The cost of old equipment

Every year credit unions go through a budget process to determine hardware and software requirements for their employees.  Unfortunately, many credit unions want to write off their equipment’s depreciation over a sixty-month time period and then continue to utilize the equipment far beyond it’s life expectancy.   

COSTS

I believe credit unions who follows this scenario fail to understand the real cost for delaying hardware and software upgrades.  These costs typically first show up when hardware fails.  Even if new hardware fails within the first year, it is typically covered by a warranty and can be either serviced on-site or expressed back to the vendor for repairs.  

Repairing older hardware, however, can cost more because newer replacement hardware (disks, memory, and I/O card interfaces, etc.) may not be 100% compatible with the existing hardware.  Existing devices, motherboard firmware and operating system, as an example, may not fully support the capabilities of the new replacement part.  This more than likely will cause unexplained and intermittent operating system crashes that can cause lost employee productivity and inadequate customer service to the members.  

Lost productivity has a soft cost to the organization, particularly when an employee is forced to seek time on another employee’s PC or must deal directly with a support technician before they can continue their assigned job role. Another cost is the member’s negative experience with the employee that can jeopardize how a credit union is viewed by their members.

PERFORMANCE

Replacing older hardware and software ensures that employees are not having to wait on a slow PC to respond.  Older hardware will not perform as well each time new software products are installed or upgraded over time.  In addition, newer software products such as Microsoft Excel and Word files shared between different software versions could slow done the employee when having to deal with incompatibility issues. Also, the software industry typically adds features based on a number of factors but one specific factor is hardware value to performance.  As an example, a PC purchased 3 years ago for $1,000 will not perform as well as a PC purchased today for the same $1,000.   

RECOMMENDATION

With the low cost of PCs today, hanging on to old equipment is not very cost effective.  My recommendation is to plan for a third of a credit union’s PCs to be updated each year in rotation.  PCs should be written off in a 36 month asset depreciation schedule. Doing this will ensure your PCs are replaced every 36 months avoiding many of the issues that older hardware and software may cause.  This will significantly improve your employee’s productivity and ensure credit union members receive the service they expect.

EPL Staff

EPL, Inc.