Lower TCO of Sun technology finds favour with International Healthcare Distributors

Spending more up-front to reduce costs over the long-term is not often an option taken by companies struggling to cope in a difficult economic environment. However, while the trend is towards controlling immediate costs by restricting spending, one company has taken a long-term view of its Sun technology upgrade, spending more than double the amount initially expected, to deliver a lower projected total cost of ownership (TCO) over a five-year term.

And it did this with the express approval of its finance department.

When pharmaceutical products distributor International Healthcare Distributors (IHD) required an upgrade to its technology infrastructure, it engaged Sun Microsystems SA, Sun partner African Legend (AL) Indigo and technology investment evaluation specialist Winslow Consulting Group (WCG) to provide a solution, says Ian Bezuidenhout, IS operations manager at IHD.

"We were prepared to invest more than our initial budget after considering the long-term implications of retaining ageing technology, and a TCO exercise conducted by the finance department proved to IHD that changing two old enterprise servers with new workgroup servers, will have an immediate and long-term saving on the bottom line," says Bezuidenhout.

Isabel Labuschagne, IHD finance manager, explains: "We were running older technology that was very costly to maintain. By upgrading to the new systems, we will benefit from exceptionally good maintenance charges over a five-year period. Based on these facts, choosing to spend a larger upfront sum was not a difficult decision to make."

Bezuidenhout says the company has long been a Sun customer. "We have been using Sun equipment since 1993, and as the load on our business systems increased, we had to look at introducing new systems," he says.

The company runs a sophisticated distribution operation for some of the world's best-known pharmaceutical companies. With two shifts operating from early in the morning to late at night, Bezuidenhout says the company was beginning to experience performance problems resulting in extended operating hours for warehouse staff.

"From initially looking at a system upgrade, the TCO calculation presented by WCG, demonstrated that a full technology refresh would be slightly over budget in the first year only, and well within budget for the next four," he says.

According to Andrew Bennett, account manager at Sun Microsystems SA, the TCO calculation was a key motivator in closing the deal. "We brought in WCG to take a look at the cost implications of an upgrade versus a technology refresh from a five-year TCO perspective," he says.

Patrick Kuwana, regional director of WCG, acknowledges that the term TCO has been badly misused in the world of technology sales. "However, when WCG speaks of TCO, or other metrics such as ROI, NPV, IRR, etc, we derive our costs and calculations directly from the balance sheet. We take real-world financial information from the client to deliver accurate and reliable information instead of simply dropping an impressive-sounding acronym," he says.

Kuwana says the results of the study clearly demonstrated in rand terms that replacement of IHD's IT environment would ultimately reduce the overall cost of its infrastructure with a positive ROI and cash flow over five years.

Bennett notes that older technology costs more to maintain than newer equipment, while application performance is also considerably improved by leveraging new technology.

"The vision of IHD in considering not only what its requirements are today, but considering what they may be in the future, will ultimately save the organisation a considerable amount over the lifespan of its equipment," he says.

The solution supplied to IHD includes Sun Fire V880 servers and StorEdge 3510 storage arrays. Bennett adds that Sun arranged a buy-back of the company's legacy equipment, further reducing the cost of the solution.

"Sun's goal is to reduce the cost of reliable, high performance computing in its quest to deliver computing as a service. The fact that an independent technology investment evaluation specialist has confirmed our claim that Sun technology provides real savings is a feather in our cap, which we think proves that we are putting our customers' requirements first," Bennett concludes.