Obsolescence in computer technology

By Y. Prasetyo

DECATUR, Georgia (JP): I purchased my first computer in 1985 in Bandung, an Apple Ile, and expected to use it for a long time. I used primarily the word processor, limited spreadsheet, the Multiplan and Supercalc, and some games.

Two years later, I could hardly find any new software for my Apple computer. I disposed of the computer three years later when it broke down and nobody could repair it. Then, in 1988, I purchased an IBM AT, the best product at that time. A year later I found that my "new" IBM computer was no longer an up-to-date product. There were IBM 8086 series compatible computers on the market with "Intel Inside".

My obsolescent problem was not uncommon. On a larger scale, I found some companies facing the same problem. Last year I visited a bank in Atlanta. This bank owned two old IBM system 36 mini- mainframes. They bought the first mainframe six years ago and purchased another one four years later because they could not afford to change to a newer system such as IBM AS 400. The manager of data processing said that the cost to change to a totally new system was too high and as long as the machine ran well the bank insisted on keeping these two "dinosaurs". Even though there were newer, faster, and more efficient systems on the market, they would keep these machines as long as the mainframes worked.

New machines

Many companies in the late 1980s that bought thousands of IBM 286 machines have found that they are virtually worthless in today's after-market. The main reason for this tragedy is there are many new machines that are more powerful and faster. Another reason is that there is not much new software that can run in these "old" 286 machines; something that happened to me just a few years ago with my Apple computer.

For example, one of the most popular products on the market, Windows, runs poorly on most 286 PC's and won't run at all on a computer with an earlier model microprocessor. Even the 386 machines are facing a rough future as they will not be powerful enough to run graphics software, the next "hot" product.

According to an old survey by the American Institute of Certified Accountants, computers were expected to have five to 10 years life-cycle. Today, that life-cycle is somewhere between two and three years. Since computers have become the "heart" of today's business, a shorter computer life-cycle is a dilemma. The problems of many corporations range from how to dispose of old PC's to how to depreciate the new computers in a way that will satisfy the company's shareholders and tax needs. The shorter life-cycle pattern, caused by new product invention, can also be applied to other peripheral products such as printers and monitors. Laserjet printers are replacing the old dot-matrix printers and High Resolution monitors are expected to take over from EGA or VGA monitors.

There are suggestions about how to recycle old computers. The first suggestion is called "The Trickle-Downed Theory". The "power users", such as a graphics programmers and number crunchers, can hand their computers down to "less demanding users" like secretaries or mail room operators. Just because a PC won't run Windows does not mean that it can't perform other, more routine office tasks such as printing, word processing or electronic mail transaction. Employing this method, a company can retain and depreciate a computer as long as it runs.

The second suggestion is called the "Home Computer Solution"; selling computers to employees for home use at a nominal price. The price should be reasonable enough that employees would want to purchase these used computers. Offering a low-cost computer can boost employees morale in the workplace by encouraging them to work at home after office hours. This suggestion can also cut overtime costs for the employers if the purchasers are willing to do their extra work at home.

The third suggestion is direct sale to a computer exchange market. This may not be easy for older machines, but newer computers such as 386 PC's may still have value to users with less-demanding computer needs. In Atlanta, the American Computer Exchange is an example of this alternative. The used PC's prices are easily available in various publications and newspapers. Selling old computers in bulk, may result in a better price since the seller can sell other devices at the same time rather than selling each part separately.

Two solutions

The fourth suggestion is charitable contribution when trading in the old computer system is not necessarily the answer. With old-model computers selling for so little, many companies are opting not to unload them at fire-sale prices but to donate them to schools, charities, and non-profit organizations. A company may be able to reap a substantial tax write-off and, at the same time, generate community goodwill. Even the oldest personal computer is still more powerful than the latest typewriter or calculator.

I believe there are two solutions in handling the risk of obsolescent in having a computer system. The fist solution is to purchase the latest machine on the market. With Intel chips inside in more than 75 percent of the PC's on the market, purchasing a 486 machine is a better choice than a 386 machine and a pentium machine is a much better choice than a 486 machine. Many software companies have started making new programs that can run only with pentium microprocessors. By purchasing the latest machine, we can expect to have not just a longer life-cycle, but also to use it longer since the new machine will be able to run new software that won't run in old machines.

Second, for businesses, use a shorter depreciation recovery life. Since computers' life-cycles are much shorter than any other office machine, a three-year recovery life depreciation seems pretty reasonable. The company will retain a lower book value and has the flexibility either to sell the old machines faster in order to get a better market price, or contribute them to get the tax write-off.

Personal computer technology has changed dramatically in the last ten years. The newer products are always better than the previous ones. The best way to stay on the cutting edge of personal computer technology is to ride the wave, stay on the top, learn about the new things that are available and adopt a proper learning attitude. Machines without users are useless.