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ROI

By Vulpinemac ·
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Please explain, if you will, how a 3-year ROI earns more money than 5.

by Vulpinemac In reply to ROI

You really make my point because after 3 years, a Windows box is pretty well shot, due to hardware failures and OS overload (just look at the junk in that registry folder!) Even after 5 years, the Mac is running just as well as it did from the first and the hardware is almost 70% less likely to have had a catastrophic failure.

No, the accounting department of too many corporations has ended up costing those companies far more than they should have in the name of saving money. They felt that cheap, short-term investments in materiel would save more money than buying longer-lasting components that wouldn't need as much support. As a result, the IT departments became the biggest loss department in every single one of those corporations.
Interestingly, of all places a bank got out of that mind set and now the IT department is <i>making more money than it costs</i> to operate. No, it didn't buy Macs, but it completely changed how it looked at its systems. That bank, by the way, fully supports the use of iPhones and iPads within its offices.

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ROI

by YetAnotherBob In reply to Please explain, if you wi ...

I will try to explain.

ROI means Return On Investment. The Accountants figure these things based on the long term use of a system. They want to replace systems before they break, but only just before. It is really an exercise in statistics, sort of like actuarial accounting for insurance companies.

The investment will pay back at some conceived rate The ROI period is the length of time it takes, according to the Accountants tables to pay for a replacement. For instance, when I worked for a power company, the figure for a transformer was 15 years. The transformers would last for 25 years if used at the rated levels, but if run at 125% of rated load, they would only last 15 years. So, transformers were routinely used for up to 125% of the rated load. After all, the transformer was paid for on the books, so it made no difference to the accountants if it broke down 'early'.

The same principle is used in computers. the Accountants tables say a three year payback is needed. They have justified the cost up front in order to get the computers in the first place.

The next thing they look at is the computers cost. If your Apple costs 1.5 times more than the no-name Windows box, then it is worse by 1.5X, as long as the no-name will last for three years. That the Apple will last twice as long is something that the Accounts don't care about right now. All the major suppliers know this. That's why Dell, for instance buys cheap components with an expected life span of around 4 years. It makes the expected life span of the computer work out to 3 years total. (I don't have time or space here to explain the intricacies of estimated life spans) That the Apple has an expected life span of 5 to 7 years doesn't even matter to the Accountants. They want to replace all of the computers on a regular rotation anyway, for organizational cost reasons.

IT is a cost sink in almost all organizations. That means that the IT department doesn't make any cars or trucks for GM, or fly any airplanes at Virgin Atlantic. IT instead supports the work of others, some of whom are primary producers. That is the real reason for IT to exist. The Accountants know this of course, but they are really terrible at explaining things. Any department left to itself will soak up all of the profits of any company, so the Accountants are always trying to reign things in.

When the technology curve slows down, it will be possible to make an argument that a realistic longer ROI period is better. The total cost over many cycles can be less if you spend more per cycle, but the cycle is longer. That is the basic argument for quality. But, presently, a 4 year old computer is two generations old, and frequently costs more to sell than the corporation gets for it. It's really a question of rapid technical advancement. But, Mores Law seems to be slowing down. The peak speed for silicon based chips was reached around 2002. There is some speed up currently possible, using water cooling and things like that, allowing for speeds of over to 7 MHz on a chip, but not really any faster. Most of the improvement since then have been by expanding the bus size from 32 to 64 bits, and placing multiple cores on the same chip. Basic physics says that the energy expended in a transistor is a function of the frequency. The speed stopped improving when the switching speed on the chip started melting the transistors. Since then, we have been looking in many places for things that will allow us to increase the speed. Things like advanced cooling technologies (Liquid Nitrogen anyone?) and SOS (Silicon on Sapphire) and more recently Graphene and Diamond. Each of these have a higher melting temperature, but are still very costly to implement. But, we can't get much faster chips until these problems are solved, and even then, there are limits to miniaturization. We even know what they are.

It's really a very interesting topic.

Oh, and I'm glad that you managed to get the iPhone added to the list of supported devices. It should really not be as hard as it is in most organizations to get support.

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