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1Management Update:

IT Asset Management StagesForm the Stairway to Success

Gartner provides step-by-step advice formoving an IT asset management imple-mentation from the entry level to higherlevels. At higher levels, IT asset manage-ment provides significant financial and

strategic value to the enterprise.

1Management Update: Analyze TCOIssues When Planning PC Disposal

Because the value of IT equipment declinesrapidly, disposing of obsolete and surplusequipment will cost more than you wouldreceive from selling it. Weigh the total costof ownership issues and develop a process

for PC disposal.

12Management Update:

How to Understand the Benefitsof Mobility

Successful mobility is more than thetransmitting of voice and data. It also

depends on how users interact with devicesand how information is processed. Many

enterprise managers are looking for insightson how to articulate mobility’s benefits and

prove its return on investment.

17At Random

(continued on page 2)

InSide Gartner This Week Vol. XIX, No. 37 10 September 2003

(continued on page 8)

Management Update:IT Asset Management StagesForm the Stairway to Success

Gartner provides step-by-step advice for moving an IT asset managementimplementation from the entry level to the higher levels. At higher

levels, IT asset management provides significant financial and strategicvalue to the enterprise.

Making IT Asset Management Programs Successful

Sound strategies, clear requirements and patience make IT asset managementprograms successful. Sustaining positive financial results from IT assetmanagement programs requires process design and appropriate executionby dedicated personnel — whether in-house or from external service provid-ers. There is no such thing as a big, one-time payback from IT asset manage-

Management Update: Analyze TCOIssues When Planning PC Disposal

Because the value of IT equipment declines rapidly, disposing ofobsolete and surplus equipment will cost more than you would receive

from selling it. Weigh the total cost of ownership issues and develop aprocess for PC disposal.

Gartner’s TCO Model Includes Disposal

PC disposal presents unique challenges and potential costs that enterprisesseldom consider. A significant number of retired assets go unnoticed andaccumulate in storage closets and warehouses. Although temporaryelimination is often the most expeditious alternative, it is also the leasteffective and most costly in terms of total cost of ownership (TCO).

When Gartner initiated its TCO research, the costs of PC disposal werelargely recovered in the proceeds received when equipment was sold —

2 Inside Gartner This Week

© 2003 Gartner, Inc. and/or its Affiliates. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has beenobtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissionsor inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. Theopinions expressed herein are subject to change without notice. Comments should be e-mailed to: [email protected].

Management Update:IT Asset Management Stages Form the Stairway to Success (continued from page 1)

ment. It is a series of incrementalsteps or stages that lead to savingsover time. The integration of assetmanagement with other back-endsystems will yield savings but thetrue value is in the holistic view ofthe environment.

Gartner’s business process maturitymodel for IT asset managementshows that many IT asset manage-ment implementations stagnate inthe chaotic and reactionary (lower)levels of this model, and fail to reachmature stages. However, with a cleardefinition of objectives and the rightcombination of people, processesand tools, enterprises can advancetheir IT asset management programsto the next level.

The Gartner IT AssetManagement Maturity Model

Strategic Planning Assumption:Enterprises that systematicallymanage the life cycle of their ITassets will reduce cost per asset by asmuch as 30 percent during the firstyear, and between 5 percent and 10percent annually during the next fiveyears (0.8 probability).

Although IT asset managementprograms have existed for years, fewimplementations can be consideredmature. By understanding theposition of its IS organization in theIT asset management processmaturity model, an enterprise can

better chart its path to higher levelsof maturity, and identify areas toinvest in people, processes andtechnology. As IS organizationsevolve from level to level, each stepwill yield incremental savings andvalue, resulting in lowered costs anddecreased risk.

IT asset management programs canbe broken down into five levels,ranging from chaotic environmentswithout any processes, dedicatedpeople or tools, to mature environ-ments with a set of tools that arefully integrated with back-endsystems, tested processes anddedicated staff. The five levels are:• Level 1: Chaotic — uncontrolled• Level 2: Reactive — limited

accountability• Level 3: Proactive — life cycle

focus• Level 4: Service-Oriented —

service-level management• Level 5: Value Creation — cost

recovery

The majority of enterprises are inLevel 1 or Level 2 (see Figure 1).However, IT-dependent businessprocesses require at least Level 3 ISmanagement process maturity.

Action Item: IS organizations shouldidentify the combinations of people,processes and technologies that willmake it easier and faster to progressto the next level of IT asset manage-ment program maturity.

Addressing Organizational,Process and PersonnelDiscontinuities

Tactical Guideline: Tools automatesupport processes — they do noteliminate them.

The process maturity model repre-sents layers in the evolution of assetmanagement that revolve aroundchanges in personnel management,as well as improvements in pro-cesses and technologies. At eachlevel in the model, organizational,process and personneldiscontinuities must be addressed.Every function — for example,install, move, add and change(IMAC) processes, or procurement —contributes to these discontinuities,and every functional area mustmodify its behavior to reduce andeliminate them.

To support business processes, an ITasset management program mustimprove management of its people,processes and technologies (asreflected in the process maturitymodel). Therefore, enterprises mustfocus on more than just buying anddeploying new technologies. Theymust acknowledge and manage thethree discontinuities — organiza-tional barriers, numbers (processdesign) and politics (personnel).

Action Item: Enterprises that assumeLevel 3 is the highest level they canachieve should revisit their goals

310 September 2003

and objectives and plot a course sothey can reach Level 5.

Level 1: Chaos

Tactical Guideline: Enterprisesmust focus asset managementefforts on collectively implementingprocess, personnel and technologyimprovements to achieve optimaltotal cost of ownership, servicelevels and asset use.

When most IS organizations decideto implement an IT asset manage-ment program, they typically have aspecific problem that needs address-ing. Analyzing this problem led themto identify the need for a way to trackIT assets. These IS organizations areat Level 1 in the maturity model.Approximately 30 percent of enter-prises are in the chaotic environment

Figure 1Gartner’s Estimate of Asset Management Penetration by Process Maturity Level

of Level 1, which is characterizedby the following:• Immature processes and inad-

equate tools to track or manageassets

• An IS organization that rarelyknows what assets it owns,where these assets are physi-cally located and who is usingthem

• Unused hardware assets that sitin storage rooms, with nocontrol mechanisms or account-ability

• Multiple technicians with theability to access the assetinventory and make unrecordedchanges to it

• Lack of a centralized purchas-ing or negotiation team; instead,the enterprise lets businessunits or local offices purchaseassets on an ad-hoc basis

• Untracked IT contracts that typicallysit in filing cabinets

• No systems to track the intellectualcapital and negotiation strategiesassociated with acquisition

• Lack of sound operations manage-ment practices

• Ineffective planning for all life cycleaspects of IT asset management

• Unpredictable service, support andcosts

Enterprises at Level 1 also tend to havesimple goals for their IT asset manage-ment programs, such as:• Desiring only a basic IT asset

inventory, most likely in response toa specific problem, so that the effortis project-driven

• Viewing IT asset management as aone-time activity, not a continuousbusiness process

Source: Gartner Process Maturity Level

ITAsset

ManagementProcessMarket

Penetration

40

30

20

10

ChaoticLevel 1

ReactiveLevel 2

ProactiveLevel 3

Service-OrientedLevel 4

Value CreationLevel 5

50%


Level 2: Reactive

When IT processes mature to areactive state, the enterprise hasreached Level 2 of the maturitymodel. This stage, in which the ITasset management program focuseson counting assets, is characterizedby the following:• IS organizations create spread-

sheets or a database to help trackassets.

• Annual physical inventoriesidentify and catalog all PCequipment.

• Autodiscovery tools supplementinventory data, but linkages areweak.

• Inconsistently followed IMACprocesses reduce the accuracy ofinventory data.

• Reports are basic, lack detail andusually aggregate assets, makingit difficult to identify and resolveproblems.

• Inventories typically run on aproject-by-project basis (forexample, impending migration orsoftware license audit) instead ofbeing regularly scheduled.

• Software and hardware areusually treated as separate assetsrather than being viewed as asingle complex IT asset.

• Ownership of asset trackingprocesses resides within the ISorganization, usually at the Tier 2level of the help desk.

• Linking and sharing of data withthe purchasing department occurssporadically.

Many IS organizations that haveundergone merger-and-acquisition

activity fit within this level becausethey tend to have multiple overlap-ping tools without centralizedoversight or governance. Gartnerestimates that approximately 45percent of IS organizations are atLevel 2.

Enterprises at Level 2 tend to havethe following goals for their IT assetmanagement programs:• Complete an annual physical

inventory of hardware assets• Use autodiscovery technology to

help reconcile data• Determine process gaps through

periodic spot audits• Generate reports as required

Level 3: Proactive

Tactical Guideline: Enterprisesshould establish and maintaindiscipline, and measure and reportfrequently.

As enterprises move into Level 3 ofthe maturity model, they move intoproactive management. This stage —in which processes are implementedto manage the assets throughout thelife cycle, from requisition to deploy-ment to retirement — is characterizedby the following:• Inventory data is linked with

financial and contractual data tocreate a centralized view, in an ITasset management repository, ofhow the asset is performingwithin the enterprise.

• Repository and autodiscoverytools are integrated with the ITservice desk to provide on-demand inventories and fasterTier 2 problem resolution

• A cross-functional team assessesthe requirements of the differentdepartments affected by the ITasset management program

• Processes are well-defined,adhered to, reviewed and re-engineered when necessary

• A director-level position — anasset manager with reportingresponsibility to the IS andfinance organizations — leads theIT asset management implementa-tion team

• Senior management sponsorsactivities for the IT asset manage-ment implementation

• Life cycle management processesare developed, beginning withpoint of requisition throughretirement

Gartner estimates that 20 percent ofenterprises are at Level 3.

Enterprises at Level 3 tend to havethe following goals for their IT assetmanagement programs:• Form cross-functional teams for

major projects• Develop and maintain an opera-

tions manual• Follow repeatable processes for all

new IT asset management projects• Create asset taxonomy for tracking• Gather data to feed preparation

for Level 4

IT Asset Management Tools

Tactical Guideline: IT asset man-agement tools alone do not guaran-tee a program’s ease or success.Enterprises also need guidelinesand policies for the management oftheir assets.

Management Update:IT Asset Management Stages Form the Stairway to Success (continued)

510 September 2003

Significant confusion exists regard-ing the term “asset management,”especially from an IT context.Vendors have added to the confusionby using asset management todescribe autodiscovery and inven-tory functions, rather than thecomplete functionality of an IT assetmanagement repository.

An IT asset management repositorycontains the three primary attributesof IT asset management — physical,financial and contractual. Capturingand integrating physical, financialand contractual data supports thefunctions needed to manage IT assetseffectively and optimize their perfor-mance. Enterprises can then managethe life cycle of these assets to cutcosts, reduce liability exposure,improve software compliance andbetter match use with contract terms.

Software tools help enterprisesautomate the implementation of anIT asset management program whilealso providing valuable data aboutall managed IT assets. Althoughthese tools don’t eliminate the needfor manual intervention, they canhelp reduce the need for it.

Enterprises can gain some value byimplementing each tool individually.However, enterprises will realize themost value from integrating toolsand processes over time. IT assetmanagement tools in and of them-selves won’t solve all enterpriseissues related to asset management.Tools will automate — but can’treplace — the processes that supportan IT asset management program.

Developing an IT Asset Man-agement Operations Manual

Tactical Guideline: Because IT assetmanagement is an iterative process,enterprises need to documentprocesses, and then review andrevamp them periodically to ensurethat the program meets changingbusiness requirements.

Enterprises that have reached Level 3in the maturity model will have well-defined processes (with accountabil-ity) that detail the practical applica-tion of the people, processes andtools that support the IT assetmanagement program.

A well-written operations manualsummarizes the scope of an IT assetmanagement program and includesthe policies, guidelines, standardsand processes needed to implementand maintain an asset managementstrategy effectively. It also records theguidelines, procedures and expecta-tions set by the IS organization, andcan be an effective tool for trainingand transitioning new leaders.

When developing an operationsmanual, enterprises need to:• Establish objectives and time

frames• Set roles, responsibilities and

accountability• Develop an IT asset management

team organization chart• Define the terminology• Document all corporate policies

that impact IT asset usage• Include company forms• Document processes for all stages

of the IT asset life cycle

• Document the standards andexceptions process

• Provide a list of approved vendorsfor various types of IT assets

To ensure that processes are under-stood and regularly adhered to,enterprises should identify keyparticipants and business processes.Capturing and documenting theprocesses in an operations manualguarantees that new and old employ-ees in the IS organization knowabout the processes and will adhereto them. Having a point of referencefor processes helps ensure that theyare closely followed. Without thatadherence, data accuracy becomesquestionable, which in turn nega-tively affects the decisions madebased on that questionable data.

Action Item: Enterprises shouldestablish responsibility and ac-countability for each identifiedprocess, and campaign toward agoal of streamlining processeswhen feasible.

Level 4: Service-Oriented

Tactical Guideline: IS organiza-tions that implement servicereporting as a collection of metricswill not realize the full benefits ofthe approach until they link thosemetrics with customer satisfaction.

Gartner estimates that 5 percent ofenterprises with a distributed, hetero-geneous IT environment are at Level 4in the maturity model. This stage ischaracterized by the following:• Established metrics measure the IT

asset management program’s value.


• Service levels are created to meetbroader business or IT goals (forexample, lower total cost ofownership).

• Reports are run frequently.• Each month, the asset manage-

ment team identifies and commu-nicates opportunities for savingsto the business units.

• Requisition processes are auto-mated and integrated withpurchasing and enterpriseresource planning (ERP) systems,enabling faster procurement aswell as efficient order trackingand invoice reconciliation.

• Inventory levels are tracked tomaintain low-cost inventory levelsas well as prevent the overbuyingof hardware and software.

• In addition to software, trackedassets usually include PCs,servers, networking equipmentand telecommunications; thatinformation is housed in acommon repository.

• Assets are retired and disposed ofaccording to a technology replace-ment plan.

• IT asset management team staffinghas stayed constant or grown tofulfill service demands.

Enterprises at Level 4 tend to havethe following goals for their IT assetmanagement programs:• Using service-level metrics as a

basis for planning• Continual verification that service

is delivered according to plan• Periodic review of service delivery

with business units and seniormanagement

• Routine and managed communi-cation about service delivery

Performance Metrics

Tactical Guideline: Defining IT assetmanagement service levels will helpasset managers clearly articulate thevalue IT asset management canreturn to business units.

As IT budgets face increased scru-tiny, an IS organization must im-prove the operational efficiency of itsIT assets. Many IS organizationstherefore turn to IT asset manage-ment programs to provide this data.

But without a clear set of perfor-mance measures and correlation ofthis measurement data back tobusiness objectives, the program’svalue can’t be measured accurately.These metrics illustrate how theprogram is performing, identify newopportunities for increased savingsand provide valuable insight into avendor’s performance.

Ideally, an IS organization shoulddetermine its metrics before launch-ing an IT asset management pro-gram. That way the IS organizationcan compare performance againstthe expected return on investmentand planned time frames (such aswhen a break-even point is reached).However, it is never too late toimplement performance metrics. Theonly critical mistake would be tonever create performance metrics.

Furthermore, performance measuresof the IT asset management programmust closely align with businessgoals — and be analyzed in thecontext of these business goals.Because IT asset management is not

a one-size-fits-all program, enter-prises must develop metrics that arespecific to their business goals.

Action Item: To create a meaningfulset of IT asset management perfor-mance indicators that can measureasset optimization and efficiency,adopt an approach that tracks anasset throughout its life cycle, fromreceipt to disposal.

Level 5: Value Creation

Strategic Planning Assumption:Through 2010, 80 percent of enter-prises that demonstrate businessvalue from their IT asset manage-ment programs will sustain success-ful initiatives (0.7 probability).

Even though IT asset managementhas existed for many years, fewenterprises have reached Level 5 inthe maturity model. Without assis-tance from vendors to drive contin-ued program maturity, customerswill stagnate at Level 4 in the model.

Level 5 is characterized by thefollowing:• The enterprise has implemented

all three tools of a mature IT assetmanagement program (repository,autodiscovery and software usagemonitoring).

• Seamless integration has beenachieved with strategic systems(for example, human resources,accounts payable and receivable,general ledger, ERP, purchasing,network and systems manage-ment, configuration management,IT service desk, and problem andchange management tools).

Management Update:IT Asset Management Stages Form the Stairway to Success (continued)

710 September 2003

• Business units are charged backfor computing resources.

• Total cost-of-ownership metricsare linked with IT asset manage-ment metrics.

• Data from management andbusiness applications are used toaudit business process efficiency(for example, employee productiv-ity and cost) and effectiveness (forexample, customer satisfaction)across all assets in the enterprise.

• IT cost recovery encompasses abroader range of user require-ments and sophistication levels,with usage-based pricing models(for example, standard service andpremium service).

• An asset management groupmanages the infrastructure of allenterprise workplace assets andprovides easily quantifiablemonetary value to the enterprise.

• Vendors and contracts are stan-dardized and well-managed.

• Contract and license complianceis no longer an issue.

• Systems are managed for optimaluse.

• Continual improvements feedback into the process.

• IT asset management data is usedto prevent problems.

• Metrics are revised to reflectprocess improvements.

• IT asset management is a corebusiness process that enablesbusiness operation.

Interpreting Business Data

Tactical Guideline: Decision sup-port frameworks, when coupled withthe use of business analytics tools,

will improve the effectiveness ofbusiness operations.

Vendors of IT asset management toolstry to outdo each other with thenumber of prepackaged reports theyoffer, as well as their ability to custom-ize or create reports if the preinstalledones do not meet the IS organization’sneeds. However, an unlimited supplyof available reporting options will nothelp an asset management teamunderstand and interpret what all thegathered data means.

The data must be analyzed in thecontext of how it supports the busi-ness and IT objectives. Today, datasupport basic reporting functionality,such as counting assets and assessingmigration requirements. For IS organi-zations to move to Level 5, the datamust support cost recovery. Assetallocation, use and trending datatargeted to specific constituencies willensure that business planners andsupport teams have access to thedifferent data sets that support theirjob functions.

Using a combination of decisionsupport and business analyticsframeworks and tools, enterprisescan tightly link IT spending withbusiness impact. Recognizing thatcustomers cannot move to this levelof analytics without assistance, somevendors are moving early to addressthis budding market requirement.

Recommendations

• Define goals, objectives and timeframes for IT asset management

assessment and implementation.• Develop metrics to measure the

effectiveness of the expandingsphere of the initiative anddocument the results.

• Identify tactical bottlenecks,resolve problems and continue toaddress the bottlenecks that aredelaying the move toward processmaturity.

• Realize that continuous IT processimprovement will lead to costsavings and asset effectiveness.

Written by Edward Younker,Research ProductsAnalytical source: Patricia Adams,Gartner Research

This article is an excerpt of a chapterfrom a new report, “Winning AssetManagement Strategies.” The report isan offering of the Gartner ExecutiveReport Series, a new business venture ofGartner Press that provides buyers withcomprehensive guides to today’s hottestIT topics. For information about buyingthe report or others in the ExecutiveReport Series, go to www.gartner.com/executivereports.

For related Inside Gartner articles, see:• “Management Update: Ten Major IT

Asset Issues Managers Should Ad-dress,” (IGG-08272003-02)

• “Management Update: IT AssetManagement Is Mandatory, NotOptional,” (IGG-08202003-01)

• “Management Update: Asset ManagersShould Assess How Their IT SpendingStacks Up,” (IGG-08132003-01)

• “CIO Update: To Control TCO, It MustBe Measured and Managed,” (IGG-04162003-02)

• “Management Update: Five Sure Waysto Reduce IT Asset Costs,” (IGG-03262003-04)


Management Update:Analyze TCO Issues When Planning PC Disposal (continued from page 1)

to employees, brokers oroutsourcers. Increasingly, however,as enterprises extend the life cyclesof their PCs, the sale proceeds arefar less than the actual costsassociated with disposal. As aresult, Gartner has expanded itsbase TCO model to include dis-posal as a separate line item.

When evaluating the costs of variousdisposal options, three factorsshould be considered:• The per-PC costs• The administrative overhead costs

associated with the disposalmethod selected

• The legal and economic risks tothe enterprise for improperlydisposing of PCs

Per-PC Costs

The costs to dispose of PCs (seeFigure 2) include those associatedwith:• Disconnecting the computer from

the network and printers• Staging equipment• Backing up and sanitizing the

hard drives• In some cases, reloading the

operating system, testing theequipment and processingpayments

• Administrative paperwork• Packing• Shipping and handling

Those costs are estimates only andare offered as an aid to develop yourown analysis.

Administrative Overhead

The second part of a disposal costanalysis includes administrativeoverhead (see Figure 3). Those costswill vary based on the disposalmethod selected. The costs arespread over the number of PCs to bedisposed and can occur one timeonly or reoccur each time a surplusof PCs builds up.• For example, if donating PCs is

the disposal method of choice, youcould partner with one largecharitable organization to take allsurplus PCs. The one-time cost toset up the arrangement couldconsume 20 to 40 hours of labor.

• Conversely, if you are donatingPCs to local or smaller organiza-tions that have limited PC needs,it may take weeks to find homesfor large quantities of PCs.

To evaluate the administrativeoverhead costs, it is necessary toreview the issues involved with eachmethod of disposal.

Charitable Donation

Charitable donations are a popularmethod of disposing of PCs; how-ever, charitable organizations aremore discerning about which PCsthey will accept. The main reason forthat is the cost of maintenance. Also,when an enterprise removes theproprietary data using an overwritesoftware tool, the tool writes over theoperating system software in addi-tion to the sensitive data. As a result,the recipient charitable organizationreceives what is known as a “naked”

PC and will not be able to use thedonated system. That creates aproblem for the charitable organiza-tion as well as the enterprise if the“donated” machine is deemedworthless and disposed of inappro-priately. Therefore, when donating aPC to a charitable organization, youare required to reload the operatingsystem according to the underlyinglicense agreement so that the systemscan legally be used.

Employee Sale

Many enterprises elect to sell or givesurplus PCs to their employees.Pricing for the sale of the equipmentis time consuming and must becarefully coordinated. PCs must bepriced low enough to warrantinterest among employees, but highenough to cover most of the costsassociated with the sale. Finding thatbalance will become increasinglydifficult, because of the rapidlyfalling prices of new consumer PCsand the penetration of computersinto the home.

Also, the use of employee purchaseprograms, primarily in Europe, hascaused a lessened demand for usedPCs. In addition, although theoriginal warranty may have expired,the employee may require technicalsupport and will look to the em-ployer to provide that support. Evenif you explicitly state that no follow-on support will be provided toemployees, it will be expected — notjust today, but for as long as theyown the PC and are still working forthe company.

910 September 2003

Figure 2Estimated Per-PC Costs of Various Disposal Options

LaborRate Time

EmployeeSale

CharitableDonation

BrokeredSale orAuction

TotalDestruction Trade-In Outsource

Per PCAdministrative Tasks:Including filling out formsand updating inventory(assumes online inventory;if manual, add additionaltime).

$ 50 0.50 $ 25.00 $ 25.00 $ 25.00 $ 25.00 $ 25.00 $ 25.00

Staging Equipment(removing from desktop)

$ 35 0.25 $ 8.75 $ 8.75 $ 8.75 $ 8.75 $ 8.75 $ 8.75

Backing Up Hard Drive $ 50 0.25 $ 12.50 $ 12.50 $ 12.50 $ 12.50 $ 12.50 $ 12.50Sanitize Hard Drive $ 50 0.25 $ 12.50 $ 12.50 $ 12.50 $ 12.50Reload Operating System $ 35 0.25 $ 8.75 $ 8.75 $ 8.75 $ 8.75Testing PC $ 50 0.25 $ 12.50 $ 12.50 $ 12.50 $ 12.50Providing Follow-onTechnical Support

$ 50 0.50 $ 25.00

Processing Payments $ 35 0.25 $ 8.75 $ - $ 8.75 $ -Prepare TransferDocuments

$ 50 0.25 $ 12.50 $ 12.50 $ 12.50 $ 12.50 $ 12.50 $ 12.50

Disposal Fee (includesshipping)

$ - $ - $ - $ 30.00

Packing $ 35 0.13 $ 4.38 $ 4.38 $ 4.38 $ 4.38 $ 4.38

Shipping (1) $ 30.00 $ 30.00 $ 30.00 $ 30.00 $ 30.00

Outsourcing Fee (2) $ 60.00

Total $ 160.63 $ 126.88 $ 135.63 $ 93.13 $ 126.88 $ 148.75

Less Sale Proceeds (3) $ 25.00 $ - $ 30.00 $ - $ 42.00 $ 42.00

Per-PC costs (do notinclude the additionaladministrative overheadcosts contained in Table 2or end-user downtime thatis captured whendeploying new PC figures)

$ 135.63 $ 126.88 $ 105.63 $ 93.13 $ 84.88 $ 106.75

(1) Shipping charges will vary based on ultimate destination and whether PCs are individually packed or palletized.

(2) Fees vary based on the basket of services selected and the pricing methodology of the outsourcer.

(3) Sale proceeds will vary based on the quantity, method, vintage and condition of the equipment being sold. Forillustration purposes, we assumed that PCs were disposed of in year 3 where resale value is approximately 3 percentto 5 percent of the original equipment cost. For machines disposed of in year 4 or later, sale proceeds would be zero.

Source: Gartner Research (August 2003)

s


Management Update:Analyze TCO Issues When Planning PC Disposal (continued)

Brokered Sale or Auction

Some enterprises believe that theycan get the best price for surplus PCsby selling them themselves throughan auction or by brokering a sale. Itis important to understand thecomplex nature of the administrative,logistics and record-keeping require-

ments for the sale, as well as theuncertainly of the outcome. It is alsoessential to understand where thatequipment goes after it is sold. Apotential contingent liability exists ifthe purchaser of the equipment laterdisposes of it illegally and it is tracedback to the selling enterprise.

Trade-In

Trade-ins are becoming more com-mon as enterprises realize thesignificant opportunity they have inlinking the disposal of surplus PCswith the purchase of new PCs.Original equipment manufacturershave some targeted offerings for the

Figure 3Estimated Additional Overhead of Various Disposal Options

EmployeeSale

CharitableDonation

BrokeredSale orAuction

TotalDestruction

Trade-In Outsource

Plus additional costs spread overthe number of PCs beingdisposed

Hosting sale: Assigning prices,staging equipment in a sales area(or setting up and maintaining anintranet Web site) and answeringemployee questions

six to 20hours

Finding a charitable organizationthat wants and can use PCs

20 to 40hours

Locating brokers that will acceptall or certain quantities, or puttingequipment up for auction on aWeb site

10 to 40hours

Finding and contracting with areputable supplier

five to 20hours

five to 20hours

Selecting a supplier at the time ofprocurement; accordingly, thiscost will occur only during theterm of the procurement contract

two hours

(1) These costs should be added to the numbers above in the other figure ("Estimated Per-PC Costs ofVarious Dispersal Options"). They should also be spread over the number of PCs being disposed of andcan occur on a one-time basis or could reoccur each time surplus builds up.

Source: Gartner Research (August 2003)

O

1110 September 2003

disposal of surplus PCs, rangingfrom fixed-fee trade-ins and consign-ment sharing to “we’ll just haul itaway for free.” Some will also donateequipment to charity on your behalf.

Trade-ins are often the most cost-effective method and can be used asa negotiating point when purchas-ing new hardware. Understand,however, that you will still have toperform all of the labor tasksassociated with disposal. If, how-ever, you are not purchasing newPCs for some time, do not let thesurplus PCs sit idle until that time— pick another option.

Outsource

Outsourcing disposal tasks isanother popular method. Theoutsourcer will collect, inventory anddocument surplus equipment;eliminate confidential or sensitivedata on software; and perform all ofthe packing and removal functions.Some will even host an employee PCsale or charitable contributionprogram. Each service provider hasdifferent capabilities, offerings andpricing structures, so selectionshould be based on enterpriserequirements vs. an outsourcer’scapabilities and pricing structure.Again, careful evaluation criteriashould be used when selecting aprovider to ensure that the supplierselected can do what it says it will do.

Total Destruction

Finally, for PCs beyond four yearsold, or for those that are brokenbeyond repair or contain proprietary

data that is overly sensitive, totaldestruction may be the most cost-effective option.

Legal and Economic Risks

Ultimately, the most expensive costassociated with PC disposal is the costfor failure to dispose of PCs (and thedata residing on the drives) appropri-ately. Many enterprises have paid theprice in terms of additional cost,regulatory fines, bad publicity andeven litigation when PCs turned up inlandfills or third-world countries, orwhen confidential or sensitive datawas recovered from hard drives thatwere not appropriately sanitized.Nowhere does it say that if youdispose of a PC in an “environmen-tally unsafe manner” that you will becharged a certain amount of moneyper PC, but some enterprises claim thatthey have paid as much as $200,000 infines. Other enterprises have reportedthat they had to pay again when thedisposal providers they partneredwith collected their payment and thendumped the equipment. Enterprisesmust clearly understand and carefullyassess disposal alternatives againstcorporate tolerance for risk.

Recommendations

When selecting a disposal method,recognize that two areas must beaddressed:• The old stuff in the closet or

warehouse• On an ongoing basis, installed

equipment that will be removedfrom service as technology isrefreshed

In addition, PCs are removed fromservice every day for various reasons,such as physical failure, inability torun new applications or operatingsystems, and corporate downsizing.Therefore, each of these reasons willlikely dictate a different disposalpath (such as donation, remarket ortotal destruction).

For older or broken equipment,enterprises should investigatewhether the costs associated withdisposal and the secure sanitiza-tion of hard drives will exceed theproceeds from selling the equip-ment. If so, they should look at totaldestruction as the primary optionfor disposal.

A number of new and pendingregulations will have an impact onthe costs and processes associatedwith PC disposal. Most notably, theWaste Electrical and ElectronicEquipment directive, which wasdeveloped to bring some common-ality to European Union membercountry requirements on electronicwaste collection and recycling,requires electronic manufacturersto cover the cost of recyclingproducts at their end of life. Thedirective is schedule to take effectin August 2005.

In the United States, no nationalmandates exist for the disposal ofPCs, but 50 pieces of legislation arepending in 24 states, and most ofthem are different. Some of thelegislation suggests that a recyclingfee be paid when a new PC ispurchased. Other legislation stipu-lates a fee at the end of a PC’s life.


Management Update:How to Understand the Benefits of Mobility

Although it is unclear what theoutcome will be on any of theproposed and new legislation, thecost of recycling will clearly bepassed on to consumers in the formof higher prices.

Bottom Line

• Implementing a systematicapproach for surplus and obsoleteIT equipment — especially PCs —is one of those problems thateventually must be tackled.

• PC equipment retirements willcontinue to grow as enterprisesrefresh aging technology, causinga problem previously handled in

an ad hoc manner to become largeenough that it must be addressed.

• The challenge is to considerequipment disposal and sales anecessary and ongoing part ofday-to-day operations.

• Little economic value remains inmost machines that are more thanthree years old; however, enter-prises face legal and economicrisks for improperly disposing ofmachines.

• Protecting the enterprise from riskvs. capturing economic opportu-nity should be the main driver forformalizing a process for thedisposal of PC equipment.

Written by Edward Younker,Research ProductsAnalytical source: Frances O’Brien,Gartner Research



• “Management Update: Total Cost ofOwnership Analysis Provides ManyBenefits,” (IGG-08272003-01)





Successful mobility is more thanthe transmitting of voice and

data. It also depends on how usersinteract with devices and howinformation is processed. Manyenterprise managers are looking forinsights on how to articulatemobility’s benefits and prove itsreturn on investment.

Hard and Soft Benefits

Strategic Planning Assumption:Through 2004, 75 percent of enter-prises that implement mobile accessto applications will fail to articulatemobility’s quantitative and qualita-tive benefits, and will be unable toprove ROI (0.7 probability).

All too often, the benefits of mobilityare not adequately articulated. Partof the reason for this is that, depend-ing on vertical or horizontal applica-tion, the benefits are different foreach user, market and industry.Benefits are often clumped in a singlecategory such as “increased produc-tivity.” However, benefits must bedefined by each application for eachuser individually —no genericbenefit model exists.

For “hard” benefits, the main benefitcategories boil down to increasingrevenue or decreasing cost. Theseinclude productivity enhancements,and improving accuracy and effi-

ciencies (for example, decreasingpaperwork or the time to get informa-tion). Many of these hard benefits aremeasurable and quantitative.

The model also includes “soft”benefits, which may have highvalue, but aren’t measurable interms of hard return. This categorymay include responsiveness oremployee satisfaction.

Action Item: Gather a team by eachline of business to identify wherereal-time information can provideopportunities to increase revenue ordecrease costs — user input isessential here.

Management Update:Analyze TCO Issues When Planning PC Disposal (continued)

1310 September 2003

Case Study: A Mobile Implemen-tation Cost/Benefit Analysis

In an effort to better articulate themethods of developing an ROImodel, this case study looks at a six-month pilot of a mobile implementa-tion by a large national retailer. Itidentified six main areas in whichmobile and local wireless technologycould impact its business (see Figure4). For each area, it defined quantita-tive expectations from the use of thetechnology.

For example, in its warehouse, whereit routinely fills large trucks forregional deliveries to its retail stores,pickers fill orders that have been

The goal was a savings of 5 percentto 15 percent. For this case study,however, only wide-area mobileapplications were assessed. Theseinclude applications for mobileexecutives (for messaging), mobilesales (sales force automation),distribution (truck deliveries) andmobile inspectors who rate eachstore.

Moving from quantity to quality, theretailer wanted to identify “painpoints” where mobile and wirelesstechnology could help it achievehard and soft benefits (see Figure 5).Looking at its business processes, itcould select where additionalinformation in the field would help.

placed. The company felt that byimplementing wireless LAN technol-ogy, it could better track inventorylevels (and thus reduce the chance ofitems being out of stock) and increasethe efficiency of filling orders. Thiswould impact the company in fourways:• By filling orders faster, it could keep

more trucks making deliveries.• It could fill more trucks with fewer

personnel.• The trucks could be filled more

accurately, with fewer mistakes.• It would reduce the number of out-

of-stock items, which wouldincrease sales opportunities.

g Reduce costs by 5 percent to 15 percent

g Lower device costsg Increase communication capability

g Increase sales calls and proposals bytwo to four per week

g Improve number of stops by 50 percentg Increase related revenue by 15 percent

g Add in-store point-of-sale terminals

g Increase from 10 per week to 12

Warehouse

Mobile Executive

Mobile Sales

Distribution

In-Store Personnel

Inspectors

• Large, national retailer

• Six-month pilot, 55 users

• Minimal current use of wireless data technology

• Looking to improve processes in six main areas:

Source: Gartner

c

Figure 4Case Study — Wireless Benefits Scenario


For example, the company is assess-ing a remote calendaring andscheduling application for its mobilesales force to use. If the applicationwere integrated into the company’scustomer relationship managementsystem, a remote user would be ableto get appointment changes “on thefly” as the inside-sales operativescheduled them, allowing thecompany to potentially increase thenumber of customer visits it couldmake each week. This, in turn, wouldallow it to increase the number ofproposals and sales it had. Also,sales operatives could retrieveinformation about each clientremotely (for example, contact, saleshistory and special requests) as wellas each prospect.

Management Update:How to Understand the Benefits of Mobility (continued)

The company knew that by specify-ing the historical sales informationto stores, they would be betterstocked and there would be less“emergency” shipments, whichwere costly to the company toadminister on an ad hoc basis.

Benefits were derived qualitativelyfrom users and administrators, aswell as quantitatively from matchingsales and company records from theprevious two quarters. Looking ateach mobile implementation for sixmonths, by adding cost savings andrevenue increases, this implementa-tion of 55 users should provide ahard benefit of almost $500,000 (seeFigure 6). Soft benefits (from themobile messaging application) also

were incurred, but they could not bequantified adequately.

The capital costs for hardware,software and services were mea-sured, as well as internal costs(staffing) and external (consulting).Finally, support costs for a six-monthterm were measured.

ROI could not be achieved duringthis six-month time frame; however,the retailer anticipates that, ascapital costs decrease, enoughbenefits could be measured in a 12-month time frame to prove ROI.Service and support costs wouldcontinue, but other costs are fixedand the implementation is scalable tomore users, for a higher return.

Warehouse MobileExecutive

MobileSales

DistributionIn-Store

PersonnelInspectors

Identifying the Benefits

Improve accuracy and speed; decrease inventory and personnel

Increase number of stops per week, routing, emergencies

Provide mobile POS terminals for busy times, inventory tracking

Increase number of visits per week, reduce paperwork

Increase sales calls, proposals and revenue

Provide access to corporate applications: e-mail and intranet

Source: Gartner POS point of sale

Figure 5Case Study — Evaluating the Mobile Chain

1510 September 2003

Action Item: Identify your owncompany needs to identify opportu-nities that would decrease costs aswell as drive revenue — but ac-knowledge that these will differ bycompany, application and industry.

Implementation Lessons

Tactical Guideline: Mobility, not justwireless access, represents the nextmajor business and technicaldiscontinuity large enterprises are

Figure 6Case Study — Cost/Benefit Analysis

facing. While the PC and Internetrevolutionized communicationssystem types, mobility will revolu-tionize information flow.

Lessons learned from an implemen-tation are a key part of the solutionprocess. The final step in theprocess is an assessment that willhelp tighten procedures for thefinal rollout, identify any user ortechnology issues that need rectify-

ing, and prepare the pilot to scaleto a larger audience.

“Going mobile” means navigatingan abyss of many work-in-progresstechnologies. Examples of lessons tobe learned from a pilot projectinclude:• Customization for integration to

legacy systems is always needed.• Expect the project to take 15

percent more time and moneythan anticipated.

Total Benefits Total Costs

Application BenefitApproximateQuantitative

Mobile Office Intent was to cut out the use ofnotebook computers for someusers, but most found they stillneeded notebooks on the road;responsiveness increased, butnot by a measurable amount --

Sales Increased number ofproposals by three each week,improved accuracy, salesincreased by about 2.5 percent $370,000

Distribution Improved the number of stopsby an average of 60 percent,which helped fuel sales, moreinventory at store $100,000

Inspectors Increased number of stops to 12and also increased accuracy ofdata and timeliness; reducedpaperwork costs $17,000

Total $487,000

Cost/Unit Total

Hardware25 mobile office $300 $7,50010 inspectors 750 7,50010 distributors 6,500 65,00010 sales 750 7,500Total 87,500

SoftwareWAG $150,000

Network ServicesCDPD $50 $9,000Mobitex 50 10,500ServicesExternal 200,000Internal 60,000Total 429,500

Six-Month TCORIM $1,611 $20,138

Notebook 11,602 58,010Total 103,068

Total Costs $620,068

iPAQ 2,492 24,920

CDPD cellular digital packet dataRIM Research In MotionTCO total cost of ownershipWAG wireless application gatewaySource: Gartner


• Benchmark current systems andset reasonable goals.

• Training is important for alaunch.

• The pilot is of primary impor-tance; plan small launches forlater.

• Don’t expect payback from allapplications; some may providemore value on investment (VOI)than ROI, especially messaging.

Although most of the market hypehas been focused on device mobility(that is, cellular phones, Blackberry’sPDAs and wireless modems forlaptops) and wireless network accesstechnologies, Gartner believes theseare not the major issues. More thananything else, a mobile worldrequires investments in a number oftechnologies that must interactwith each other and be compatible.Hardware, software and networksneed to work together to provide aneffective mobile solution. Thesolution must be tightly integratedand transparent.

Action Item: Before you get started,prepare your wireless implementa-tion and requirements plan to beused as a technology guide, budget-ing document and a tool to measureROI.

Achieving Tactical andStrategic Value on Investment

Tactical Guideline: High VOI will begained through enterprise perfor-mance initiatives that drive shared

decision making, employee interac-tions, employee communities andother enterprisewide collaboration.

Enterprise-level initiatives buildcompetitiveness in the enterprise.These initiatives pair informationaccess with broad collaboration.When collaboration processes arewell-designed and well-supportedwith technology, enterprise activitiesare coordinated, and strong collabo-rative networks will form.

Tactical VOI is achieved through:• Gains in the speed of decision

making, project startup anddelivery

• Consistency and “doing it right”the first time

• Easing access to people andexpertise

• Avoiding duplication of effort andrepeated mistakes

Additionally, collaboration andinformation access help increaseknowledge transfer and organiza-tional competency. It also easesaccess to people and expertise.Finally, the continual capture ofemployee knowledge in an explicitform will enable the enterprise tooffer customer self-service throughaccess to this knowledge.

Strategic VOI is developed throughcollaboration and organic innova-tion, which drive reaction time downand speed time to market. Theaddition of customer self-service willincrease customer feedback, which is

a strategic asset. Next, the expansionof networks and relationships willalso expand value. Finally, easingemployee access to job resources andproviding innovation opportunitieswill increase satisfaction levels.

Recommendations

• To specify the hard and softbenefits of mobility, establishteams — from each line of busi-ness — to identify where real-timeinformation can provide opportu-nities to increase revenue ordecrease costs, as well as othersoft benefits.

• Before starting to implement amobility initiative, prepare awireless implementation andrequirements plan to be used as atechnology guide, budgetingdocument and a tool to measureROI.

Written by Edward Younker,Research ProductsAnalytical source: Phillip Redman,Gartner Research

This article is an excerpt of a chapterfrom a new report, “Winning AssetManagement Strategies.” The report isan offering of the Gartner ExecutiveReport Series, a new business venture ofGartner Press that provides buyers withcomprehensive guides to today’s hottestIT topics. For information about buyingthe report or others in the ExecutiveReport Series, go to www.gartner.com/executivereports.

Management Update:How to Understand the Benefits of Mobility (continued)

1710 September 2003

At Random

Make Windows Updates Automatic for Consumers, but Only for Security. On 19 August 2003, published reportsquoted senior Microsoft executives as saying that the company is considering making software updates auto-matic when the Windows operating system is used on consumer desktops. The possible move would make the“auto-update” feature — which enables Windows to download security patches without specific approval fromthe user — a default setting.

The proposal to make Windows security updates automatic for consumers’ PCs could help protect the averageuser, who typically lacks the time and IT knowledge to keep up with the seemingly endless stream of Microsoftvulnerabilities and related patches. The recent MSBlaster attack — specifically targeted at Windows XP, whichis widely used by consumers — shows that consumers urgently need help securing their systems. But automaticupdates will be an acceptable response only if Microsoft agrees to a rigorous set of ethical and technical stan-dards. Before making auto-update the default setting for consumers, Microsoft must explicitly state that, withoutformal customer opt-in, it will never:

• Use this functionality for any purpose other than delivering security updates• Use this mechanism to force new functionality or licensing terms, except as a requirement to maintain

security

In addition, Microsoft must:

• Change the wording of its end-user licensing agreement for auto-update, so that it is more specific andmore restrictive concerning the methods used to collect information and the types of information that canbe collected

• Allow an extensive security review of the auto-update mechanism by outside parties, because a compro-mise of this comparatively new feature could have catastrophic results

• Continue to improve the quality of its security patches and the auto-update process (in particular, byproviding users with understandable and actionable information, especially when patches are applied outof sequence)



• “Management Update: Total Cost ofOwnership Analysis Provides ManyBenefits,” (IGG-08272003-01)






At Random (continued)

Enterprises, which face different configuration-management challenges, should not use auto-update. Theyshould instead evaluate Microsoft’s Software Update Services Server and other configuration and patch man-agement products that allow IT operations to control the patch process.

Analytical sources: John Pescatore and John Girard, Gartner Research

Blackout Illuminates Vulnerabilities of the Telephone System. On 14 August 2003, wireless and wireline carriersstruggled to keep their phone lines functional after a power outage blacked out much of the eastern UnitedStates and parts of the Midwest and Canada.

The blackout challenged telecom providers that rely on batteries and generators to keep their networks running,and some fared better than others. All telephone company central offices have backup power systems. Morechallenging is the powering of remote devices, such as mobile cell sites or “remote terminals” for providingtelephone service to distant areas. These remote terminals caused many of the problems. Most landline custom-ers experienced few problems. Mobile phone users had a more difficult time, due mostly to high call volumesand incapacitated cell sites. Voice-over-cable services also experienced outages. But no type of telecom providershould get complacent. The telecom industry should take the blackout as a wake-up call. Although the publicswitched telephone network has a number of redundancies and significant checkpoints and safeguards,including backup power sources, telecom providers should test these processes to find the vulnerabilities in thenetwork. Communications become even more critical when the lights go out, and the telephone companies’backup power is antiquated and sometimes overloaded or not maintained sufficiently. This situation leads tosporadic outages. What’s more, an increasing number of network solutions rely on the use of remote terminalswith digital multiplexers, and most remote sites typically have only four-hour reserve backup power as do mostcell towers associated with mobile services. Cable companies don’t provide for remote backup power at all.

The Sept. 11 attacks underscored the need to protect national security and critical infrastructure. This blackout,which many electricity experts warned about for years, demonstrated the vulnerabilities in the communicationscritical infrastructure. The telecom industry must use this experience to improve network reliability or facepossible regulatory mandate or litigation. (A recent of rash of lawsuits seeks retribution for liabilities based onthe power failure.) Gartner recommends being proactive as carriers can take corrective steps at their own pacerather than by governmental edict.

Analytical sources: John Mazur and Ron Cowles, Gartner Research

China Attempts to Block Foreign Software in Government. On 18 August 2003, Chinese and western media sourcesreported that, by year-end 2003, China’s State Council intends to mandate that all government ministriespurchase only China-made software at the next upgrade cycle. The move is meant to support the local softwareindustry and protect state information security. Those seeking exceptions will need to submit a special request.

China’s entry into the World Trade Organization (WTO) in late 2001 indicates its desire to be a serious globaltrading partner. But the country’s policy of software protectionism undermines its sincerity. While this protec-tionist stance is not in violation of China’s WTO membership, it does go against the spirit of the agreement. The

1910 September 2003

government is a dominant consumer and should set an example, especially when China’s top 100 companiesare state-owned and likely to follow suit in support of government initiatives. (After several years of encourage-ment from the Chinese congress, more than a third of Chinese government ministries have begun moving toChina-made software, such as the Red Flag Linux operating system and Kingsoft’s WPS Office desktop/officeautomation suite.)

In support of this “home grown” campaign, China is leveraging localized products from open-source software(OSS) and local vendors. This will likely stimulate growth in China’s contribution to the OSS market, as Chinaadapts products for its needs, returning the adaptations and enhancements to the community under the GeneralPublic License. However, while this “China-made-only” policy may be feasible on desktops, it is not yet feasiblein the enterprise application space. The intent may be to influence the desktop/office automation market, but aside effect that will be more difficult to manage is the purchasing of database, ERP, CRM and supply chainmanagement products — categories in which the scarcity of local and OSS offerings will handicap governmententerprises.

The ruling may also be an attempt to push Microsoft into making concessions in China. Microsoft — in responseto a Linux threat — recently reduced pricing to US$40 for an Office and Windows package it offered as part of agovernment initiative in Thailand. Microsoft may offer a similar package in China as an incentive to keepChinese enterprises using its products. Other multinational corporations will likely partner with Chinesecompanies in an attempt to work around this ruling, such as Sweden’s Industrial and Financial Systems isdoing with China’s UFSoft. China’s move may also inspire other foreign governments in their efforts to limittheir reliance on proprietary platform and application software. Many of them, especially in Europe, will pooland share OSS applications across government agencies.

Software vendors targeting the public sector must articulate a response to this move and its likely consequencesfor the governments of other countries. Revised licensing terms, stronger local presence or alliances with localplayers, and more attention to government lobbying will be required in countries where OSS receives primaryconsideration.

Analytical sources: Dion Wiggins, Andrea DiMaio and Kristian Steenstrup, Gartner Research

New IBM Software Support Brings More Consistency. On 12 August 2003, IBM announced that it will now supportproducts under its International Program License Agreement (IPLA) for a minimum of three years, with for-feeextended support after that. This will affect middleware, storage solutions, printing, retail store solutions, andAIX and OS400 products. Products for zOS and OS390 continue to be sold under the IBM Customer Agreement(ICA).

IBM has now stated how long it will support all its software products. For products covered by the IPLA, IBMwill:

• Provide support for a minimum of three years from the date the product or version is available for purchase• Provide at least 12 months’ notice before withdrawing support


• Ensure that effective dates of withdrawal occur only in April or September• Ensure that all components of a product bundle will be supported for the same period• Provide information on product life cycle dates on a single Web site

At the end of the support period, IBM will offer for-fee extended support for an unspecified number of years.There will be some exceptions where products depend on third-party vendors, such as WebSphere businessintegration adapters. IBM has made its terms for IPLA consistent with those for ICA and has taken another stepin making support consistent across all its product and platform combinations. An earlier step came in October2001, when IBM revamped its Passport Advantage program for volume license purchase. This new model forIPLA will suit enterprises that upgrade to each new software version or skip one version. The typical releasecycle for IBM products is one year. The resulting predictability will help enterprises with planning and budget-ing. IBM’s extended support differs from Microsoft’s, which offers a two-year extension. The charges for andduration of IBM’s extended coverage are not yet known, but the longer the customer stays with extendedsupport, the higher the cost is likely to be. IBM’s cost of supporting a diminishing number of customers willhave diminishing economies of scale.

Some information is available on www.ibm.com/software/supportlifecycle. So far, the site carries only ageneral statement of the policy. More information should follow in October 2003. Enterprises now entering aplanning phase should seek a detailed statement for IBM products in their portfolio. Other enterprises shouldreview their plans in light of this information. All should seek clarification of the extended support options.

Analytical sources: Jonathan Mein and Bob Igou, Gartner Research

GRIC’s Acquisition of Axcelerant Has a Narrow Window of Opportunity. On 13 August 2003, GRIC Communica-tions, a provider of roaming dial-up and Wi-Fi (Wireless Fidelity) mobile enterprise communications, an-nounced a definitive agreement to acquire Axcelerant, a provider of managed wireline remote-access broadbandservices.

The acquisition of Axcelerant by GRIC — which are now independent managed services brokers withoutoverlapping service offerings — will take away the two companies’ freedom to work with other brokers.Axcelerant will become a “captive” seller of GRIC’s roaming services, and GRIC will become part of a serviceprovider that competes directly with its own legacy carrier and broker resellers. The combined entity’s statedmission is to grow into a competitive position to challenge leading service brokers such as Fiberlink. Achievingthis goal will require a strong, unified marketing and sales plan for global managed wireline services. The newentity will need to move quickly to put deals in place with telecommunications carriers worldwide to representitself as a single provider of wired and wireless managed access. Gartner views both GRIC and Axcelerant asweak in the managed services arena, and this common weakness will have to be overcome by the mergedentity’s management team. Timing will be critical, because other managed service providers are already invest-ing in global managed services. Many of these providers have already made significant progress in this area,and the new entity will likely be eclipsed if it is not fully competitive by the end of 2004.

Gartner believes that resellers may be impacted by this acquisition. Enterprises that have reseller agreementswith GRIC — through AT&T, for example — should ask their service providers for protection against possible

At Random (continued)

2110 September 2003

forced migration away from GRIC. Axcelerant clients should review their contracts to determine their service-level rights to continued service after a change in ownership.

Analytical sources: John Girard and Eric Paulak, Gartner Research

Hewlett-Packard Will Boost Its .NET Capabilities by Acquiring Extreme Logic. On 13 August 2003, Hewlett-Packard (HP) announced a definitive agreement to acquire Extreme Logic, a consulting firm that architects andimplements business solutions based on Microsoft .NET. HP did not release financial details of the transaction.Extreme Logic, with about 200 employees, will become a subsidiary within HP Consulting. HP Consulting willretain Extreme Logic’s management team.

HP, on its own and through its acquisition of Compaq Computer, has focused a great deal of its strategy inrecent years on becoming a leader in the Microsoft market. Historically, HP Consulting has been strong inproviding Microsoft-related infrastructure services for products such as Microsoft Exchange and SQL Server. InSeptember 2002, HP Services and Microsoft announced that HP would act as a global Prime Integrator for .NET.The Extreme Logic acquisition enhances HP Consulting’s Microsoft practice by increasing its ability to delivervalue as a Microsoft .NET system integrator. In particular, the deal will bolster HP Consulting’s .NET capabili-ties in the eastern United States. Extreme Logic also brings considerable expertise in architectural methods (morethan 100 of the company’s 200 employees provide architecture services).

Enterprises demand comprehensive solutions (not point products) and expect these solutions to exploit theInternet. This acquisition will eventually enable HP to offer a broader range of solutions as a part of its AdaptiveEnterprise initiative. HP should be able to integrate Extreme Logic’s intellectual assets into Adaptive Enterpriseby mid-2004.

HP has also made a strong commitment to its channel partners and has attempted to grow the share of itsbusiness that partners contribute. The solutions that emerge from the Extreme Logic acquisition will likely (andshould) be made available for partners to sell and help deliver.

During the past several years, HP Services has striven through organic growth, partnerships and acquisitions togain the size and scope to differentiate itself and to compete more effectively on a global scale. The Extreme Logicdeal belongs to HP’s serial acquisition strategy. In 2001, Compaq bought Rainier, a company similar to ExtremeLogic. HP Services wants to become the premier infrastructure service provider for enterprises as well as forother IT service providers. Buying Extreme Logic will boost HP Services’ capabilities in this area, and enter-prises should shortlist HP for .NET infrastructure solution work. However, apart from areas within the commu-nications, network service provider, financial services, manufacturing and government sectors, HP remainslimited in its ability to offer solutions for vertical industries.

Acquisitions tend to create confusion for all of the parties involved. Until this acquisition is complete, potentialExtreme Logic customers should carefully scrutinize proposals and contractually ensure that appropriateresources will be applied to their implementations.

Analytical sources: Michael Haines and Michele Cantara, Gartner Research


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