Obsolescence in computer technology

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.