This research assesses the total cost of ownership (TCO) for Gartner's Managed Diversity handheld profiles. Managers responsible for controlling mobile costs and resource levels, as well as those responsible for mobile device support, should understand the demands that such devices place on their organizations.

• Managed devices in the platform or appliance level have significantly lower TCO (by 53% to 63%) than unmanaged devices in the concierge level.
• A platform smartphone is 15% costlier to support than a smartphone in the appliance category.
• Although they have a higher purchase price, ruggedized handhelds don't have a significantly higher overall TCO than business PDAs and smartphones.

• End-user organizations should use TCO to analyze staffing requirements, benchmark internal or external costs, and negotiate outsourcing services.
• Smartphone vendors should use TCO to improve products, emphasize features, and determine appropriate support services to sell or bundle with the smartphone.

The TCO of PDAs and smartphones depends on the complexity of the applications used, the amount of support they require and the impact on users' productivity. The cost of labor, as well as the cost and availability of services, varies across regions. As in the 2007 update, we've defined four different use patterns that we've seen most-frequently implemented in organizations, and we've calculated the resultant TCO associated with each, using labor and services rates for fully developed economies. These profiles have been slightly modified to reflect input we have received from users during the past two years.

In this scenario, we assume that knowledge workers will use the mobile devices for voice, e-mail, personal information management (PIM) and browsing, and for one or more business applications. Applications are presumed to consist of one or more local (on-device) applications requiring management of the source code and data. The IT organization will provide full PC-like support throughout the life cycle of the device. Platform devices are selected by the IT organization based on its skills and expertise. Users aren't afforded the opportunity to choose devices.

Security and service-level agreements are maintained by narrowing the device choices. Devices are purchased by the organization because quality of service on local applications cannot be delivered without complete control (browser applications are delivered under the appliance category).

In this scenario, users are equipped with WAN-enabled, ruggedized devices to perform a narrow set of functions in harsh environments (that is, the devices may be dropped or poorly treated). Such devices are used primarily in vertical applications. Users (often field workers) are instructed to execute only selected line of business applications on the device. This category also includes all the items mentioned in platform PDA and smartphone. Wireless LAN-enabled-only devices are not covered here, but can be extrapolated from the appliance PDA and smartphone category.

In this case, we assume that use and support will be limited to a narrow set of applications, which usually include voice, e-mail, PIM and browsing. Web-based applications can also be delivered to appliance devices without affecting the TCO profile. The IT organization selects synchronization software that supports a wide range of hardware, and makes available a wider set of pre-approved devices in return for limited functionality. Local application development on the device is not permitted. By narrowing the permitted functionality, security and management costs are reduced.

This scenario simulates the cost of supporting a knowledge worker who doesn't comply with business standards and, therefore, demands custom, hands-on support for a nonsupported device, or nonsupported applications on a supported device.

Our TCO model is a generic scenario, rather than the reality of any particular IT organization. Companies should perform their own analyses using our models to determine the site-specific impact of a particular change. Differences in end-user proficiency, installed-base sizes and implementation strategies can significantly affect an organization's costs.

The following list summarizes the assumptions used in building our scenarios.

• We've assumed a deployment of 250 devices. Larger-scale deployments may see economies of scale in several cost items.
• Devices are bought and owned by the enterprise. Devices in the concierge category are likely to be purchased by the user and potentially expensed back.
• We're presenting an estimated annualized cost per user, with hardware and software costs depreciated over two years. Ruggedized hardware has a longer useful life and, therefore, is depreciated over four years.
• Hardware costs are reported as the average selling prices for business-class PDAs and smartphones. We've included full hardware costs without subsidies or discounts. Some organizations procure subsidized PDAs and smartphones from a mobile operator, which will also supply voice and data services, and possibly management services. This results in varying discounts, depending on the number of units and the lengths of the contracts. We encourage organizations to replace this number with their own costs. Hardware costs also include a small number of test units.
• We've estimated the costs of voice and data traffic, choosing tariffs close to those of mature economies, such as North America and Western Europe. We have accounted for a flat, unlimited plan.
• Ruggedized PDAs have access to voice and data services, as vertical application workers increasingly need access to all corporate communication systems. However, we've assumed lower voice service costs for this profile.
• We assume that personal productivity, messaging suites and browsers are typically included in the standard software build. Therefore, we don't allocate additional cost.
• The cost of using and supporting standard business applications is included in the platform and platform ruggedized profiles. No other business application software costs however are included. It's impossible to predict the costs, due to the varied nature of applications across organizations using the TCO model.
• In IT software, we account for the wireless e-mail solution and, when appropriate, the cost for additional mobile device management and security software. Software that was taken into consideration offered functionalities such as configuration management, hardware and software inventory, software distribution, authentication, encryption, ability to enable/disable Bluetooth, infrared, Universal Serial Bus and storage cards. We also account for IT software maintenance.
• The model assumes that technical support and help desk functions are fulfilled in-house. However, when mobile devices are supplied by an operator, it's likely that the operator will also provide management (at least operating system management) of the devices as part of the deal. In this case, add the operator's fee, and subtract service and support costs.
• In our calculations, we have used the salaries listed in Table 1, which reflect labor costs of mature markets, with a 33% burden. These rates affect operational and end-user costs and, of course, vary by region and country.

Unburdened base salaries are salaries before social cost, pension, medical and other benefits. We've made the following assumptions specific to each profile.

• Devices are expensed and have a life cycle of two years.
• IT labor costs account for the complexity of managing one or more business applications.
• Support includes a native wireless e-mail solution, as well as the cost for a management and security software suite.
• Training costs will be higher than in the appliance profile, because we assume that IT personnel and end users will have to be trained to use and support at least one business application.
• We assume a users' mix of 40% structured task users, 45% knowledge workers and 15% power users.

• Devices are depreciated over four years.
• A warranty uplift is factored in to match the longer life cycle of the device.
• All devices are cellular-enabled.
• Voice costs are lower, due to the data-centric nature of assigned tasks.
• Support includes a native wireless e-mail solution, as well as the cost for a management and security software suite.
• Users depend more on such devices to accomplish their job, implying higher end-user operations/downtime costs.
• We assume a users' mix of 30% data entry users and 70% structured task users.

• Assumes an enterprise-based or network-operations-center-based wireless e-mail suite that accomplishes the required management and security via the server software. No additional third-party management and security tools are in place.
• The users' mix is made up almost entirely of knowledge workers (90%), with a smaller percentage of power users (10%).

• There are no economies of scale in the procurement of hardware and software and in the provisioning of services. Depending on how this is handled, it may require a unique gateway.
• Custom management and support are provided that entails allocation of dedicated permanent or temporary staff to manage and support these devices.
• For this profile, we have chosen a user mix made up of 85% knowledge workers and 15% power users.

The biggest cost item is represented by voice and data traffic: Such costs vary by use pattern, region and carrier. Hence, we've singled out this cost item so you can easily replace our sample numbers with your own, as applicable. If mobile communication expenses aren't managed carefully, then they can easily grow disproportionately.

Our sample deployments are managed environments in which users have policies for mobile device use, as well as clear expectations regarding the type of support they'll receive from the IT organization. For the appliance profiles, management is achieved by narrowing the device functionality; for the platform profiles, management is accomplished by applying principles similar to managing PCs and notebooks.

We assume that the wireless e-mail suite will include sufficient management and security features or that these will be supplemented by adopting further software suites. The use of such tools automates and centralizes functions such as inventory, asset tracking and software distribution, and enables data encryption, as well as user and device authentication. Such investments are accounted for in IT software costs and have a positive reflection on operations costs. In the concierge profile case, devices are mostly managed manually.

Concierge PDAs and smartphones are more than twice as expensive to support as platform and appliance PDAs and smartphones. For this category of users, we recommend establishing a custom, hands-on support (Level 3, concierge service), possibly at a fee.

In the platform scenario, we assume devices that run a business operating system. In the appliance and concierge scenarios, however, the devices can run a business or consumer operating system. Some consumer operating systems could be less mature than others and potentially pose more support problems. Our calculations do not account for this.

Under the appliance support scenario, we stated that Web applications can be delivered without affecting the TCO profile. Of course, this is only true where organizations can do it without additional infrastructure investment for adapter servers to sit between the Web server and the device or additional IT labor to reconfigure/set options on portals to support mobile devices.

Ruggedized or industrial handhelds differ markedly in hardware design from business PDAs and smartphones. Units in the industrial category are bigger and heavier, but meet specifications that include:

• Resistance to drops of one meter or more on concrete floors
• Water, dust, cold and heat resistance
• Tolerance to electromagnetic shock

These products often have bigger peripheral bays so that add-on components, such as bar code scanners and radios, are self-contained. Industrial handhelds have larger batteries so users can get through a typical work day without having to recharge.

The TCO profiles (see Table 2) included herein build and expand on a Gartner management strategy called "managed diversity," which attempts to replace the single, standard approach used by many organizations with a framework of choices. By implementing a structured support system with varied support levels within such a framework, organizations can defend business information and enforce policies regarding data movement between the device and the corporate network, while respecting users' preference for a wide range of devices.

Hardware: The annualized cost of the device, plus 7% of the annual value for lost, stolen, or damaged devices and spare parts. We have included the cost of five spare devices (for 250-user deployments and one in the concierge scenario. We assumed no upgrades to the standard one-year warranty.

Software: Annual allocation for software on the device, IT software and annual maintenance

Tier 1: Service desk requirements

Tier 2: Escalation and dispatched support, management of device configuration

Tier 3: Escalation and architects

Security: Security specialists

Management: Supervisory management, based on a ratio of other staffing

User Training: Trainers to train users

IT Training: Services/classes to train IT technicians

Disposal: Annualized cost allocation for device wiping and proper disposal at the end of asset life; includes residual value, if any

Training: Time users spend in training classes. We account for one hour per user per year in the appliance and concierge scenario, two hours for platform scenario; four hours for users of platform ruggedized devices

Fixing: Time users spend fixing their own or others' devices

Downtime: Lost productivity because of hardware or software problems; discounts for lost time (assuming that platform smartphone/PDA users can still do 40% of their work when the device is inoperable). Ruggedized PDAs users cannot perform their jobs without the device; appliance and concierge smartphone/PDA users can do 80% of their work with the device inoperable; we don't account for lost business.

A comparison of the average TCO for PDA and smartphones (see Table 3) with data from our previous update shows an overall 28% decline and some sharp reductions in some cost categories. However, such declines are not all attributable to real capital and operational expenditure reductions. We do not supply the profile comparisons for all individual TCO profiles; however, readers will find similar reductions.

We account for the price decline in software and hardware or other technology market changes, such as the convergence of management and security product suites. Other declines, however, are attributable to some changes we have made to the TCO model in this iteration.

Hardware has become more reliable, and software has become easier to use. Options have been reduced, with more functionality integrated. We have factored in a 20% price decline in hardware; and we are no longer considering a requirement for additional memory and accessory during the life of the device; Software costs have also declined and we no longer consider the cost of a separate management and a security suite. Instead, we factor in a wireless e-mail solution that includes sufficient security and manageability features or a cheaper wireless e-mail suite and an additional management and security tool. We have also eliminated some legacy cost items from the old model — for example, we have deleted costs for service desk software.

The cost for a data plan is unchanged, while we accounted for lower voice service costs (a reduction of 17%).

All labor-related figures have been affected by the fact that we have updated our salary figures. We have lowered Tier 1 and Tier 2 support (by 19% and 57%, respectively) and increased Tier 3 and security. This is partly the result of feedback from IT operations analysts, and partly because we no longer include account management, system research and evaluation ($65.6 in total in the previous update).

As disposal costs are decreasing for all type of hardware, we accounted for this trend. We now calculate administration and management costs as a percentage of the IT staff required in each scenario. The development of IT and end-user training courses was also reduced substantially, this time reflecting what we have heard from our clients in hundreds of inquiries during the past year.

The 16% decrease in end-user costs (see Figure 1 and Figure 2) is attributable in large part to the fact that we have introduced salary variations. (In the old model, end users in all scenarios were on the same salary level, whereas, in this iteration, each scenario has a different user mix.) We have also included various degrees of dependence on the device for different types of workers — i.e., some workers rely less heavily than others on mobile devices do their jobs.

The TCO models contained in this research can be widely used. End-user organizations can gauge their own costs versus these benchmarks. Opportunities for outsourcing can be properly evaluated. The impact of improved tools can be assessed. The costs can also be used in the presentation of Gartner's Managed Diversity materials to end users to push them to recognize the costs of the tradeoffs in each choice.

Of particular note are the implications of using ruggedized versus nonruggedized devices for tasks in which workers may mistreat the technology. Our models show that, from a cost perspective, the choices are nearly equal. Nonetheless, the benefits are ruggedized devices are clearly superior to nonruggedized. Because they are impervious to drops, the unit will stay in service much longer without downtime. Because the life span of the device is four years, less IT time will be devoted to procuring and deploying machines to end users.

Management sometimes proposes that nonruggedized devices provide lower upfront capital costs. Coupled with a strategy of buying new devices when failures occur, this will, in most cases, prove a more costly approach than purchasing ruggedized devices initially. The risk with buying ruggedized devices is that new application requirements and new operating system versions may shorten the life cycle of the device, thereby increasing the overall TCO.

One last consideration should be made regarding labor costs. IT, administrative and end-user labor costs make up 38% of our average TCO. As we noted in the assumption, we have used salaries typical of mature markets, and we have assumed a 33% burden. These figures will vary by region, and the differences can be noticeable in emerging markets. As a consequence, this portion of the TCO can be reduced by as much as 70%.