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10 reasons to purchase new hardware during a recession

It may seem like the last thing you want to do in the midst of tough economic times is invest in new hardware. But IT consultant Erik Eckel suggests that trying to coast on failing or outdated equipment will cost you more in the long run.

It may seem like the last thing you want to do in the midst of tough economic times is invest in new hardware. But IT consultant Erik Eckel suggests that trying to coast on failing or outdated equipment will cost you more in the long run.


It's no secret. Many organizations curtail all possible spending in a recession. Budgets are cut, staffs are reduced, and new hardware purchases are often eliminated. During difficult economic periods, cost-cutting measures are prudent, even necessary for companies struggling to survive. But suspending hardware investments can prove shortsighted. Eliminating system replacements and PC upgrades may well worsen an organization's predicament. Here are 10 reasons new hardware purchases shouldn't be delayed -- even during a recession.

Note: This article is also available as a PDF download.

#1: Equipment still wears out

As bad as an economic recession becomes, one fact doesn't change. Power supplies, hard disks, motherboards, displays, and other components still fail. The laws of physics don't rest just because the economy is in turmoil. Electrical surges still occur, mechanical failures continue, and planned obsolescence keeps marching along. Simply put, PCs, servers, network components, and other business-critical items will fail, even in a recession. This equipment must be replaced.

#2: Productivity becomes paramount

When PCs, displays, or network switches fail, it may be tempting to visit an old parts closet to dig out replacements. Old, entry-level Celeron- or Pentium-powered PCs with 256MB of RAM and rattling power supplies won't help managers (now often responsible for production tasks, too, due to departmental layoffs) efficiently complete expanded task lists. Nor will such machines enable overworked colleagues to run QuickBooks, CRM applications, or proprietary programs smoothly. Nor will a 15" CRT enable productivity gains when replacing a 22" widescreen monitor used to display customer information alongside order entry software.

The same is true for network equipment. Outdated hubs and routers were decommissioned for a reason. They were either too slow, failed to operate properly, or didn't meet the organization's needs. They certainly won't improve productivity now, when staff sizes are smaller, remaining employees must absorb the workload of laid-off staff, and stress levels climb ever higher. The subsequent delays and inefficiencies translate to lost opportunities, poor customer experiences, and less revenue.

#3: Downtime is expensive

Older equipment fails more often. Outages and downtime are even more acutely felt during tough economic downturns, when fewer staff are available to diagnose the failure, identify appropriate fixes, obtain replacement parts, replace the failed component, and then test the repair.

Meanwhile, other employees facing more burdensome task lists are dead in the water. Their productivity drops to zero. Depending upon the situation, a single failure can prevent employees from accessing CRM systems, entering sales, billing clients, printing invoices, answering customer inquiries, processing claims, dispatching service personnel, and otherwise fulfilling critical operations. Sales plunge, revenue is lost, and an organization's financial standing declines.

#4: Competition suffers, too

When respected economic experts, including Berkshire Hathaway's Warren Buffet, reveal that they believe growth opportunities exist in a tough recession, your first reaction may understandably be disbelief. Fortunately, though, there are arguments to be made that recessions provide a foundation from which well-managed and well-positioned companies can prosper.

Your competitors are suffering, too. If your organization can leverage their weaknesses during turbulent economic periods, it can capture rivals' market share. Exploiting weaknesses and maximizing opportunities in tough financial environments often isn't possible, however, without the proper systems. And hardware investments are usually required to power such systems that enable taking advantage of unique opportunities.

#5: Manufacturers offer discounts

Just like everyone else, computer manufacturers are facing hard times. Fourth quarter U.S. sales were off 3.5 percent. A January 2009 Time magazine article questioned whether the PC market will ever completely recover.

Manufacturers are scrambling to develop intriguing new product lines (witness netbooks) and improved, more cost-efficient distribution (including via layoffs and new strategic partnerships). In the interim, deals are available for the taking. Organizations shouldn't feel obligated to pay a posted online price (even if already discounted) for a new PC or pay the first price presented for a new bank of rack servers. Due to current economic conditions, sales representatives are more likely than ever to rework pricing for corporations needing new equipment.

#6: Consultants are more willing to negotiate

Many IT consultants are also now willing to negotiate project pricing (including passing along to clients hardware discounts they've negotiated as resellers). Project estimates prepared and delivered even six months ago may well possess more attractive pricing today.

While many IT consultants become even busier during recessions (since many organizations choose to lay off in-house staff and outsource technology services), that's not universally true. Many consultancies may have lost clients (who have closed shop, merged with other organizations, or cancelled or reduced service contracts). Still others may be seeking to diversify their client base or avoid layoffs of their own.

#7: Running older hardware longer costs more

Trying to squeeze a few extra years out of PCs or servers actually ends up costing organizations more in the long run than does replacing old equipment. According to Info-Tech Research Group lead analyst Darin Stahl, "When you look at costs -- particularly around a four- to six-year life cycle -- it may seem like you are saving money, but really it's costing you, because you are going to increase your support costs."

Yankee Group Research Inc. research fellow Laura DiDio concurs. "One of the classic mistakes is [being] penny-wise and pound foolish. Some companies are not prescient enough to say, ‘I'd better keep good records and do regular inventories and asset management to see which servers, of which groups of power users, might need to be upgraded or refreshed sooner than others.' "

In a January 2008 Channel Pro magazine article, in which organizations are encouraged to replace 25 percent of their systems every year, author Carolyn Heinze added, "In the long run, these older systems wind up costing more in lost efficiencies, compatibility issues, service and maintenance, and downtime."

#8: Interrupting purchase cycles is expensive

By replacing a quarter of an organization's PCs every year, for example, companies ensure critical employees receive new, faster, more reliable equipment annually. Then, the critical employees' systems can be handed down to the next tier of operations staff. In short, using this method, every employee receives a hardware "upgrade" every year, and no system is ever more than four years old.

Interrupting such purchase cycles is expensive, and not only due to the lost efficiencies, compatibility issues, and downtime costs. If an organization waits longer to replace the majority of its users' systems, out-of-pockets costs spike (instead of remaining steady). Pay now or pay more later. That's the moral of this entry.

#9: New applications require greater resources

Many new technologies -- everything from new versions of accounting and bookkeeping software to CRM tools and new server platforms, such as Windows Small Business Server 2008 -- have greater hardware requirements than the older platforms they replace. Windows Small Business Server 2008 won't even run on 32-bit servers; the popular small business server OS now requires 64-bit hardware.

Organizations are being forced to upgrade system hardware, as programs become increasingly sophisticated and as Microsoft's desktop operating systems demand more computing power. Windows XP, for example, required only a Pentium 233-MHz CPU, 64MB of RAM, and 1.5GB of hard disk space, whereas Windows Vista Business' hardware requirements call for a 1-GHz CPU, 1GB of RAM, and 128MB video RAM, along with 15GB of free disk space. Companies that choose to suspend hardware investments subsequently automatically forfeit the time-saving, cost-reducing advantages many new software applications deliver.

#10: Employee retention remains a consideration

Good employees are as valuable as ever. Even though the pool of potential replacement hires grows with the unemployment rate, the cost of locating and training new staff remains significant.

When a good employee leaves an organization, his or her department often experiences a slowdown while a suitable replacement is recruited and trained. Worse, vast institutional knowledge can be lost when the veteran employee leaves, never to be replaced.

Fortunately, hardware investments are among the elements that can improve job satisfaction. Rewarding valuable employees with new (faster, more reliable, more modern, sleeker) equipment can go far in reducing frustration, while also confirming an employee's value and contributions. Awarding new PCs to key workers critical to ongoing operations is a simple step. Best of all, productivity gains usually result, as well.

About

Erik Eckel owns and operates two technology companies. As a managing partner with Louisville Geek, he works daily as an IT consultant to assist small businesses in overcoming technology challenges and maximizing IT investments. He is also president o...

23 comments
Eric Hall
Eric Hall

However critical the systems and IT equipment may be to an organization, there is no substitute for avoiding layoffs, especially in government, by postponing purchases and keeping staff employed!

mdhealy
mdhealy

IMHO the sweet spot is buy new every three years, but when buying get last year's model. Consider two scenarios: 1. Buy the latest model every five years, so your average age is about 2.5 years and your oldest boxes are five years behind new gear. You replace 20% of your boxes per year. 2. Buy last year's model every three years, now your average age is also 2.5 years (since a new box is a year behind the times) but no box is more than four years behind the latest stuff. You replace 33% of your boxes every year, but you pay a lot less per box since you are buying last year's model. And most of the life of each box is near the bottom of the bathtub curve (in my experience, after any box has been in service for 3.5 to 4 years its probability of failure begins to rise dramatically). It is of course wise to standardize so it's easy to stock spare parts. Also, when older boxes are taken out of service keep a few around for cannibalization purposes until absolutely none of a given model are still in use.

mark.silvia
mark.silvia

I did not even have to use scare tactics with a couple of my clients. I simply told them the truth. One of them had 3 servers that were at least 10 years old along with PCs that were in the neighborhood of 3-6 years old. It took them about a year to come up with enough capital to replace all the servers. During that time I thought I was operating a machine shop for vintage steam locomotives. It was high maintenance, parts were scarce, performance was slow, and threat of failure was high. One the new servers were in my clients were glad they upgraded.

ashepard
ashepard

Good article and would like to add reasons number 11, 12 and 13. 11) hardware\OS or application is no longer supported. Yea, (____fill in the blank___) makes great servers that still runs from the last century (1999,1998,1997...) but try to find them on the "supported hardware" list. Recession or not its time to replace them. 12) The older equipment does not run as efficiently as newer equipment. If the company wants to save money or look "green friendly" then upgrade. 13) Size does matter. Try to put the newer larger disk drives or memory in the older servers - does not fit. This is comming from a guy with his working Sinclair ZX-81 and 16k memory expansion pack. Sometimes its just better to upgrade. BTW, IMO these same rules apply for disaster prep and recovory. The 9th PandemicFlu webcast by Health and human services is next week - Wed. Jan 28th at 2pm Source: http://www.pandemicflu.gov/news/panflu_webinar.html

Refurbished
Refurbished

Depending on the hardware, getting supplies for it may be difficult also. I recently replaced a printer because it had become difficult to get toner cartridges for it.

somebozo
somebozo

working in a country which imports all IT equipment from abroad, I must add one more benefit to this list. When US suffers recession, cost of technology drops and it becomes cheaper to replace hardware. I can see that evident from exceptionally large purchase orders we are reciving now for cisco and hp equipments.

Michael Kassner
Michael Kassner

Forgive me, if this seems impertinent, but I do not understand your point number 7. If the computer does the job asked of it longer than expected, what's the down side?

BALTHOR
BALTHOR

Sell more for less,and less for more.

Michael Kassner
Michael Kassner

I wish there was a better way to recycle older equipment to areas that don't have equipment at all.

Jaqui
Jaqui

power consumption is higher for older equipment. it is actually far less costly to replace older equipment, since the power consumption reduction is lower, reducing power bills. this is most noticeable in a large organization, but in tight economic times, any long term reduction in expenses is a good thing, no matter what size the company.

Timbo Zimbabwe
Timbo Zimbabwe

I think the following is what he was referring to in point #7: ?In the long run, these older systems wind up costing more in lost efficiencies, compatibility issues, service and maintenance, and downtime.? I'm not sure that I fully agree with that assessment, though.

NickNielsen
NickNielsen

I think Erik was referring to companies that set a life expectancy for their PCs of greater than the usual 3-4 years. Forcing a PC to remain serviceable beyond that point can get expensive quickly. PCs, cars, and people are very similar; they require more maintenance as they age. In the PC, hard drives, optical drives, and floppy drives start to deteriorate. Memory fails and power supplies weaken. At some point, the cost of repairing and maintaining older equipment will exceed the cost of replacing it. Some businesses will replace PCs outright when they reach end-of-life. Others will keep them till they fail and replace them then. In the military, computers that exceeded their expected service life were usually kept in service until they failed. At that time, a tech would determine the failure type, then management would decide whether to repair or replace. Usually, anything more serious than a hard drive replacement and reimage justified replacing the unit. I've seen PCs that run unattended for years and years, but they are the exception rather than the rule, and are greatly assisted in their survival by not being exposed to user interaction on a regular basis. :)

godivarides
godivarides

do you have any "old" RAM for a still operating HP 7950 Pavilion w/AMD Athlon Processor?

The Scummy One
The Scummy One

older systems -- I'll sell 'em cheap! cheap!! cheap!!!

ashepard
ashepard

As servers aged we would keep them as spare parts for the two or three that still kept running. We have a HP from 1999 that has survived multiple power outages and heat problems. However - it is slow, Server 2000 is no and Oracle 8.0.5 are longer supported and its used for just one application now. Yes the computer runs and we have spare parts but no fail over.

skydiver44
skydiver44

I tell ya,I started building computers from frame up since around '91 and you wanna talk about old stuff??? I still have 32K memory sticks. We thought we had the latest and greatest at the time! To my wifes displeasure I've kept all that stuff....talk about a warehouse full!! (I even have 16" metal disks that held 2 full ;) meg on each side!) They came in a carry case of 8, which was what the computers we were working on held at that time.

NickNielsen
NickNielsen

In late 1999, I was doing a rollout of Win 98 on Pentium III PCs and ran into an old Zenith Z-248 up and running in a corner. When I asked about it, I was told it was the RAS and had been plugging away for 12 years. A few days later (still on that project), I was told that asking about it killed it. The admins dialed into it and connected with no problems, then checked the server logs. They discovered that was the first time the RAS had been accessed since 1997, so they took it off-line.

seanferd
seanferd

I guess I wasn't paying attention: they were sealed units. Single platters would be a bad sign. :)

NickNielsen
NickNielsen

or DEC. I don't remember being able to exchange Winchester discs except as a pack.

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