June 1, 1998
he federal government's desktop computer purchases are as varied as the government offices that make the purchases. "There's no typical configuration" for federal desktop computers, says Ashok Mehan, president of SMAC Data Systems, a computer maker based in Gaithersburg, Md. "Each agency has different needs and a different information technology infrastructure." The differences depend less on whether the customer is from the defense or civilian sectors, or from a large or a small agency, and more on their particular workload requirements, vendors report.
Thanks in part to the growing popularity of purchasing desktop computers from General Services Administration schedules instead of through IDIQ (indefinite-delivery, indefinite-quantity) contracts, federal customers are more in line with commercial buying trends. In the past, "if something was popular in the commercial sector six to nine months ago, it might just now be catching on" with the government, says Felice Liston, executive director of federal sales for Micron Electronics Inc. of Nampa, Idaho. "But with the way purchase vehicles are structured now, we're seeing [government customers] buy newer, fresher technology much faster."
Federal spending per desktop computer has "remained fairly constant over the years," says Phil Kennett, general manager for Digital Equipment Corp.'s Federal Personal Systems Group in Greenbelt, Md. But because computer prices have decreased so much, he adds, "the user can now get a lot more capability for that expenditure."
The federal government spent about $1.2 billion on desktop computers in fiscal 1996, according to IDC Government, a Falls Church, Va., market research firm. That figure will remain almost constant through fiscal 2001. "It's a pretty flat market," says Payton Smith, an IDC Government research analyst. "Everyone in the federal government who wants a desktop PC already has a desktop PC, so the only computers being sold are computers that are replacing existing computers," he says. Meanwhile, federal downsizing is reducing the government's workforce and therefore shrinking the number of potential computer users.
According to IDC Government, the top PC brands in the federal marketplace in fiscal 1996 were Dell Computer Corp., Gateway 2000, Zenith Data Systems, Compaq Computer Corp. and IBM Corp.
Although many vendors report that federal purchases reflect their entire range of offerings, some buying patterns have emerged. For example, there is an overwhelming preference for mini-tower computers that can sit on the floor as opposed to desktop models that take up valuable desk space. Government Technology Services Inc. (GTSI), a Chantilly, Va., reseller, reports that 95 percent of its federal desktop computer customers choose mini-towers.
Paradoxically, despite their complaints about shrinking desk work areas, federal buyers are opting for larger monitors with higher resolutions. This is especially true for customers who use graphics-based software applications, according to Kennett. Partly due to a drop in monitor prices over the last couple of years, most units sold to the federal government-up to 90 percent in the case of some vendors-measure 17 inches.
The preferred hard drive storage capacities are also increasing, due both to significant price drops and increasing user expectations. "The federal government is demanding as much as we can deliver," Kennett says. "We can't make them bigger fast enough."
"Three- to six-gigabyte [hard drives] seem to be the standard," adds Mark Thoreson, a GTSI sales manager. Vendors report that their more power-hungry users are ordering hard drives with as much as eight or nine gigabytes of storage. The buyer sentiment seems to be, "Make sure I don't run short," Thoreson says. This despite the fact that most users are connected to networks that provide massive storage on their servers, he adds.
The cost of RAM (random access memory), used by software applications while they're running, has also decreased. Although today's standard computer configurations include 32 megabytes of RAM, many users are choosing to upgrade to 64 megabytes. And buyers planning to work on high-end graphics are adding even more memory, bringing their RAM up to as much as 128 megabytes.
In the processor arena, Intel Corp. has the federal market cornered. The company's Pentium II chips are supplanting its regular Pentium chips in popularity. SMAC's Mehan cautions that "regular Pentiums are a dead-end investment because the Pentium IIs use all new technology." Typically requested chip clock speeds (a familiar, though not the only, measure of performance) fall between 233 and 333 megahertz.
The customer's budget may drive buying decisions, but the preference is clearly for high-end systems. "Federal government users are in the business of manipulating vast amounts of data, so they have a huge requirement for speed and power," says Rocky Mountain, Dell's federal marketing manager. "Their choice will be to get the latest, greatest technology."
"They'll buy the most they can for the amount of money" they've allotted, says Micron's Liston, "even if they don't necessarily at this point need all [of that machine's] capabilities. They understand that technology moves so fast that if they get as much as they can for their money now, it will hopefully decrease their total cost of ownership in the future. They won't have to turn that machine around so quickly because it won't become so outdated." Among federal agencies, the Defense Department in particular tends to have a higher interest in acquiring the newest, fastest technology, according to several computer vendors.
Some peripheral devices such as CD-ROM drives have become so popular they are now automatically included in most machines. Other items that are frequently requested as add-ons are modems (especially internal 56-kilobytes-per-second modems), PC-card readers, graphics cards, video cards and network interface cards (if a computer is to be part of a network). Some companies also report a growing interest in DVD (digital versatile disk) drives. Customers "want to order everything they need from day one," says Digital's Kennett.
Many federal buyers are also buying pre-installed software-operating systems such as Microsoft's Windows 95 or application software such as one of the Microsoft Office suites. Customers "seem to be telling us that they want the information technology industry to perform some of the preparation activities and that they're looking for an operable system when it comes in the door," Kennett says. "They don't want to tie up their manpower" with such tasks, he adds.
SMAC's Mehan says that for price reasons, some of his company's customers, most notably the Navy, are buying all their software directly from software companies. "I haven't seen that [buying pattern] proliferate widely in the civilian sector, but I see that's the order to come, at least for commercial, off-the-shelf software," he says. In some cases, customers who buy software separately are nevertheless asking hardware vendors or systems integrators to load that software and custom-arrange their computer desktops.
In addition to insisting on year 2000 compliance, federal computer buyers also increasingly ask for Desktop Management Interface (DMI) compliance, to make it easier for remote systems administrators to perform desktop support tasks without having to visit each individual machine on a network. "Information technology shops continue to shrink, so there are less people to support more machines," says GTSI's Thoreson. "It's a convenience they're willing to pay for."
Warranty policies and other support services are also factored into buying decisions, as federal users increasingly look at the total cost of ownership rather than just the initial purchase price of a machine.
Network computers-bare-bones machines, sometimes without hard drives, that rely on other computers on their networks for most software and storage needs-have had little impact on the federal desktop computer marketplace. Buyers are instead taking advantage of decreasing prices that allow them to purchase robust systems for about $1,500. Most federal sales fall in the range of about $1,200 to $2,000 per PC.
Portable computers, on the other hand, have made a dent in the desktop computer marketplace. IDC Government predicts their numbers in the federal sector will increase 10 percent annually between fiscal 1996 and fiscal 2001. "One reason is that people are using them as desktop replacements," says IDC Government's Smith. "They're not very much more expensive, they're just as capable, and they have the added bonus of portability. They've reached the price point where the portability factor becomes worth the extra money."
The price difference between roughly comparable desktop and portable computers is now less than $1,000, according to Jim Connal, Gateway 2000's director of federal sales. "Price is one function of the value equation, along with functionality, power and the screen [quality]," Connal says. "No one wants to go to a desktop replacement and lose anything." Gateway 2000's top-of-the-line portable computer features up to six gigabytes of storage on the hard drive, up to 192 megabytes of RAM and a 14.1-inch screen.
Increasing worker mobility and higher numbers of telecommuting employees are also driving sales of portable computers. Gary Newgaard, Compaq's director of federal sales and marketing, has also noticed interest in using portable computers as desktop computer replacements among mid- or upper-level managers who either travel long distances or frequently move around their facilities or attend meetings elsewhere in town. The availability of portable computer docking stations-which usually provide a regular-sized keyboard, a larger monitor, a mouse and network connectivity-also is driving the market. About 65 percent to 70 percent of Compaq's federal portable computer buyers also purchase a docking station.
"A trend I see coming is the LCD flat panel monitor," says Lawrence Hamm, vice president of marketing and contracts for Intelligent Decisions, a computer manufacturer, reseller and systems integrator in Chantilly, Va. "Now they're probably still price-prohibitive, but we'll see users' [preferences] moving" in that direction. Hard drive prices will also continue to drop, according to industry representatives. By the end of the year, users will be able to purchase five- or six-gigabyte hard drives for the same price as today's three- to four-gigabyte hard drives, according to SMAC's Mehan.
Processors are changing too. Intel's recent release of faster Pentium II processors (with clock speeds of 350 and 400 megahertz) and a new bus technology are bound to change buying trends, says GTSI's Thoreson, creating two "distinctly different classes of computer . . . whose parts won't necessarily interchange. There will be lots of heartburn when it comes to upgrade time."
The computers at the low end of the spectrum will sell for less than $500, according to industry observers. And prices across the range will continue to drop. "Whatever yesterday sold for $1,200, today will sell for $1,000 and tomorrow for $800," Mehan says.
Luba Vangelova is a Washington-area freelance journalist.
June 1, 1998