END-TO-END PC LIFECYCLE COST MANAGEMENT

Leveraging Technology and Intellectual Capital to Reduce Costs and Improve Efficiency

Edward A. Bullen The Strategic Enterprise Consulting Group

EXECUTIVE SUMMARY ....................................................................................................................................................... 3 PRODUCT LIFECYCLE BEST PRACTICES ASSESSMENT ........................................................................................................................................................................ 5 PUSH MODEL DEPLOYMENT STRATEGY ................................................................................................................... 5 LIFECYCLE OPTIMIZATION .............................................................................................................................................. 6 BEST PRACTICES PROCUREMENT AND ASSET MANAGEMENT SYSTEM .......................................................... 6 FINANCIALS.......................................................................................................................................................................... 7 SUPPLY MODEL ................................................................................................................................................................... 8 INTEGRATED ASSET MANAGEMENT AND SUPPORT SERVICES ............................................................................. 8 BUSINESS CASE .................................................................................................................................................................... 10 STRATEGIC PROCUREMENT ........................................................................................................................................... 10 PUSH DEPLOYMENT STRATEGY ................................................................................................................................ 12 AUTONOMIC SOLUTION ARCHITECTURE ................................................................................................................... 12 ASSET MANAGEMENT ..................................................................................................................................................... 13 BUSINESS CASE SUMMARY ............................................................................................................................................ 14 PARTNERSHIP OFFERING ................................................................................................................................................. 15 APPENDIX A ........................................................................................................................................................................... 16 APPENDIX B ........................................................................................................................................................................... 17

EXECUTIVE SUMMARY
Global corporations face many important IT issues that are impacted by PC cost of ownership. These issues may include the following: Strategy - Implementing global standards Financial - Structural cost reduction Procurement - Implementing best practices; Reducing administrative costs Technology - Information architecture development and implementation; Managing obsolescence; Application deployment and portfolio management Services - Maintaining or enhancing service levels Asset Management - Asset tracking; Usage optimisation; Disposal of end-of-life assets Risk Mitigation - Sourcing strategies, vendor switching costs According to surveys, the three dominant issues facing CIO's today are 1) Cost management and/or cost reduction, 2) Maintaining or improving service levels to end users, and 3) Risk Mitigation. These issues seem to be in conflict with one another. That is, it would seem to be impossible to improve service levels while reducing costs and without increased risk. This is especially true when implementing PCs in a business environment, where many costs are hidden and the complexity of the infrastructure makes support difficult. Consulting studies have shown that, in addition to the key issues of cost reduction and service level enhancement, corporations are also increasingly concerned about risks associated with PC-related lifecycle activities (i.e. vendor relationship management, contract management, supply, and so forth). In order to successfully address these critical issues, it is important to know all costs associated with owning and managing PCs (includes laptops) within the enterprise. Understanding these costs facilitates effective management of the IT infrastructure and enables significant, cost-saving business decisions. Not understanding these costs may lead to poor management decisions, higher risk, and higher costs. The greatest cost saving opportunities are realized by focusing on lifecycle processes including planning, procurement, deployment, steady-state support, asset management, and disposal. There are a number of companies that have developed TCO (total cost of ownership)-related technologies that are designed to reduce the administrative cost for deploying and managing PCs, including SECG, LANDesk, and Microsoft. The Strategic Enterprise Consulting Group (SECG) is also a leader in championing and implementing key end-to-end best practices that, when deployed in an integrated fashion, lead to substantial cost reduction opportunities while enhancing service levels and improving customer satisfaction. These PC lifecycle best-practices include: Strategic procurement (Includes process automation, standardization, single sourcing, volume procurement, lifecycle optimization, and leasing) Push deployment strategy (A strategy for managing rollouts which removes end-users from the procurement process, eliminates the concept of order cycle time, facilitates rapid deployment, and results in high structural cost savings and increased customer satisfaction) Autonomic Solutions Architecture (Advanced technologies that reduce administrative costs of deployment and management of a PC throughout its lifecycle. Linkage elements include: Systems Management (migration, manageability, image management), wireless, and security) Enterprise-wide Asset Management (Includes the implementation of an enterprise-wide asset data repository which is linked to the procurement process for asset data capture) SECG proposes a value proposition, based on the technologies and practices mentioned above, that could yield hard cost savings of up to US$250 PC per year. This value proposition includes: Market leading PC manageability, security, and wireless technologies Globally integrated products - models, warranties Optimized supply model - direct fulfillment, logistics management, global supply priority Push model deployment strategy - managed rollouts, lifecycle optimization Integrated procurement and asset management system - automated processes, enterprise-wide asset data repository, links to other systems Flexible financials - multiple price-indexing models, comprehensive financing, tax mitigation, and billing options Program Management - single-point-of-contact (SPOC), end-to-end project management, virtual project office 3

The financial aspects of this value proposition are based on the total estimated worldwide PC volume within your company and assume optimal usage of the proposed combination of technology, services, and financing. The ability to implement best practices from an integrated, end-to-end perspective differentiates a company from its competition. Independent watch-groups and consultants consistently validate this statement. A customer organization should seek out vendors whose strengths include the following: Differentiated products Breadth of technology Market leadership in PC manageability Extensive service, support and solutions capabilities Global resources Extensive enterprise experience SECG is committed to helping your company reduce its PC total cost of ownership. SECGs unique financial models and considerable intellectual capital can be used to help your company build a compelling business case for the implementation of PC lifecycle best practices resulting in considerable structural cost savings and improved customer satisfaction.

PRODUCT LIFECYCLE BEST PRACTICES

ASSESSMENT Most PC-related cost issues are not directly technology-related. Rather, they are related to the operational management of the distributed environment and how the technology is utilized. The SECG Value Proposition can best be implemented after we have gained a thorough understanding of the related issues of Lifecycle Management within your organization. Elements of the assessment component of the SECG Value Proposition include a PC lifecycle cost assessment, asset management assessment, physical security evaluation, problem management overview, and service level agreement review. PC Lifecycle Cost Analysis The SECG Value Proposition includes a comprehensive PC lifecycle cost assessment. Key components of this TCO analysis will include the following: Identify the key charts of accounts for a PC lifecycle cost assessment. Document and validate current processes and practices. Identify hidden or shadow processes that might exist Examine all processes and technologies for process time reduction and service cost reduction opportunities. Perform an analysis of lifecycle costs, including planning, procurement, deployment, steady-state support, and asset management processes at your company. Process costs will be quantified (including shadow processes) based on customer-supplied data. Systems Management Tools Validation Prototype - new systems will be deployed within your organization, using advanced systems management tools and capabilities, as well as IT advances currently in place. The prototype will demonstrate and validate projected savings from the lifecycle cost analysis. Develop a road map to guide your company toward best practices implementation. Asset Management Assessment The existing processes and operational activities are evaluated and advice is given on the necessary scope of work for an asset management service implementation to complement the existing organization. Security Evaluation An assessment of the existing asset-related security practices is performed and opportunities to improve asset protection are identified. Problem Management Overview Break/fix (maintenance) contracts and processes are analyzed for improvement opportunities. Service Level Agreements Review Existing Service Level Agreements (SLAs) are reviewed (including related third party SLAs) and recommendations are made for improving service levels via specific asset management services within the Value Proposition. PUSH MODEL DEPLOYMENT STRATEGY The push model deployment strategy is based on the following: Advanced aggregate planning and forecasting Procurement automation Business-driven standards Single sourcing of supply Large volume asset refreshes This strategy differs from typical transaction-oriented procurement systems where planning is limited and forecasting is highly inaccurate. End-users of a typical company or organization play a major role in a transaction-oriented procurement environment, which results in considerable customization at the user level and drives support costs up. The push model involves deployment of standards that are based on business requirements. The product mix is determined by job type rather than user preference. The end-user is, therefore, removed from the procurement process altogether. This greatly simplifies the procurement process and reduces costs. As well, when large volumes of PCs are acquired via a push approach, the procurement cost per PC is essentially eliminated. This is because the one-time procurement cost is spread over many machines. 5

LIFECYCLE OPTIMIZATION Lifecycle optimization is the determination of the duration of time that a PC should be deployed within an enterprise coupled with an operating discipline that manages process elements of the entire PC lifecycle. SECG has developed a Lifecycle Cost Model that has been used to determine the optimum life of PCs when deployed in a networked, corporate environment. The typical optimum lifecycle for PCs in a networked, corporate environment is three years (For more detailed discussion, refer to the Business Case section, below.) Components of the lifecycle cost model include: procurement, configuration, IMAC (installation, moves, adds, changes), break/fix, and disposal. Turning over inventory at the optimal lifecycle point all but eliminates upgrade costs and has a substantial impact on break/fix costs. Optimizing the lifecycle, by eliminating hardware upgrades and limiting break/fix activity to warranty service only, can result in substantial incremental annual hard cost savings for a typical company. The SECG Lifecycle Cost Model is also useful for business case justification of initiatives such as full or partial asset refreshes, global standards development, and consolidation of end user services such as, help desk, servers, e-mail, and internet/intranet. In addition, this model is also useful in making single sourcing and lease versus buy decisions, and in performing brand value comparisons. SECGs Value Proposition to your company recommends optimizing the lifecycle of PCs to be deployed in a push strategy. PCs will be deployed in a big bang asset refresh fashion and replaced every three years as prescribed by the optimum lifecycle. During that period, PCs will be managed to minimize break/fix charges over and above warranty service levels and to limit the number of hardware upgrades allowed. BEST PRACTICES PROCUREMENT AND ASSET MANAGEMENT SYSTEM SECGs Value Proposition includes the implementation of both web-enabled and client/server-based systems that significantly enhance and automate enterprise processes and operations in both the areas of asset acquisition and asset management. SECGs acquisition services are designed to facilitate the procurement of leased and/or purchased technology assets via electronic linkages to the manufacturer, a preferred vendor/manufacturer, and/or leasing company. These services are supported by integrated applications, a substantial item product information catalog, and a dedicated team of people. This team performs and manages the acquisition process of distributed computing products while reducing costs, streamlining administrative activities and delivering detailed asset information. SECGs Acquisition Systems have the following functionality specific to your company: View company standards for HW/SW configurations of systems and peripherals along with company-specific pricing Create product requisitions and orders Tiered approval features Review the status of a pending order Check status of approved orders Review estimated ship dates for ordered products Additional benefits of the proposed acquisition system include the following major components: Order tracking Order discrepancy resolution Confirmation of order placement with estimated ship date Notification of vendor change requests Processing of your company change order requests Verification of equipment shipment with supplier Processing of RMAs (Return Merchandise Authorizations) for incorrect shipments Coordination of order placement and delivery for approved orders Notification of any constrained hardware, off-the-shelf software or services which will affect the delivery schedule. Facilitate resolution with appropriate vendors. Full and complete invoice reconciliation Ensuring that data regarding new assets is updated in the asset management repository.

In conjunction with the previously mentioned asset acquisition system, SECG proposes the implementation of a closely integrated asset management system that enables comprehensive tracking and management of all technology assets within the enterprise. This asset management system is more than a simple repository and provides for advanced decision support to your company or organization management team and administrators. In brief, this robust client/server system aggregates all relevant asset data at the time of initial acquisition, delivery, and installation, and integrates this data into a comprehensive asset management database. Once part of the system, the assets are tracked and managed throughout the entire lifecycle. All of the relevant data and events that occur during the asset lifecycle are captured and updated and made accessible via this system. In addition to on-line view of asset records, advanced asset reporting is available from this system to aid in enterprise management and decision support. The reporting function has been determined to significantly enhance enterprise planning, forecasting and project related initiatives such as technology migrations. In addition to maintenance data and history by serial number the following major data elements are available via such a system and will enable your company organization to maintain a broad view of their desktop assets: Hardware Component level detail Acquisition information Installation information User information and location Software version level License compliance Upgrade planning control Standards enforcement Change management Manage lifecycle events Re-deploy assets and components Global change capabilities Warranty/maintenance Warranty terms Warranty status Maintenance tracking Warranty/maintenance contact Financial and leasing Present value of lease rentals Gross remaining rentals Depreciation Net book value Charge-backs Manage lease schedules Commencement and termination dates End-user skills Course and skill inventory Course and skill assessments Costs for skills training User profile

Your company will have access to more than a large number of data elements relevant to end-users and technology assets and access to more many standard search and report capabilities pertaining to your company enterprise desktop asset environment. FINANCIALS For managed rollouts, it is important to establish pricing agreements that help guarantee competitive pricing throughout the term of the contract. SECG offers several price-indexing models including transaction or special bid pricing, relationship (or fixed discount) pricing, benchmark pricing (based on third party indices, such as IDC), and cost plus pricing. Your company will receive the best pricing on your company PC hardware standards, while obtaining equally competitive pricing for nonstandard purchases. Price per Seat financing (hardware and services) is also a potential financial component of SECGs Value Proposition to your company. In conjunction with global financing companies, SECG is uniquely positioned to offer a comprehensive financing solution for your multinational PC financing requirements. The best technology financing companies provide in-country financing in many countries, with offshore financing available in several additional countries where lease financing is not legal. A single worldwide master lease agreement, written in English, provides consistent lease terms and conditions around the world. One advantage of this agreement is the ability to perform cross-border transfers of PCs within your company. A PC asset can be moved across country borders without the termination of the lease agreement and the associated termination penalties. 7

Rather, the lease in the original country is terminated and re-established in the new country under the lease terms and conditions for the new country. Other flexible lease features include like-for-like exchange at the end of the lease, subleasing, and technology exchange options. SUPPLY MODEL SECG assists customers to select a global vendor with significant presence and resources in all geographies, including North America, Europe/Middle East/Africa (EMEA), Asia Pacific North (AP-N), Asia Pacific South (AP-S), and Latin America (LA). Such vendors provide Global Priority Supply Programs. Such a program is designed to facilitate consistent, preferential treatment of supply and worldwide. The advantage to your company is that supply is reserved in each geography/ country specifically for your company. If a product is constrained in some way, the vendor will provide a substitute of equal or greater value. The supply component of the SECG Value Proposition to your company includes a direct fulfillment model. Product will be shipped to your company locations directly from the vendor manufacturing site. The rollout assessment, however, may identify cases where business partners should be used in the fulfillment process in order to deliver the best value to your company. The fulfillment model for your company will be optimized for a managed rollout. INTEGRATED ASSET MANAGEMENT AND SUPPORT SERVICES SECG can provide your company with an integrated, modular solution that supports all or selected aspects of asset control as summarized below. Single-Point-Of-Contact/Virtual Program Office The SECG Value Proposition provides a single-point-of-contact (SPOC) for issues related to assets that are placed under asset management control. The SPOC concept provides vendor and supplier/distributor-independent control over all asset management processes as well. In addition to conventional communication methods, SPOC services will also be made available by way of a web-based Virtual Program Office. The Virtual Program Office (VPO) will function as the "control center" for the management, execution, and support of your company/SECG Master Agreement. This includes vendorindependent management of client contracts for hardware and software, facilitation and coordination of the rollout, coordination of problem and warranty handling, MACs (moves adds, changes), lifecycle management, and protective maintenance coordination. The VPO will be structured to provide appropriate and interactive channels for communications, issue reporting and resolution, status reporting, and general project-related discussion. Rollout Key elements of SECGs rollout strategy include implementation planning, site readiness assessment, pre-delivery preparation, installation, and post-implementation support. Major objectives of the rollout will be to minimize business disruption during the deployment, ensure consistency and quality of the products and services being deployed, adhere to schedules, and utilize proven processes and methodologies. The SECG Value Proposition includes rollout of the desktops and servers in the client environment in close cooperation with our logistics partners. The rollout will leverage systems management and advanced management technologies to facilitate the deployment. Problem Management or Break/Fix Involves support by facilitating a replacement (swap) strategy as the solution to improvement of the desktop availability. All repairs are handled off-site, without a user waiting for the return of his desktop. Change (MAC) Management Supported by web-based technology for easy access and coordination of all asset-related changes including physical delivery, moves, adds, and changes on site for both hardware and software. Software Control An implementation, based on a DSL (Definitive Software Library), where all platform-certified production software is collected for distribution and version control purposes. Software Distribution This is performed either at the point of distribution, or directly at the target site, using the closest Enterprise Management gateways or local file server. In case remote access is not possible or included in the scope, the local activities by client or contractor personnel can be coordinated. 8

Physical Security This involves asset protection, implementation, and integration with the enterprise asset repository, in order to lower risk of theft. Testing and Certification SECG works with hardware vendors to handle testing and certification of standard and non-standard software and hardware as support for the change and software distribution process. The goal is to verify the compatibility of hardware and software to customer-specific configurations, test existing customer images on new hardware, and provide the linkages to logistics partners in support of product fulfillment objectives.

BUSINESS CASE
According to surveys, the three dominant issues facing CIO's today are 1) Cost management and/or cost reduction, 2) Maintaining or improving service levels to end users, and 3) Risk Mitigation. These issues seem to be in conflict with one another. That is, it would seem to be impossible to improve service levels while reducing costs and without increased risk. This is especially true when implementing PCs in a business environment, where many costs are hidden and the complexity of the infrastructure makes support difficult. In order to successfully address these critical issues, it is important to know all costs associated with ownership of a PC. The Total Cost of Ownership (TCO) of a PC describes the hard and soft costs associated with the owning, operation, and disposal of a PC asset in a business environment throughout its lifecycle. Understanding these costs facilitates management of the IT infrastructure and enables significant, cost-saving business decisions. Not understanding the total cost of ownership of a PC may lead to poor management decisions, higher risk, and higher costs. TCO information is most effective when viewed from an end-to-end asset management perspective. The figure, below, is a simple representation of the full lifecycle process. The greatest cost saving opportunities are realized by focusing on the complete end-to-end process.
Planning/Forecasting Steady-State Disposal Procurement

Configuration & Installation

The greatest cost saving opportunities are realized by focusing on lifecycle processes including procurement, deployment, and asset management. Implementing key end-to-end best practices can, when deployed in an integrated fashion, lead to substantial cost reduction opportunities while enhancing service levels and improving customer satisfaction. These PC lifecycle best-practices include: Strategic procurement (includes process automation, standardization, single sourcing, volume procurement, lifecycle optimization, and leasing) Push deployment strategy (removes end-users from the procurement process, eliminates the concept of order cycle time, facilitates rapid deployment, and results in high structural cost savings and increased customer satisfaction) Autonomic Solutions Architecture (Advanced technologies that reduce administrative costs of deployment and management of a PC throughout its lifecycle. Linkage elements include: Systems Management (migration, manageability, image management), wireless, and security) Enterprise-wide Asset Management (links procurement process and facilitates optimization of PC usage) STRATEGIC PROCUREMENT Strategic Procurement involves an evolution of opportunities, with progressively increasing cost savings potential, including: Process Automation Standardization Single Sourcing Volume Procurement (versus transactional) Lifecycle optimization Lease Financing (versus purchasing) Process Automation Process automation is highly beneficial for companies that employ a transaction-oriented procurement process. Elements of best in class procurement systems include order entry, confirmation/ review, status tracking, reconciliation, receipt verification, asset data capture, and reporting. Typical companies spend between 6% and 10% of the hardware cost on procurement activities. These expenditures are over and above the actual hardware cost. Process automation can generally reduce those costs to less than 3% of the hardware cost.

10

Standardization Standardization impacts IT administrative costs. Standardization reduces redundancy in support services and facilitates improved services. Because of the reduced complexity of the environment, maintenance and support costs are lower up to 25%. It is recommended that companies establish two to three standard specifications that are based on specific requirements of the strategic business units within the corporation. The key to realizing the savings and benefits of standards will be the development of an operating discipline that motivates compliance to these standards with limited exceptions. Single Sourcing Single sourcing, is defined as the deployment of product from a single manufacturer, and can lower procurement costs, IT administrative costs, and disposal costs. Additional benefits include simplified supplier relationship management (one set of briefings, one set of evaluation units, etc.), a less complex service environment (one set of spares, fewer parts, etc.), and technology advantages, such as deployment automation and built-in software distribution. As part of its value proposition to your company, SECG assists its customers to establish unique price indexing mechanism and supply guarantees that help to mitigate the perceived risks of selecting a single supplier. Volume Procurement Volume procurement can lead to additional hardware cost savings. Vendors generally can realize greater efficiencies in manufacturing and fulfillment processes, which translate into lower hardware costs for their customers. Process and administrative costs are positively impacted as well. Traditional transactional procurement environments amplify inefficiencies in forecasting and procurement activities. Volume procurement reduces procurement and IT administrative costs by spreading them over a large number of units. This will benefit your company by improving forecasting and lowering effective order cycle times. Lifecycle Optimization The optimum lifecycle of a PC is the duration of time that a PC should be deployed within an enterprise. Determining the optimum lifecycle of a PC can result in considerable cost avoidance. Components of the SECG lifecycle cost model include the hardware price, planning, procurement cost, deployment (includes image development and maintenance, configuration, and installation costs), steady-state support (includes hardware upgrade costs and the associated labor to install them, and break/fix costs (warranty uplifts and post-warranty costs)), and disposal costs. SECG has demonstrated that, by viewing these costs from a cash flow perspective, on an equivalent uniform annualized basis, it is possible to identify the optimum lifecycle of a PC. SECG studies have shown that the optimum lifecycle of a PC (includes notebooks) is approximately three years. This is not surprising, in that the typical warranty is also three years. After the warranty expires, break/fix costs go up and continue to rise, year after year, as parts become harder to acquire. In addition, as the hardware ages, upgrade activity increases. Turning over inventory at the optimal lifecycle point virtually eliminates upgrade costs and has a substantial impact on break/fix costs. Optimizing the lifecycle, by eliminating hardware upgrades and limiting break/fix activity to warranty service only, can result in substantial incremental annual hard cost savings for your company. Financing Financing is the final element of the strategic procurement formula being recommended for your company. An operating lease can be attractive from a financial and an administrative standpoint. Under an operating lease, the procurement transaction becomes an off-balance sheet expense. This type of expense lends itself well to an activity-based costing environment and simplifies charge-back administration. Incremental annual cost savings for an operating lease can be substantial. On top of savings potential, operating leases also offer administrative benefits as well. Leasing provides the mechanism for managing obsolescence of the technology. Disposal of the equipment at end-of-lease is built into the model. Leasing also eliminates the need to pay property taxes for PCs and eliminates administrative cost incurred for managing property records. Lease terms have become flexible, with options such as, like-for-like exchange at the end of the lease and cross border lease transfers.

11

Additional financial benefits are achieved with an on-demand-like price per seat model, which allows the customer to bundle hardware and services together. The customer does not own the PC asset. Rather, the customer receives a single invoice per PC on a monthly basis for the duration of the PC lifecycle. Invoices for hardware and services are consolidated into a single invoice. As well, and perhaps most importantly, the customer has the flexibility to both increase in size and number of assets or decrease in number without the payment of termination penalties. The assets simply are taken away and the monthly invoice ceases. PUSH DEPLOYMENT STRATEGY The second best practice is based on a push deployment strategy. It involves advanced aggregate planning, procurement automation, business-driven standards, single sourcing, and large volume asset replacement. This strategy removes the end user from the procurement process. In the push strategy, PC deployment is based on business need and job as opposed to individual user preference. This strategy requires the deployment of a volume or systems-type procurement methodology as opposed to a transaction-type procurement system. Advanced aggregate planning and forecasting is a key component of the push implementation strategy, with the benefit being the perceived reduction in order cycle time. Because advanced planning is required and implementation is done in a big bang (total asset refresh) approach, the procurement costs per PC are essentially eliminated. This is because one time procurement costs are spread over a large volume of PCs. The push deployment strategy lends itself to lifecycle optimization. Compliance with a strict operating discipline for managing the lifecycle as described above yields considerable financial benefits. The push deployment strategy also favors rapid implementation. This leads to high customer satisfaction ratings usually a 2X improvement over tactical buying customer satisfaction ratings. Through the implementation of the push strategy, it is therefore possible to reduce costs while increasing service levels. Conservatively estimated, the overall savings that are possible through lifecycle optimization in a push implementation strategy and the implementation of universal management technologies can be as much as US$200 to US$250 per PC per year for a typical company. AUTONOMIC SOLUTION ARCHITECTURE Development of an Autonomic Solution Architecture consist of implementation of advanced technologies that reduce administrative costs of deployment and management of a PC throughout its lifecycle. Linkage elements include: Systems Management (migration, manageability, and image management), wireless, and security. Advanced systems management technologies feed the concept of autonomic computing; that is, having the automatic capability of self diagnosis, self-healing, and connectivity. Some of these types of technologies include: Client Recovery and Rescue - Facilitates data recovery and continued operations after catastrophic PC failures. Distributed Wireless Security Auditor (DWSA) Facilitates the detection of "rogue" security risks in wireless networks. Instant Connections - Automatically detects wireless and wired networks and configures the PC to work with them. The benefits of these TCO/technology linkages include increased efficiency, standardization, process automation, and administrative cost reduction, as well as natural links to ESM tools. An assessment, based on Lenovo ThinkVantage and LANDesk technologies, of cost savings for the most fundamental lifecycle processes can be found in Appendix A. This assessment demonstrates that advanced management technologies can result in deployment and asset management savings of close to US$170 over the life of a PC. SECGs technologies, thus, eliminate costs that will otherwise be incurred over and above the hardware price. Wireless networking has emerged as a major enabling technology. Benefits include change management enablement, reduction of cabling costs, asset management simplification, extension of the wireless LAN, replacement of leased lines, facilitation of operating cost reduction in desktop to mobile transition, and facilitation of off-the-books" PC deployment. It is also estimated that wireless nodes can be implemented at a 50% reduction in cost over wired networks. Concurrent with the emergence of wireless networking as a major enabling technology are wireless-related technical solution requirements. These include: Fully integrated antenna design no sacrificing of ports IEEE 802.1x security support 12

Software to automate and simplify mobile connectivity Industry standards compliance - includes multi-vendor interoperability and meet international regulatory requirements Integrated wired and wireless solutions Consulting services

PC-related security has also emerged as a major issue with corporations around the world. Security issues can be broken into two categories: Physical Property Protection Theft Security Breaches Theft The highest cost impact of theft is from loss of proprietary information. PC theft has increased with rise in mobile users. The cost of theft for typical corporations (based on actual cost study data) is approximately US$2.00 per PC per year. Security Breaches Ninety percent of companies have experienced breaches, with seventy-four percent experiencing losses. Losses average US$33.00 per PC per year. These losses can be categorized in terms of tangible and intangible costs: Tangible Costs of a Security Breach - Lost business due to unavailability of breached resources - Lost business traced to customers moving to "safer" environment - Labor and costs associated with detection, containment, and repair - Costs associated with gathering of evidence and prosecution of hackers - Public relations costs - Increased insurance premiums - Legal costs associated with liabilities resulting from breach Intangible Costs of a Security Breach - Loss of customer trust - Loss of business due to bad press - Competitor access to proprietary information Security-related technical solution requirements, based on market assessments include: Hardware-based security (Trusted Computing Group Compliant) Secure storage of user identity, not accessible from memory or from disk drive, built-in smart card function Data Protection dedicated encryption capabilities, secure web browsing Device and user authentication Approved devices identifiable by the network, elimination of hardware tokens, automation of user authentication with biometrics, proximity badges, and password banks. Standards-based Support of industry standard cryptographic interfaces Conservative savings (from the implementation of these technologies) are estimated to be approximately US$21.00 per PC per year. This equates to a 60% reduction of security-related risk. ASSET MANAGEMENT Having established a baseline for the total cost of ownership of a PC within the enterprise, it is crucial to develop a strategy for managing PC assets. Steady-state asset management is a set of business processes, under which the configuration and use of a PC is monitored and controlled. These processes involve the capture of relevant data for PCs and peripherals through the entire lifecycle of a PC, the maintenance and distribution of software, preventive hardware maintenance, lease management, and asset usage optimization. It is important to look at how asset management decisions affect the business environment. Some related activities might span country borders or taxing entities within a country. Some asset management decisions are time-sensitive, with the actions and results being highly dependent on the timing of an event. Effective oversight of the challenges of asset management with an enterprise-wide asset repository and automated processes can result in significant capital and administrative cost savings as well as considerable productivity enhancements. Additional benefits of a comprehensive implementation of integrated asset management tools and processes include shortened delivery cycle times, enhanced decision support, improved up-time, simplification of audits, and improved effectiveness of training programs. Such an integrated solution can yield additional savings on a per PC per year basis, over and above the savings already described from the push implementation strategy. 13

Implementing end-to-end lifecycle management best practices in an integrated fashion will position your company to optimize the usage of the technologies being deployed and realize the maximum cost savings over current practices. BUSINESS CASE SUMMARY The overall business case for a Best Practices environment is summarized below: Implement an integrated procurement and asset management system, including procurement automation and an enterprise-wide asset data repository, integrated with the procurement system, with flexible asset tracking and reporting capabilities. Implement a hybrid ordering strategy that takes advantage of direct ordering from the manufacturer as well as through value-added resellers. Establish a limited number of standards with processes and operating discipline to manage exceptions. Optimize the PC lifecycle by turning over technology within a three-year lifecycle, eliminate hardware upgrades within the optimal lifecycle, and limit break/fix to warranty service only. Utilize flexible financing options to manage the asset and its related services. Implement a push deployment strategy, including advanced aggregate planning and forecasting, definition and implementation of a limited number of standards with limited options, and big bang volume replacement. Exploit SECG advanced management technologies to reduce administrative cost in the areas of procurement, deployment, steady-state asset management, and disposal. SECG is uniquely positioned to implement this business case, from a products and services perspective, in an integrated fashion. In addition to SECGs capability to deliver a complete end-to-end asset management solution, SECG differentiates itself from its competition in its ability to provide value-added services and capabilities for each of the best practices that comprise the business case above. A complete listing of these differentiators can be found in Appendix B.

14

PARTNERSHIP OFFERING
As discussed in the previous section, the implementation of Total Cost of Ownership (TCO) methodologies and practices offers your company the potential for significant savings. In the interest of assisting your company in achieving the benefits offered by our industry leading TCO capabilities, SECG is offering to participate, with substantial resources, in a joint shared risk/shared reward project, which would facilitate your realization of these savings. We are proposing that your company and SECG enter into an agreement wherein your company will commit, in principle, to implement the elements of the SECG Value proposition. In return SECG will commit to provide the following to your company: Single Point of Contact Strategic Enterprise Consulting Group Business Case Development PC Lifecycle Cost Assessment - Includes a benchmarking assessment of procurement, deployment, and asset management processes at your company or organization. SECG will quantify process costs (including shadow processes) based on customer-supplied data. With validated baseline costs, it is possible to evaluate practical application of PC-related best practices, such as process automation with low-level systems management tools, transitioning to a more mobile work environment, and price per seat. Vendor Transition Guarantee SECG offers to assist its customers in mitigating risk and switching costs in transitioning to SECG as the principle vendor. This includes documentation and validation of actual as is customer process costs, calculation of transition cost and associated risk based on a combined customer/SECG assessment, and provision of consulting assistance and services designed to mitigate transition cost resources will be applied as required (i.e. Self-maintainer training & certification, systems management script translation, etc.) Rollout Deployment Planning SECG will conduct a two-day seminar, the purpose of which is to provide knowledge transfer of best practices associated with managed PC rollouts. Key issues and roadblocks will be identified and high level plans developed. Applications Portfolio Planning SECG will conduct a two-day seminar to outline application portfolio issues and strategies that may be impacted by best practices rollouts Transition Support and Technical Support Plan Hand-off from SECG sales support to long-term support programs. Process Reengineering/Architectural Solution Design Process design and operating discipline for the deployment of TCO-related advanced management technologies, including vertical integration with server solutions. Training Roadmap Includes identification of critical skills and on-site skills transfer sessions. Global Account Management Fulfillment, tax mitigation, regional issues Hardware Pricing Optimization Via indexing and fulfillment management Services Sourcing Pricing based on prototype and integrated test - Project Management - Deployment Services - Disposal Management TCO-related Savings Guarantee SECG will back up its partnership agreement with the vendor with a written commitment to achieve a specific level of cost savings, based on the lifecycle consulting studies that are performed.

15

APPENDIX A
THINKVANTAGE ADVANCED MANAGEMENT TECHNOLOGIES - COST SAVINGS ESTIMATES Process Procurement (order entry, confirmation/ review, status tracking, reconciliation, reporting) Savings US$50/PC Tool Direct Access Assumptions Typical procurement costs are 6-10% of hardware cost. Fifty- percent reduction in procurement costs can be achieved through process automation. Nominal reduction of 60 to 80 minutes off of standard processes. Manual process: 15 minutes; Automated process: <3 minutes Manual process: 10 minutes Automated process: <2 minutes Less than 6% of PCs require BIOS refresh, configuration recovery, or restoration of image load. Assume one hour of labor to perform restore or recovery operation manually. Less than five minutes when automated. Sixty-five to seventy percent of users require some level of remote support once per year. The typical process (including travel time) requires one hour. Assume that remote control results in a fifty percent reduction in support time. Eighteen to twenty percent of user base is involved in a MAC each year. SMA is used to capture and transfer data. Manual process = 60 minutes Automated process < 20 minutes Manual disk erase and file transfer (including travel time) = 1 hour. Automated process = 15 minutes

Configuration/Installation

US$100/PC

Receipt Verification

US$15/PC

IUB , SMA, LANDesk, Wake-on LAN AIC, AssetID

Asset Data Capture/Tagging

US$10/PC

AIC, AssetID,

Support (Configuration Restore, Recovery)

US$5/PC/Year

Rescue & Recovery

Support (Remote Control)

US$25/PC/Year

LANDesk

MAC (Moves, adds, changes)

US$10/PC/Year

SMA

Disposal

US$55/PC

WOL, LANDesk

General Assumption: Labor rate: US$75/hour fully burdened Total estimated savings = US$270 (over life of a PC) Estimated annualized savings = US$106 per year (assume typical cost of capital and tax rates)

16

APPENDIX B
SECG VALUE-ADD END-TO-END BEST PRACTICES Strategic Procurement Order Process Automation - A single front end for cataloging and order placement/tracking (including third party components) - Order Review - Partial orders - Invoice reconciliation - SLA/Vendor management - Asset data repository feeds Standardization Global product offerings Single Sourcing Price indexing (multiple options) Volume Procurement Global Priority Supply Lifecycle Optimization Business case justification; unique financial models Leasing Flexible lease options (i.e. like-for-like exchanges, cross-border lease transfers, etc.) Push versus Pull Vendor Imaging Technology Center Global Program Management Expertise and Intellectual Capital Rapid Deployment Expertise (Technology-assisted) SECG/Vendor HelpCenter - Technical Support (7 day x 24 hour) International Warranties Autonomic Solution Architecture Integrated across desktop, notebook, and server lines LANDesk Suite with ThinkVantage Technologies, Microsoft, etc. Integration to other ESM solutions: Tivoli, HP OpenView, CA, SMS Resource teams for solution design and implementation World-renown TCO/Asset Management consulting expertise Enterprise-wide Asset Data Repository Strategic links to enterprise systems management tools Full-featured: Hardware, software, demographics, financial, warranty Integrated solution: direct feeds of procurement (and lease) data Linked to key Help Desk solutions

17