Total cost of ownership

XPLORE TECHNOLOGIES WHITE PAPER RUGGED VS. CONSUMER TABLETS: IMPORTANT CONSIDERATIONS FOR THE TOTAL COST OF OWNERSHIP

“Research shows that tablet computers are experiencing a period of rapid growth with a compounded annual growth rate of 81% forecasted from 2010 to 2015, according to a recent report by IC Insights” Mobile computing is becoming more prevalent in the enterprise today as consumers ranging from executives in the C-Suite to forklift operators in a warehouse use a mobile computing device to carry out their jobs. Mobility is the key to advancement, power and efficiency for both consumers and companies.

The introduction of the Apple iPad® propelled the popularity of tablet computers in the enterprise, even though rugged tablets have been around and in use for many years. The big question is will the tablet computer become the default device for a company’s mobile users? And perhaps more importantly for some; how will the deployment of tablet computers in the enterprise affect a company’s bottom line?

Many companies in the mobile enterprise are acting quickly to deploy touch-screen tablets for their employees. Research shows that tablet computers are experiencing a period of rapid growth with a compounded annual growth rate of 81% forecasted from 2010 to 2015, according to a recent report by IC Insights. In its 2011 Annual Report for Mobile Devices for Enterprise and Government Mobility Applications, VDC Research’s Mobile and Wireless Practice also found that the outlook for mobile devices is bright with a continued uplift expected through 2015.

THE NUMBER OF MOBILE USERS IN THE ENTERPRISE IS GROWING According to iGR, an independent research organization, in May 2011 there were an estimated 75.3 million U.S. mobile users. iGR’s model suggests that number will increase to 78.2 million by 2015. Of that number, approximately one-third fall in rugged mobile sectors such as mining, utilities, construction, manufacturing, transportation & warehousing and federal, state and local government.

This growth of a mobile workforce is coinciding with the growth of tablet computing. For example, VDC’s analyst David Krebs in a recent webinar highlighted that VDC expects 55 million tablet computers to ship in 2011 of which 25% are for enterprise purposes. While rugged tablets are not new to the marketplace, the driving force behind the growth of tablet computing in the enterprise is that fact that tablet computers today are powerful devices that are built tougher, lighter and can carry out mission critical applications resulting in less downtime for employees. With this type of growth in terms of employees as well as tablets, companies need to consider the Total Cost of Ownership (TCO) when making the decision to purchase tablets for their mobile workforce.

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RUGGED VS. CONSUMER TABLETS: IMPORTANT CONSIDERATIONS FOR THE TOTAL COST OF OWNERSHIP

DECIDING ON RUGGED VS. CONSUMER TABLET When it comes to deciding between a consumer tablet and a rugged tablet one should consider the following:

FINANCIAL CONSIDERATIONS “VDC concluded that some companies forgo TCO analysis and opt for consumer-grade devices because they underestimate the hazards to which their mobile devices will be exposed, and therefore their rugged needs.”

OPERATIONS

FUNCTIONALITY

FINANCIAL CONSIDERATIONS Certain mobile employees work in situations that require computers that can withstand vibrations, heat, cold, liquids or specific hazardous situations. In those cases, consumer tablets simply will not stand up hazardous situations. In those cases, consumer tablets simply will not stand up to those requirements.

Certain industries have found that consumer tablets may look attractive initially but further investigation shows they lack the ability to be used day-in-and-day out and withstand the environment in which they will operate. Not only do consumer devices fail up to four times more often than enterprise-class devices, but each failure results in longer stretches of lost productivity and more IT support time to resolve. VDC concluded that some companies forgo TCO analysis and opt for consumer-grade devices because they underestimate the hazards to which their mobile devices will be exposed, and therefore their rugged needs. And even among companies who use TCO analysis, most dramatically underestimate the failure rates, replacement costs and productivity impact on their business. That’s why rugged tablets are being heavily deployed in the following fields: direct store delivery, field service, transportation and logistics, warehousing, manufacturing and distribution, and certain governmental operations in federal, state and local government.

In some cases, a rugged computer may be the better choice because it is designed specifically to withstand harsh challenging conditions such as: vibrations, immersion in water, dust and tiny particulates entering the actual computer, outdoor weather issues, etc. Once the decision is made to consider rugged tablets because of the type of operations in which the units will be used, you will find that there are a number of suppliers of these types of computers. Rugged Tablet PCs are not new. Companies, government agencies and the US military have used these computers for decades. And as technology and software has evolved the rugged tablet PCs have gained extraordinary power and performance and are stronger and more rugged than ever. These

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RUGGED VS. CONSUMER TABLETS: IMPORTANT CONSIDERATIONS FOR THE TOTAL COST OF OWNERSHIP

“Gartner recommends that clients deploying applications on a ruggedized device primarily consider only Windows platforms to reduce project risk….Other options present a high degree of risk for buyers because of the small number of vendors producing those products.” are ultra-mobile, tough and customer-engineered, specifically designed for use in mission-critical applications.

How do you go about choosing a rugged tablet? It is important to be clear about what rugged is and what rugged is not. A truly “rugged” Tablet PC is critical for tough, rough and harsh environments whether inside or outside. Look for a tablet that has both an IP rating as well as a MIL-STD-810G rating. The IP rating is the Ingress Protection rating, which is a rating that specifies the environmental protection provided by the casing on the computer. For most rugged computers, the IP rating consists of two numbers – the first reflects protection against solid objects and the higher the number the more protection afforded. The second number represents protection against liquids with a higher number representing more protection. The scale runs from 0 to 6 for the first number and 0 to 8 for the second. Therefore, a computer with an IP rating of 67 would be a very, very rugged computer offering significant protection, while a computer with an IP rating of 24 would offer only limited protection.

The second rating that is important when considering a rugged tablet is the MIL-STD-810G standard, which specifies a variety of environmental tests that manufacturers use to prove that their rugged computers, including tablets, are truly rugged. Among the tests are those that demonstrate the effects of altitude, extreme temperatures, rain, humidity, sand, dust, shock, vibration and numerous other conditions.

VDC Research considers systems that conform to the MIL-STD-810G standard to be fully rugged.

OPERATIONS Presumably the most important features on a rugged computer is the operating system and applications, and what can and can’t be installed, managed, updated, upgraded and used every day by mobile employees. Some tablet PCs operate using Microsoft® Windows® OS and applications, thereby streamlining enterprise administration and management while providing end-users software that is already familiar to them. It’s important that the operating system be as robust as possible to support the software that you will want your employees to use. This is a key difference between consumer tablets, which are more media-centered compared to rugged tablets, which are powerful PCs tailored to their field. As the use of consumer tablets increases their operating systems will become more capable in the future, however right now there are few consumer tablets with the ability to operate as fast and effectively as their rugged counterparts. Gartner Research emphasized the benefit of using Microsoft Windows for mobility: “Gartner recommends that clients deploying applications on a ruggedized device primarily consider only Windows platforms to reduce project risk….Other options present a high degree of risk for buyers because of the small number of vendors producing those products.”

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RUGGED VS. CONSUMER TABLETS: IMPORTANT CONSIDERATIONS FOR THE TOTAL COST OF OWNERSHIP

FUNCTIONALITY It is important to consider whether to accessorize a tablet with add-ons or to choose integration. Almost all mobile devices today have add-on capabilities. Some industries require multiple add-ons such as a bar code scanner and a receipt printer. The problem with add-ons is that they are separate hardware components and the more add-ons needed the more potential for problems such as complete device fail“One of the benefits ure and significantly reduced battery life. It’s a widely accepted fact that failure rates for accessories and of rugged tablet PCs peripherals added to consumer tablets are higher than those of ruggedized mobile computers. Bolting on is that they have these peripherals can increase the risk of downtime, and in large enterprises, managing tablet PCs and been designed from numerous add-ons can become a logistical and inventory management challenge. the ground up, usually with integrated One of the benefits of rugged tablet PCs is that they have been designed from the ground up, usually components and with integrated components and accessories that seamlessly work together. Rugged computers often accessories that integrate built-in bar codes and RFID scanners, numeric keypads, GPS, WWAN communications and seamlessly work color cameras. Some rugged tablets even have the ability to remove the back of the unit to make specific together.” repairs and changes right in the field, which reduces costly downtime for companies. In some situations, tablets must be mounted in vehicles such as forklifts, trucks, cars, ambulances, etc. The actual mounting system can be designed and integrated specifically to work with the rugged tablet to provide a single reliable system for the task at hand.

CALCULATING THE TOTAL COST OF OWNERSHIP OF A RUGGED TABLET The Total Cost of Ownership (“TCO”) is a financial estimate that helps enterprise managers assess the costs that are related to the purchase of any piece of capital equipment. Ideally, a TCO assessment will offer a final statement that reflects tangible as well as intangible costs associated with the purchase.

Both are important in making the TCO assessment. While the tangible costs are readily apparent (e.g. the cost of the device, software, installation, training, etc.) the often hidden intangible costs are frequently far more important in the long run.

It may be tempting look solely at the actual dollar cost of a rugged tablet vs. a consumer tablet, where the prices vary by thousands of dollars; however there are more important criteria to consider when evaluating which tablet is best for employees.

TANGIBLE AND INTANGIBLE COSTS THAT DETERMINE THE TOTAL COST OF OWNERSHIP TANGIBLE COSTS • • • •

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HARDWARE PURCHASE PRICE UPFRONT FEES INSTALLATION COSTS INTEGRATION COSTS

INTANGIBLE COSTS • • • • • •

EMPLOYEE DOWNTIME IMPACT ON CUSTOMER SERVICE SYSTEM MAINTENCE UPGRADES EMPLOYEE MORALE DATA LOSS

RUGGED VS. CONSUMER TABLETS: IMPORTANT CONSIDERATIONS FOR THE TOTAL COST OF OWNERSHIP

“VDC has estimated that mobile employees on average lose 5080 minutes of productivity when mobile devices fail and this loss of productivity can represent as much as 41 percent of a mobile device’s TCO.” It is vital to have proof of the return on investment (ROI) and a model to validate the TCO of mobile computing. Companies simply cannot invest in mobility and tablet PCs without a clear picture of both shortterm and long-term costs. Oftentimes TCO analyses do not look carefully at the soft costs and variables that can impact the productivity of their Employees. Rather, the “I can buy four consumer tablets for the price of one rugged tablet” mindset tends to be the primary consideration. However, this train of thought can be proven to be very short sighted in the current economic climate.

A recent study produced by VDC reported that nearly 50% of the total cost of using an enterprise mobile computing device is the result of lost worker productivity due to device failure. That is a large number.

VDC also reported that the average annual TCO of ruggedized “large form factor devices” which would include rugged tablets is $2,814. And, their analysis takes into consideration not only the cost of the equipment or “hard” costs, but the very, very important “soft” costs, such as lost productivity from employees as one that has significant repercussions.

VDC has estimated that mobile employees on average lose 50-80 minutes of productivity when mobile devices fail and this loss of productivity can represent as much as 41 percent of a mobile device’s TCO. The previous chart referred to tangible and intangible costs. Another way to look at this is through hard vs. soft costs.

Hard costs would include: • • •

Hardware (mobile platforms and peripherals) Software (upfront fees, license fees, development costs) System Design and Integration (upfront fees, license fees, development costs)

Soft costs can include: • Training (initial user training, ongoing user training) • Operational (system maintenance, 3rd party technical support, internal technical support, up

grades, application management) • Downtime (lost manpower/wages; lost revenues; HW replacement).

In VDC’s study of comparing TCO of rugged tablets vs. consumer tablets, a significant TCO savings with rugged tablet PCs became evident. According to the study, the average annual TCO for a rugged device (large form such as tablet PC) is $2,814. The TCO for a non-rugged device is $6,598. That’s a 40.4 percent difference. Furthermore, in a five year period, the average of rugged vs. non-rugged is $14,071 compared to $34,788. Again, that is a 40.4 percent difference in favor of rugged tablet PCs. 6

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RUGGED VS. CONSUMER TABLETS: IMPORTANT CONSIDERATIONS FOR THE TOTAL COST OF OWNERSHIP

Additional research in this area also demonstrates that: •

•

•

•

Upfront cost of hardware adoption accounts for only 16 percent of mobile computer TCO, which means that costs will actually be less, long-term with rugged computers vs. non-rugged.

TCO falls for every level of ruggedness, so that the more rugged the computer, the lower the TCO over time. The difference can amount to more than $1,600 per device, per year.

On average the TCO for rugged computers over three years is 15 percent lower than that of non- rugged computers. That represents hundreds of dollars of savings per unit.

Lost productivity is responsible for nearly half of the TCO for mobile devices and a variety of other factors make up the other half. Some of the other differences between rugged and non- rugged devices that have important TCO considerations include software and IT support issues, ease of use, power management and administrative control.

Failure costs are a critical portion of TCO calculations, but they can be difficult to quantify. Independent research has indicated that when a non-rugged mobile computer spends more than 40% of its time outside on streets, in the warehouse or on the manufacturing floor, making deliveries, etc., the annual failure rate can soar to more than 30% per device. Companies generally do not want to see 1/3 of their computers in the field being sent in for service or replaced entirely. The rugged tablets that are available today have much lower failure rates specifically, less than 4% a year. The cost of failure rates rises yearly as well, with some estimating that each instance costs more than $3,000. Projected costs have this increasing over 30% in the next three years. Thus, the reduction of failures is a key consideration, and if an enterprise has a number of mobile employees, these numbers can quickly add up.

There is a growing recognition that total cost of ownership for rugged devices can actually be far less than consumer devices. This is perhaps best summed up by a recent report issued on November 17, 2011, by an Internet reseller of multiple brands of ruggedized computing products, who reported that they experienced a 35% year-over-year increase in shipments of rugged tablet PCs from January through September 2011 compared to the same period in 2010.

The increase surprised the company executives who noted that “the astute IT decisionmaker recognizes the differences in the various types of tablets on the market and chooses the one that best fits the intended computing environment and the end-user needs and usage patterns, but we have heard concerns from customers that elected to acquire commercial or even consumer devices for their mobile work force these decisions were generally price driven but neglectful of total Return on Investment (ROI).

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RUGGED VS. CONSUMER TABLETS: IMPORTANT CONSIDERATIONS FOR THE TOTAL COST OF OWNERSHIP

The average life expectancy of a consumer tablet in a mobile or field work environment is probably around 90-180 days. Commercial tablets seem to perform better, but still are not designed for in-field use. Rugged tablets are specifically designed and built for use in a vehicle or in the field. “Some of our customers deployed their rugged devices four to six years ago and they are still in active use.”(1) “Some of our customers deployed their rugged devices four to six years ago and they are still in active use.”

(1)

Richard Lawson, President, Group Mobile, from Press release posted at http://www.merchantcir cle.com/blogs - 3 p.m., November 17, 2011.

CONCLUSION When examining the TCO of rugged tablets companies must consider the impact of lost productivity and revenue opportunities from a device failure, as well as ongoing IT support costs. For the majority of field mobililty applications, rugged tablets devices offer a clear total cost advantage due to their lower failure rates, integrated business functionality and lower ongoing support costs. Rugged tablets enable higher productivity, the ability to capitalize on additional revenue opportunities, and more efficient ongoing support with business-focused platforms for device management, upgrade paths, back-end integration and more.

ABOUT XPLORE Xplore is engaged in the business of developing integrating and marketing mobile wireless Tablet PC computing systems. The Company’s products enable the extension of traditional computing systems to a range of field and on-site personnel, regardless of location or environment. Using a range of wireless communication mediums together with the Company’s rugged computing products, the Company’s endusers are able to receive, collect, analyze, manipulate and transmit information in a variety of environments not suited to traditional non-rugged computing devices. The Company’s end-users are in markets that include utility, warehousing/logistics, public safety, field service, transportation, manufacturing, route delivery, military and homeland security.

FOR MORE INFORMATION

For more information please visit www.xploretech.com For Media or U.S. Investor Information Contact: Martin Janis & Company, Inc. Beverly Jedynak Tel: (312) 943-1123 (Direct) Email:bjedynak@janispr.com

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RUGGED VS. CONSUMER TABLETS: IMPORTANT CONSIDERATIONS FOR THE TOTAL COST OF OWNERSHIP