership cost to deploy, sustain, downtime and disposal of equipment overtime Return on Investment value to the organization in increased revenue or decreased costs Payback period the point in time which the benefit (revenue and/or cost savings) equal the project cost. When evaluating an investment, cost alone can lead to false conclusions. Generally projects with varying cost profiles have different rewards, risks and benefits. TCO must be considered with ROI and payback period in mind. Risk tolerance should also be considered. A higher cost, but proven solution may be more desirable especially to early adopters where project success is critical. Enterprises that base investment decisions on TCO instead of acquisition price are more successful in assessing the true cost of IT investments - Gartner

6 Consider the Project TCO Based on survey of 11 field service deployments across section of industries such as telecommunications, high-tech manufacturing, building and real estate, construction, and heavy equipment manufacturers. Change management, integration requirements and the complexity of the service model drive the total cost of ownership of a field service automation initiative. Hardware costs contribute less than 10% to the overall project cost.

7 Why Do TCO? Select the best solution Pressure on IT budgets 3 out of 4 IT projects don t deliver 23% of IT projects fail 49% of IT projects are challenged Over budget Late Fewer features than originally promised Or all the above!

8 VDC TCO Study Total Cost of Ownership Models for Mobile Computing and Communications Platforms Industrial and Harsh Commercial Environments Volume III: Field Professionals (field sales and service) Venture Development Corporation, December 2003 Interested persons can purchase copies of the studies from VDC at

9 Who conducts TCO Analysis? Rugged deployments are more likely to have conducted a TCO analysis Surprising more commercial-grade users did not conduct TCO analysis since they are most likely under the assumption that a less expensive deployment up front will be less expensive over the course of the project s life VDC found evidence the cost of commercial-grade units, on average, over the life of their deployment are more expensive on a per annum basis. Enterprises over $250M are more likely to have conducted a TCO analysis (88.5% of companies with revenue under $250M did not consider TCO). Over 80% of respondents indicated TCO analysis was conducted by internal resources However, only 53% of respondents indicated that they had conducted some form of TCO estimation and fewer than 25% conducted a post evaluation

10 VDC Total Cost of Ownership Definition Initial deployment costs Hardware including integrated I/O and RF Tethered peripherals Plug-in WWAN, WLAN, WPAN Bar code scanners Docking stations Bar code label and receipt printers Plug in GPS/AVL Digital cameras Software OS application software middleware Implementation Staging Testing/documentation Installation/integration (in-building and vehicle) Training Maintenance Extended warranties Maintenance/Service contracts Out of maintenance/service contract Spare Units WAN/WLAN/satellite network access Downtime/productivity loss* Hours lost per mobile operator Hours lost per IT support person Industry standard labor rates for mobile operator and IT support * Downtime calculations include number failures, time of productivity lost, time to protect the device and/or prepare the device for operations

11 Experienced Users Deploy Rugged The majority of those respondents deploying rugged devices within the last 60 months indicated that this was not their 1st deployment. It was somewhat surprising that the number of commercial-grade respondents indicating this was their 1st time deployment was more than twice as high as rugged respondents. (Exhibit IV-5) The majority of users who indicated they used TCO as part of their analysis and selected rugged (94%) are 2 nd + generation mobile computing users. (Exhibit VI-44) Commercial-grade respondents had a greater share of deployments installed within the last twelve months, which may indicate that they may be unaware of the potential maintenance and downtime costs that may occur in the next months.

12 Field Service Users Deploy Rugged

13 Enterprises Deploy Rugged Enterprises with more than 100 mobile users are 1.3 to 4.8 times more likely to deploy rugged over commercial Field Professional Survey Respondents Segmented by Number of Users in Most Recent Mobile Computing Deployment # of mobile users <100 Commercial Rugged % respondents

14 Enterprises Deploy Rugged On average, for projects investing $100,000 or more were 1.5 to 2.4 times more likely to deploy rugged Field Professional Survey Respondents Segmented by Total Cost of Mobile Deployment Project (excluding maintenance and downtime costs) >$5 million $1 million - $5 million $100,000 to $1,000,000 Commercial Rugged <$100, % respondents

15 Mission Critical Applications Demand Rugged Performance and Reliability Field Professional Survey Respondents Segmented by Primary Applications Office/Communications/ Installations Computer aided dispatch Work order processing Inspections Rugged Commercial Maintenance/Repair % respondents

16 Key Product Features and Specifications Top Rated Feature/Specification Ruggedness/durability Drop capability 3+ feet Shock/vibration resistant Water/liquid resistant (incl. keyboard) Ease of use software Reliable minimal downtime Expandability/ease of integration Long battery life Compact size/weight Warranty duration and coverage Portability in/out of dock Touchscreen/signature capture Wireless WAN Rating (1-7) Series IP64 5 drop Intermec Dev Library WWAN Toolkit Bluetooth Peripherals (GPS, MSR, printers, scan handle, RFID) Power management Medallion service Docking Durable touchscreen 3 radios Users highly value the design features of Intermec products

17 Rugged devices deliver longer % of Devices still in field over time 100.0% At 2 yrs 35% of commercia l devices have been replaced vs. 2% rugged 50.0% 0.0% 0 years 2 years 3 years Commercial 4 years 5 years Rugged >5 years At 5 yrs, over 25% of rugged devices are still in use By 3 yrs, 80% of commercial units have been replaced. Remote user support, remote device management, and spares logistics are critical very early in commercial deployments due to high turn over rates Replacements after 4 years are equally likely due to technology changes as device failures. Less than 4 years are typically device failures. Most commercial products offer a 1 year or less warranty and devices are typically considered disposable Most commercial devices have a shelf life of less than 1 year, resulting in many different devices in the field after 3-4 years.

18 High Turn-Over vs. Short Life Cycle Multiple devices result in higher costs Testing Application modifications Management of multiple versions Different device management tools/capabilities Different user experiences Increase help desk support time and costs ipaq launch 1/00 31xx Series, 36xx Series 37xx Series, 38xx Series 39xx Series, 5xxx Series 19xx Series, 22xx Series h5555 Extended Service exchange 3 rd party parts and repair /98 Production over 5 years 602 3/00 700m 3/01 2/03 Retirement announc 6/03 last order 9/03 last build 700C 8/ /03 Service 3-5 years after last shipment Color and value line product extension: protects printer, dock, and accessory investments

19 Few adequately conduct TCO Analysis Confusion over whether respondents possess a true understanding of their TCO VDC believes [respondents] have underestimated and likely only include initial deployment costs many users likely will experience larger deployment costs over the life of their project. Only 53% attempted to estimate TCO Less than 25% of respondents actually measured TCO results

20 TCO Results for PDA Standardized on a 5 year comparison for all devices Per annum costs of PDA over 5 years favors rugged Rugged: $ Commercial $3, By the end of the second year, the cost of owning a commercial device has exceeded rugged: Year 1+2 Rugged costs: $ Year 1+2 Commercial costs: $ This doesn t account for opportunity and other costs Inability to meet customer commitment Inability to achieve forecasted productivity increase Cost to reroute another technician to cover call Cost of overtime to complete calls and/or paperwork Increased use of cell phone or other voice communication Inaccuracy or lost data during equipment failure Shipping costs for spares deployment and service

21 TCO Results for PDA

22 TCO Results for PDA

23 TCO Results for Tablet Standardized on a 5 year comparison for all devices Per annum costs of Tablet over 5 years favors rugged Rugged: $2, Commercial $4, By the end of the second year, the cost of owning a commercial device has exceeded rugged: Year 1+2 Rugged costs: $ Year 1+2 Commercial costs: $ This doesn t account for opportunity and other costs Inability to meet customer commitment Inability to achieve forecasted productivity increase Cost to reroute another technician to cover call Cost of overtime to complete calls and/or paperwork Increased use of cell phone or other voice communication Inaccuracy or lost data during equipment failure Shipping costs for spares deployment and service

24 TCO Results for Tablets

25 TCO Results for Tablets

26 Device Cost as % of TCO Gartner: Consumer PDA Device acquisition costs less than 25% of TCO Based on device cost $671 yr1 VDC: Rugged PDA Device acquisition costs less than 20% of TCO Based on device cost of $1667 yr1 VDC Study: Commercial Grade PDA TCO ($3316/annual costs) VDC Study: Rugged PDA TCO ($2995/annual costs) 17% 9% 7% Hardware Software 8% Training/Impl Maintenance 15% End User Downtime 44% IT Support 32% 13% 18% Hardware Software 10% Training/Impl Maintenance 13% End User Downtime 14% IT Support

27 What about handsets (phones)? Must match your ROI to your feature capability No touch screen, limited memory, no scanner, screen size Generally dispatch/status only, not full paperless work orders Device availability is limited Manufacturer often negotiates carrier exclusive product offering Short shelf life, generally cannot purchase additional handsets 2+ years after rollout

28 What about handsets (phones)? The device is free/low cost, BUT.Cannot purchase the same device from multiple carriers Limits negotiating power Locks you in to long term contract Limits your coverage OR forces you to support multiple devices

29 Why Not Use Both Rugged and Commercial-Grade? Loss of volume purchasing leverage on initial purchase and network services (10-20% discount) Lack of standardization (Why did Southwest Airlines standardize on Boeing 737?) Cost of development on device is double (Software vendors have limited resources) Cost of deployment is higher (training, etc.) Cost of support is higher (two procedures, two skill sets, two vendors, two manuals, two times the spares, two of everything) Rollout delay (must redevelop software on both devices, debug and retest)

30 Why Not Pilot with Commercial Grade, Then Rollout Rugged? By the second year, your costs with commercial grade devices will exceed rugged why waste your time? Features and user experience are not consistent when you change devices Peripherals are generally not compatible User must spend extra time caring for the devices during the pilot User retraining When moving to a new platform, you must retest and may require application changes Does your IT staff really have that much time? Can your deployment wait for new rounds of testing? How much are your losing every day you wait? Your commercial-grade devices won t have any value left and your stuck with disposal Do you want to send the message your employees aren t worth high quality devices

31 SELL Your Value! You are not selling a commodity You are selling low risk, high return investments Your customer s biggest challenge is change management and risk mitigation Pilots should not test technology but test process Your customer s ROI is based on fast time to implement, reliability of product, focus on business process Downtime and high user support rates can kill a project before rollout is complete Appropriate application design tailored to the hardware features are critical for a good user experience

32 Intermec: Designed to Lower TCO Device design Device management Locked-down environments Intermec account team support Professional services Medallion services Value-added partner relationships

33 Intermec 700 Series: Lower TCO Device Design for Reliability and Maximum UpTime and Minimal Support Rugged IP64; 5 drop; 30,000 signature touch screen; extreme temperature operation; large battery Solid state storage SD or CF for data backup; storage and recovery Industry standards Mobile 2003/PPC, b, Bluetooth Integrated peripherals b, WWAN, Bluetooth, laser scanner, imager. Reduces wear and tear, reduces user support. One device many wireless carriers Power management extends battery life, less downtime in field, no need to carry extra batteries Lifecycle management Long production life Ability to order specific configuration, eliminate need to support multiple devices, reduce testing, application changes, etc. 6 month notice of last time order 3-5 years service after last build

34 Intermec 700 Series: Lower TCO Ease of development Standard OS Intermec developer support center/tech support Intermec developers library complete drivers and toolkits for all 700 features WWAN toolkit Mobile Framework Intermec Developers Library for.net 700 Java Developer Assistance Package Skypay Credit Card Collection Service Wireless Printing SDK Imager Signature Capture SDK ICCU for Device Management Intermec utilities ilaunch Locked down Menu ibrowse Locked down Browse for data collection TE2000 Terminal Emulation client ITCBaser System backup and recovery RegFlush Utility Registry Backup Keyboard remapping Intermec 3 rd party tools MCL, etc.

35 Intermec 700 Series: Lower TCO Ease of expansion Bluetooth printers, MSR, GPS b Hotspots, printers Full line of peripherals and accessories Vehicle, desktop and multi-docks Modems, mag-stripe reader, GPS Printers RFID Compatible product line extensions 700 mono, color and value line (730) share common accessories Optional upgrades to extend use RAM, storage cards, OS, etc.

36 Intermec: Designed to Lower TCO Device management solution combining the power of Intermec ICCU and Wavelink Avalanche Common management platform for ALL Intermec devices Server based management for total control Inventory and full device information centrally available Manage an entire population automatically Distribute updates to everyone at the same time Devices not on the network updated when they connect Give users the option to update later Updated devices in groups, e.g. by function, if desired TCO for mobile users is 50 percent more than for desktops. Mobile management tools, along with best practices, promise significant savings Without automated solutions for managing the remote user, IS organizations must resort to time-consuming, costly work-arounds. - Gartner

37 Intermec: Designed to Lower TCO Intermec account team support Reduce your risk of project success! Sale executive bringing you over 25 years of global mobile deployment experience; help you with building your business case, identifying best practices, introduce you to experienced users. Systems consultant assist with device training on features, discuss logistics and support best practices, hands on help when needed. Developer support for the customer or software partner. Full library including source code samples; technical support from experienced mobile developers.

38 Intermec: Designed to Lower TCO Professional services Highly experienced in mobile deployments Reduces your risk Reduces deployment time without adding additional staff to your project Project management/rollout logistics Education curriculum development Multi-media and hand-on training Installation Logistics Control Center WWAN radio activation Asset management Help desk assistance

39 Intermec: Designed to Lower TCO Medallion services Full spares management program Depot and onsite repair Image/re-image with customer applications and settings Asset tracking and management Disposal/lifecycle management programs

40 Intermec: Designed to Lower TCO Value-added partner relationships Strategic alliances Intel, Microsoft, IBM (Java, Via Voice) ATT, Sprint, Verizon, TMobile, Telus, Bell Mobility, etc High quality, select Honor s partners Committed to partner relationship Intermec channel support team sales and systems consultant Ability to pre-load applications at the factory

41 Intermec: #1 in Field Service Venture Development Corp (VDC) Global Market for Rugged Mobile Computers Intermec #1 Rugged PDA for Field Service, Manufacturing Rugged VMU for Manufacturing Rugged Handheld Computer for Manufacturing Intermec in Top 3 Rugged Handheld Computer for Field Service, Military Rugged Tablet for Field Service Rugged PDA for Military, Distribution, Retail Rugged VMU for Transportation, Distribution Pen Computing EDITOR S CHOICE Best Industrial PDA Best Industrial Tablet PC

42 Extra s The following case study was referenced in the VDC study. While it is a laptop user, it is a good example of the testimony of a seasoned mobile user. Can you guess who it is?

43 TCO case study Large multi-line retailer providing parts and services for home appliances, consumer electronics and home improvement equipment Employs 9500 service technicians and makes over 11 million in-home repairs annually Most recent deployment: Itronix Go-Book with MSR, receipt printer, docking station, Mobitex RF network or b to satellite 500 spares (~5%) Spent $6M in software, much custom with internal resources Implementation and training ~$300 per user Results: Save millions of dollars through wirelessly placing parts orders Increase number of service calls 10-15% as a result of using ruggedized mobile solution Reduce headcount of technical support staff Expects $35M a year in return from increased productivity, reduction in downtime due to computer failures, increase in # of service calls, a reduction in error which allows for faster billing, and overall increase in customer satisfaction levels. Expects to have payback period of two years Expects annualized failure rates of less than 3% During the selection process, the company also evaluate several commercial grade notebook suppliers products, but found that the failure rate would have been prohibitively high. The end user indicated that failure rates were found to be over 100% in those applications in which commercial-grade units were tested by service technicians. Another factor, which precluded the use of commercial-grade notebooks, in addition to extremely high failure rates, was the concern that if the chipsets changed the end user would have to support two or more applications.

44 TCO case study Most important features desired: Ability to withstand shock and vibration since units are primarily docked in the vehicle Ease of use for both the hardware and software and scalable so that they can minimize infrastructure and support costs Units must be reliable since the cost of downtime, both real and intangible, is prohibitive in their increasingly competitive business Units must be able to support multiple wireless networks Vendor must provide high-quality service, support and rapid turnaround for repairs and problems Vendor must walk the talk when it comes to developing and maintaining a real partnership agreement in order to win and/or maintain this customer s business