New PCs meld power and price (Part 2)

During the fiscal 1998 buying season, many federal PC buyers have emerged as part of the new class of power PC users who look to take advantage of the surge in the performance and capacity of desktop computers, according to industry and government sources.

Over the past year, Intel Corp. has introduced a string of powerful processors that up performance from 266 MHz to 300, 333, 400 and, two weeks ago, 450 MHz. The increase in performance has been matched by falling prices, making last year's high-end systems available at very affordable prices.

Despite the lower prices, many federal agencies have opted to buy the latest and most powerful systems rather than searching out the bargains among the lower-end systems, according to observers.

The government has always wanted the best and brightest, said Gary Newgaard, director of Compaq Computer Corp.'s federal sales and marketing. "We traditionally see the government buyer aiming for the highest processor and processor speed," he said.

For example, the Air Force put in place two new blanket purchase agreements (BPAs) with Dell Federal and Micron Government Systems in June. There have not been many systems sold yet— about 1,600 from Dell and 3,550 from Micron— but probably 80 to 90 percent of those systems have been 400 MHz, according to the program manager for the BPAs.

The Department of Veterans Affairs sees a shift to high-end systems. Since the VA put its Procurement of Computer Hardware and Software contract in place in January 1997, more than 40,000 desktops have been sold. The PCHS contract offer the full range of systems, but until now, most of the computers sold have been 133 MHz and 266 MHz desktops for general administrative staff and office professionals, a VA spokeswoman said.

The higher-speed processors have been made available as they come into the market, but the additions have been more a function of industry trends than customer demand, she said. With new clinical automation in the VA medical facilities, however, many of the desktops ordered off the PCHS contract recently have been 400 MHz or higher.

NASA's Scientific and Engineering Workstation Procurement (SEWP) II program also has seen steady business for the high-end systems. SEWP II can be used by any agency, but the fact that it originated at NASA guarantees that most of the systems available are more expensive— with a 450 MHz system costing almost $1,000 more than a 266 MHz— and are already configured for people looking for power, which is sometimes an off-putting combination.

But NASA has had no problem selling computers off that contract. "There's a lot of interest in the very latest and the highest power you can get," said Joanne Woytek, scientific, technical and engineering workstation manager for SEWP II.

Agencies are discovering that they can get the newest technology right away, an advantage to "being in touch with the commercial world rather than being in our own sphere," she said. "Our biggest problem has been keeping up with that demand."

Because of the less expensive prices and immediate availability, most buyers end up getting 400 MHz systems or higher, even though they are often looking for a system that will run specific applications, and a midrange system would do just as well, Woytek said. "Given a choice, they'd rather spend a little extra money" and get a system that will run future applications, she said.

In the past four months, federal buyers have issued a range of orders in Commerce Business Daily (CBD) for high-end systems. The Secret Service, the Bureau of Reclamation and the Naval Surface Warfare Center were looking for 400 MHz computers, while the Fleet Industrial Supply Center and the Defense Department were looking for 300 MHz computers.

Simplified Procurement

Federal users have always bought the newest and fastest computer systems available. But now, following years of market changes and procurement reforms, those systems are arriving at their destinations while they are still the best, observers said.

Just two years ago, a procurement put together in February for a top-of-the-line system with Intel's 333 MHz Pentium II processor would have been delivered to an agency just in time for the August 450 MHz processor rollout, leaving the buyer almost three system generations behind.

Now, days after the announcement, a full 450 MHz system can be sitting on a federal user's desk.

"By the time the contract was awarded, the technology was out of date, and [the agency] knew it," said Harry Heisler, vice president and general manager of Micron Government Systems, Nampa, Idaho. "Now people are buying, in real time, technology that matches their cycle."

As a result, federal agencies can buy systems that will offer adequate performance for much longer stretches, without much higher costs, observers said.

The performance increase and cuts in processor and memory prices come together to give buyers the most advanced systems available for about $2,500, the same price as midrange systems only a year ago. And the systems with higher-speed processors usually also come with extra features, such as faster CD-ROM drives, Ethernet connections, Digital Video Disc players and larger screens, making them even more attractive.

Even at the high end, buying a 400 MHz system instead of a less expensive 350 MHz system brings with it a distinct advantage for users planning on new applications or operating systems in the future. Higher prices usually bring with them better features, so systems take longer to become obsolete.

"Generally, the bean counters encourage you to cycle the equipment every three years," said Alan Bechara, vice president and chief operating officer of Comark Federal Systems, Chantilly, Va. "So lengthening the life cycle by six to 12 months is a pretty good investment."

Users who require a lot of power will definitely be able to tell the difference between two high-end systems, analysts said.

"If you are doing heavy-duty [computer-aided design] applications...which is what the government tends to do, then [you will] really notice [the difference in power]," said Nathan Brookwood, microprocessor analyst at Dataquest, San Jose, Calif. "But if [you're] doing something where [you are] just sitting in front of a screen...[you] won't notice a thing."

There are plenty of the latter type of users in the government, providing vendors with many buyers who are willing to take a lower-end system for the lower price simply because they do not need anything more.

The Air Force over the last fiscal year has sold more than 122,000 standard systems on its Desktop contracts but fewer than 10,000 advanced systems, according to a source at the Air Force Technology Insertion Branch. A standard desktop is at the low end, currently a 266 MHz to 300 MHz Pentium II system, while an advanced desktop includes the 350 MHz and 400 MHz systems.

Government Technology Systems Inc., Chantilly, has also seen a large number of sub-$1,000 system sales as agencies buy "throw-out computers," said Mark Thoreson, inside sales manager at GTSI. "They play the safety. Why buy the long term [when] it's going to be outgraded so easily?"

But the high end has always been attractive to certain segments of the government, and the newly announced 450 MHz machines will definitely be noticed. "We have some serious power users in government, and they want the latest and greatest, the bleeding edge," Thoreson said.

The swift changes in technology have caused some confusion within the procurement process, however, as agencies try to keep up with what vendors are making available from month to month.

"We've requoted bids over and over and over with the turnarounds in the market," Thoreson said. "Maybe over the next few months I'll be quoting nothing but 450s."

Indeed, agencies have put out requests in the CBD for 350 MHz systems one day and changed the requirements to 400+ MHz the next. One contracting officer said she put out an order and the same day was told a new processor speed was available. Using her common sense, she said, she changed the order.

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