Introduction

 

Chapter 2 - Optimal Purchase Decision Criteria for Information Technology
Managing IT in Government, Business & Communities
by Gerry Gingrich (ed)
Idea Group Publishing 2003

	Brought to you by Team-Fly

Knowing the importance of information technology (IT) to productivity, companies and individuals alike have invested heftily in technology, causing IT expenditures in the United States to grow phenomenally. In the fourth quarter of 1999 alone, in the US, PC makers shipped 12.6 million units (Hamilton, 2000). However, the annual comparison shows that the growth of Personal Computer (PC) sales has slowed down to only 19%. How were these purchasing decisions made? Even if the process is improved only marginally, the public can realize tremendous gains.

A few years ago, computer trade journals would invariably recommend that consumers purchase the latest technology (Kirkpatrick, 1998; O'Malley, 1999). Even though the state-of-the-art technology demanded a premium price over lesser choices, as a proportion to the cost of the entire system that difference was relatively small at that time. However, the tide has shifted since then. On one hand, hardware technology has advanced so much that consumers begin to realize that they may be buying too much product for what they really need, resulting in wasted resources. On the other hand, prices of hardware have fallen at an increasing rate over the years, which prompts trade journals to recommend delaying purchases for as long as possible. Manufacturers also recognize the need for targeting "general" users. Intel, for example, sees that most PC users do not care how fast their graphics cards are and proceeds to integrate 3D graphics to its 810E chip set instead of using the discrete 3-D chips that have better performance (Gwennap, 1999).

As an example of the premium price attached to "state-of-the-art" technology, Intel's own testing shows that when it comes to running most office-type programs there is little performance difference between the Pentium II and III, but the newer chips command hundreds of dollars more (O'Malley, 1999). Thus, even during the times of pursuing the state-of-the-art technology, acquiring "middle-of-the-road" equipment has been one of the IT manager's purchasing strategies. This approach is based on the reasoning that while at the highest end consumers have to pay dearly for that little additional benefit, at the low end products may not have the quality to meet the consumer needs. Frequently, 80% of the benefit can be achieved with the first 20% of spending in the price spectrum.

One of the difficulties in selecting a computer system is to wade through the sheer number of choices that are available in the market. Besides large PC manufacturers such as IBM, Dell, HP/Compaq, and Gateway, numerous small companies also have a strong presence to the public consumers. Since component technology has allowed PCs to be "assembled" rather than massively "manufactured" (Williams, 1997), each company uses a wide variety of components to assemble their products; and the permutations make product comparisons more difficult. While consumers in general benefit from the increased flexibility, higher quality, and lower cost, the confusing array of available products makes it difficult to determine the product that would give the biggest bang for the buck.

Another problem with this kind of evaluation is the question of proper assessment of cost and benefit. Ignoring all intangible costs for the time being, costs of equipment purchasing can be defined by what the vendor charges. However, benefits are usually in the eyes of beholder. Consumers and IT managers alike often rely on product reviews of trade journals to determine the "best" products for them. Unfortunately, the so-called editor's choices often reflect the editor's personal needs and preferences and may not be the best fit for the purchaser's unique environment. Given the close ties between magazines and their advertisers, consumers also need to be aware of the amount of "plugging" for the advertiser that may take place.

Focused on alleviating these two problems, in this article we will use PC purchasing as an example to illustrate an evaluation process that can help purchasers identify the optimal IT products for their unique needs.

	Brought to you by Team-Fly