WHEREAS personal computers have become essential to the cost effective delivery of City services; and

WHEREAS, over the life of a personal computer, the cost of supporting the computer is typically several times the initial purchase cost, and the cost of support increases with the age of the computer; and

WHEREAS new and more powerful computer applications with substantial potential benefits for City services continue to be produced; and

WHEREAS, as a result of these factors, a personal computer typically will have an economic life of three years, such that, at the end of its economic life, the support and opportunity costs of keeping the computer become greater than the cost of replacing it; and

WHEREAS the City currently has no standard approach for replacing personal computers, which has resulted in extra expense to maintain and upgrade outdated equipment;

BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SEATTLE, THE MAYOR CONCURRING, THAT:

1. It is the policy of the City to replace its desktop and laptop personal computers when they are at the end of their economic life. This policy is one element of an overall strategy to minimize the total cost of owning and operating the City's distributed computing systems.

2. To this end, the Chief Technology Officer and Department Directors shall execute the Personal Computer Replacement Policy in Attachment 1. The Chief Technology Officer is authorized to modify and update this policy as needed.

3. The Mayor's Proposed Budget for each year shall state the degree to which it proposes to implement the department computer replacement plans approved by the Chief Technology Officer pursuant to the attached Personal Computer Replacement Policy. If the Proposed Budget does not provide funding for all of the computer replacements called for in the approved plans, a description and explanation of the unfunded needs shall be provided.

Adopted by the City Council the ______ day of ______________, 19 ___, and signed by me in open session in authentication of its adoption this _______ day of _______________, 19 ___.

____________________________________

President_____________of the City Council

Filed by me this _____ day of ________________, 19 ___.

____________________________________

City Clerk

THE MAYOR CONCURRING:

____________________________

PAUL SCHELL, MAYOR

(Seal)

Larisa Benson reso4.doc

April 24, 1998 version 2 April 24, 1998

Personal Computer Replacement Policy

ESD Enterprise Information Technology

Introduction

This policy is in response to the 1997 Statement of Legislative Intent on the Gartner Group and Auditor Recommendations, which directed the Executive to develop a "uniform Citywide replacement/upgrade policy for desktop personal computers and related software, specifying the scope and conditions under which such replacements/upgrades may be approved."

The first section below states the policy. The second describes the rationale for the policy. The third contains notes to the policy.

Policy

The objective of this policy is to replace the City's desktop and laptop personal computers when they are at the end of their economic life.

Each department shall prepare a replacement plan for desktop and laptop personal computers, owned or leased.[1] The replacement plan shall have a four year horizon; shall be updated annually; shall be approved by the Chief Technology Officer (CTO); and shall be submitted to the City Budget Office with the department's proposed budget for the following year. The first replacement plan shall cover the years 1999-2002, and shall be submitted in 1998.

The replacement plan shall assume that personal computers have an economic life of three years, or else justify a different life.[2]

The plan shall include an inventory of computers; shall schedule the replacement of each computer; and shall estimate the cost of the replacements. Computers that are essentially similar for these purposes, i.e., are of the same age and have the same basic features, may be treated as a group in the plan.[3] The plan shall assume replacement costs at least equal to the real current dollar cost of a personal computer meeting current minimum City standards in the year the plan is submitted. Greater cost estimates may be justified by greater application demands. Cost estimates shall be updated annually, in response to changes in price, City equipment standards, and application requirements.[4]

The CTO shall evaluate plans for completeness, accuracy, and the sufficiency of justifications for departures from the recommended life span and base cost estimates.

Replacement computers shall meet or exceed the minimum City standards in effect when they are procured.[5]

The CTO shall review this policy annually. The CTO shall annually review minimum equipment standards and recommended maximum life spans, to determine the combination of these that best meets City service goals, and will issue any revisions to these in the first quarter of the year.

Rationale

The economic life of a computer ends when its support and opportunity costs equal the purchase and support costs of a new computer. The cost of supporting a computer is much of the total cost of ownership. The cost of support rises as a computer ages, because service requirements increase, it becomes more difficult to operate new applications that demand more computing power, and it becomes more difficult to obtain support for old applications. The opportunity cost of an existing computer is the value of the incremental business benefits that could be achieved with a new computer. The opportunity cost rises when a computer cannot operate new applications that would benefit the business. When a computer cannot operate critical new applications, it is obsolete.

The current recognized industry standard is that personal computers have an economic life of approximately three years. This is largely because the computer industry continues to provide valuable new applications that take advantage of constantly increasing processing power, and because the industry tends to stop supporting older applications that require less computing power.[6] A computer with the highest available power and most up-to-date features may have an economic life longer than three years. This policy sets a three year life because it is designed to work in concert with the City's minimum equipment standard. This aspect of the policy will be reviewed as the City improves its ability to track and analyze the total cost of computer ownership.

Plans for replacing personal computers will have several benefits. First, and most important, if a department builds a replacement plan around the appropriate computer life cycle (or cycles), and the City and the department follow the plan, the department's employees will have personal computers suited to their work.

Second, if obsolete computers are systematically replaced with new computers that conform to City standards, the homogeneity of the City's hardware and software will increase. This will reduce training and support costs, which in turn will reduce the total cost of personal computer ownership. This will reduce the marginal cost of improvements in hardware and software, which will make improvements more affordable. These gains will be most realized in Citywide applications, such as email, and in applications at the frontier of widespread use, such as geographic information systems (GIS).

Third, good computer replacement plans will give the City a firm basis for budgeting replacements. They will help the City avoid the unfunded liability that would exist with a large stock of obsolete computers that have increasing support costs, and thus will contribute to the sustainability of the budget. As a corollary, replacement plans will give departments a policy basis for requesting budget authority for replacements.

To make replacement plans successful, the City must set good standards for minimum equipment and maximum economic life, and departments must use good judgment about when to propose departures from these City standards; the City must recognize that personal computers have become basic to City services and should be funded accordingly; and, when the City and departments evaluate the costs and benefits of potential new applications that require increased computing power, they must recognize the cost of computer replacements required for these applications.

Notes

1. This policy does not apply to workstations (such as Sun workstations running GIS), terminals, palmtop computers, or other specialized computers. This does not mean that the same replacement logic does not apply to computers other than desktops and laptops. Departments with significant investments in these other computers may submit replacement plans for them.

This policy also does not apply to software, because the rationale for hardware replacement does not apply to software. Software does not deteriorate with use. Software has not doubled in power every eighteen months, and is not expected to do so. New software versions are typically installed unit-wide, except when hardware performance is a constraint, so heterogeneity from multiple generations is not an intrinsic problem.

2. A three-year life is a starting point for planning. There may be good reasons for a department to use a different replacement cycle for some or all of its computers. Different computers for different applications may have different economic lives. A department may have computers that must be replaced before 2000 because they have Year 2000 BIOS problems. A department may want a new department-wide application that cannot run on some of its computers that are less than four years old. The City may want a new corporate application, such as the new financial management system, that requires more powerful computers for some people in every department. A department may simply calculate that a different replacement cycle is better suited to its business, consistent with the basic rationale outlined here.

3. It would be a good asset management practice for departments to track individual computers, but the replacement plan submitted to the CTO and CBO does not require this detail.

4. For example, unless justified otherwise, replacement costs in each year of the 1999-2002 plan should be estimated at the 1998 cost of equipment meeting the 1998 standards; replacement costs in each year of the 2000-2003 plan should be estimated at the 1999 cost of equipment meeting 1999 standards; and so on. The Chief Technology Officer will estimate the cost of equipment meeting the standards when the standards are updated. This is a conservative approach, because the price of a given amount of computer power will almost certainly continue to decline. The value of the increased power per dollar is likely to be taken by increasing equipment standards, but may also be realized in cost reductions.

5. The established minimum equipment standard is a conservative starting point for procurement. There may be good reasons for a department to exceed the minimum standard, even for computers not intended for power users. Inexpensive options, such as additional memory, can increase the chance that a computer will still work well towards the end of its planned life. The desirability of exceeding the minimum standard will depend partly on the length of the planned life.

6. Computer chip processing power per dollar has doubled approximately every 18 months for 30 years, and the performance per dollar of other major computer components, such as disk drives, also has increased dramatically. These trends appear likely to continue. The personal computer industry has consistently translated these engineering improvements into large increases in computing power for roughly constant nominal unit costs. This creates the opportunity for continued application improvements, which in turn drives the hardware economic life cycle.

A note on redeploying computers and upgrading components

It may be tempting to redeploy an existing computer that is near the end of its economic life, but this should be done carefully, and with an eye to the potential for large support costs that cannot be justified by the remaining life. For example, redeployments often require loading different software and re-training the user. The Gartner Group concludes that

"used equipment that is less than 24 months old has a possibility of being redeployed by someone as a 'computer.' Equipment that is three to four years old, however, generally has value only as spare parts." (Conference presentation, 10/97)

Upgrading components of a computer, such as the processor and disk drive, is not a substitute for replacing it, and may be ill-advised in any case. The cost of an multiple-component upgrade can equal the cost of a new computer, and may not achieve the same performance improvement. Upgraded computers have unique and less predictable support requirements and no increase in residual value. They reduce the homogeneity of the City's hardware, and thus work against the effort to consolidate and standardize support.