This memorandum is provided in response to Council Member questions about the Town’s computer replacement cycle and whether the replacement cycle could be extended to four years

AGENDA #2c

BUDGET WORKING PAPER

TO: W. Calvin Horton, Town Manager

FROM: Bob Avery, Information Technology Director

SUBJECT: Consideration of a Four-Year Life Cycle Computer Replacement Program

DATE: May 19, 2004

This memorandum is provided in response to Council members’ questions about the Town’s computer replacement cycle and whether the replacement cycle could be extended to four years.

BACKGROUND

The Computer Fund was first established in the FY 1999-2000 budget to support a life cycle purchase program for General Fund supported desktop computers. It was one of many recommendations offered by the Technology Committee for improving the Town’s information technology capabilities. The goal was to provide increased system reliability through consistent equipment upgrades as well as reduced cost through volume buying and lower maintenance.

The program was designed to purchase 204 desktop computers for all departments in the General Fund. It was initially funded at $150,000 per year. A three-year cycle was chosen to maintain a balance between purchase costs and useful lifetime. At that time, hardware innovations and software improvements were resulting in significant changes in as little as two years time.

Since then the Town has expanded the number of computers to accommodate the increased use of database systems, online document access, email, and mobile data access. Laptops, including replacement mobile data terminals (MDT) for the Police Department, have recently been added to the program. During this past year, the Information Technology Department conducted a review of all departmental computing needs to plan for the purchase or replacement of all needed systems.

Desktop and laptop computers used throughout the Town now total about 440, of which 330 are purchased by the Computer Fund. The remaining 110 are purchased through Transportation, Housing, and Library funding but are programmed for a similar replacement cycle. The proposed budget of $220,000 for FY 2005 is intended to replace 104 desktop computers, 7 MDT’s and four laptops.

DISCUSSION

A transition to a four-year replacement program would reduce the annual budget costs but not at the apparent 33 percent rate expected. Two direct additional costs related to the extended cycle are increased loan and warranty costs. A table showing a basic four year life cycle cost is attached.

	Three Year Plan	Four Year Plan

Computers Supported Per Year	115	86

Computer Fund Annual Base Cost	$220,000	$165,000
Increased Financing Cost		$3,000
Increased Warranty Costs		$7,000
Continue Replacement of Police MDT’s at three year rate		$8,000
Revised Computer Fund Cost	$220,000	$183,000

Indirectly affected is the anticipated growth in maintenance time to resolve and repair equipment in the fourth year. Currently we see an increased failure rate of components, particularly hard drives, as the systems near the three-year point. It would be difficult to assign a monetary value to the affect of increased maintenance workload; however, with the limited staff in the Information Technology Department, any growth in maintenance would be of concern.

A second concern with a transition to the four-year cycle during this budget year is the high percentage of systems in the Police Department that are scheduled for replacement next year. The annual distribution of replacement systems is not uniformly spread across departments, and in this budget year fifty percent of the proposed funding is earmarked for desktops, laptops, and MDT’s for the Police Department.

A third concern is the potential loss of savings achieved through a large volume order. By combining purchases for all departments in the current year we were able to bundle a single purchase for 100 desktop computers. As a result we received additional discounts (in the range of 20 percent per system) and were able to buy ten extra systems needed by the Police Department. This reduced the amount of funding originally anticipated for the proposed budget.

A fourth concern is the potential need to purchase software upgrades for the operating systems. We currently do not replace or upgrade the computer operating system. The computer operates for the three-year period with the system installed at purchase. In a three-year cycle we can maintain systems that are relatively current both in hardware and software standards. This is important because of the wide range of software programs used by the individual departments. We want to make sure we can fully support the requirements of any updates or changes to departmentally-based vendor software programs.

Although there are a number of issues involved, we could modify the purchasing cycle to achieve some savings in the initial years. How effective this would be in the long run is not clear. The systems we purchase are high quality and are supported through manufacturer warranties and can be extended to four years. Additionally, we have begun to use flat panel monitors that in addition to energy cost savings may allow an extended service life and thus reduce annual replacement costs.

An extension of the replacement cycle would require a department by department review and prioritization of computing equipment needs so that critical and technically demanding needs are identified and the appropriate systems are maintained at a high level.

RECOMMENDATION

We recommend continuing to fund the computer replacement cycle on a three-year basis at least through the FY 2005 budget year. This would allow the completion of a full three-year cycle thus providing a more uniform base of computers, particularly for the Police Department. It will allow us to complete the process of bringing all Town computers under a managed replacement system and replace a few systems that are failing to meet departmental needs.

During the year we can study a number of options to further reduce costs. These could include replacing systems with lower cost components, replacing monitors less frequently than the processing unit, or simply spreading the replacement cycle to four years.