A Factor Rating Approach to the PC Purchasing Decision

managing it in government, business & communities

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


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Although features do not equate benefit, features (i.e., computer components) do generate different degrees of benefit for users. Dell Computer Corporation, for example, has effectively implemented a "build-to-order" strategy for computer system purchases. On its Web site, a series of Web pages that identify important computer components and their options provide extensive information so the consumers can "build" systems that cater to their unique needs and pocketbooks.

To apply the factor rating approach to PC purchase, it requires that the purchaser is aware of the potential use of the computer system being considered for purchase and that the relative importance of various components has also been assessed. The factor rating process assumes that the purchaser has a basic knowledge of computer components and is aware of the differences between the various options. Without this knowledge, it will be impossible to assign weights and benefit points in any meaningful way. The value of the factor rating process is that the purchaser is able to selectively assemble a set of computer components based upon an individualized benefit value. For example, for a liberal arts student majoring in English, who uses the computer just for e-mail and running standard word processing and spreadsheet software, an entry level PC will be sufficient. On the other hand, an MIS student will require a faster computer to do homework.

Our proposed process includes the following steps:

Assign weight to each component of the system according to the perceived importance by the purchaser. The sum of all the individual weights should be 100(%).
Assign benefit points, ranging from 0 to 100, for each alternative presented in each component category. It is acceptable for multiple alternatives to receive the same benefit points.
Calculate the weighted average for benefit scores.
Use the price of the system as the cost and the result in (3) as the benefit and construct a cost-benefit chart.

Thus, unlike the traditional factor analysis, this approach includes the price as a separate criterion and allows us to create a two-dimensional chart for cost-benefit analysis. We will use a limited system that contains only CPU, RAM, hard drive, and monitor for a simplified demonstration. We will evaluate three computer systems listed below:

System 1: Athlon 1.2 GHz CPU, 128 MB RAM, 40 GB hard disk, and 19" monitor. Cost: $1,700.
System 2: Athlon 1 GHz CPU, 128 MB RAM, 30 GB hard disk, and 17" monitor. Cost: $1,200.
System 3: Athlon 800 MHz CPU, 64 MB RAM, 20 GB hard disk, and 15" monitor. Cost: $900.

Suppose we are purchasing for business school students who live in dorms, we first need to know how these students use their computers. It will be necessary to conduct interviews or surveys to determine the usage patterns and the perceived importance for each component and any alternatives. For example, business students usually do not need a lot of processing power, and the small dorm rooms may render larger monitors a nuisance rather than help. On the other hand, given the fact that many college students today download music and programs from the Internet, a larger hard drive may be desirable. After taking all these observations into consideration, we may assign weight and benefit posts to components and their alternatives. A possible scenario of weight and benefit assignment is shown in Table 3. Once this is done, we can find the weighted benefit scores for all three systems (Table 3).

Table 3: Prospective PC Systems
Components and Alternatives	Weight	Benefit Points	System 1	System 2	System3
CPU	35%
Athlon 1.2 GHz		100	35.0
Athlon 1 GHz		100		35.0
Athlon 800 MHz		90			27.5
RAM	10%
256 MB		100	10.0	10.0
128 MB		80			8.0
Hard Disk	30%
40 GB		100	30.0
30 GB		100		30.0
20 GB		90			27.0
Monitor	25%
19"		70	17.5
17"		100		25.0
15"		80			20.0
Weighted Benefit Points			92.5	100.0	82.5
Price			$1700.00	$1200.00	$950.00
Cost per Benefit Point			$18.38	$12.00	$11.52

Note that the most expensive features may not receive the highest benefit scores, and a "lesser" alternative may have equal or even higher benefit to a user. For example, even the best of the soundcards may score a zero if the computer is purchased for a computer lab where no speakers or earphones are allowed.


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