Total Cost of Ownership (TCO)
I'm often asked about costs. In the computer world, the product that's cheapest to buy isn't always the one that's cheapest to own.
We need to consider how much it costs to own a product, as well. The formal name for this is Total Cost of Ownership (TCO).
When evaluating a proposed purchase, consider these costs:
- Integration - few business systems stand alone. To integrate a new system with other systems, not only must the new system be modified, but often the surrounding systems that are in place must be modified as well.
- Migration from old system to new - include decommisioning and disposal costs of obsoleted systems
- System Testing
- Financing
- Insurance
- Software License Tracking
- System Audit
- Physical Inventory
- Data and System Backup and restore costs
- Floor Space
- HVAC
- Spares Storage Space
- Electric Power
- Maintenance
- On-Hand Spare Parts
- Administration
- Training of support personnel
- Training of users
- Upgrade - both cash expenditure and personnel needed to implement the upgrades
- Decommisioning and Disposal at system end of life
The combined cost of buying hardware and software usually represents much less than the total cost of system ownership. This comes as a shock to the uninitiated.
Another surprise is that, one way or another, each new system imposes a training cost. Many organizations pay professional trainers to teach systems to their employees. Others don't. In those cases, the employees work less productively as they hunt and Axis and Allies around the new system while they Aurora Dracula model the learning curve.
As the TV ad says, "You can pay me now or you can pay me later". New systems always impose training costs: would you prefer to budget for this ahead of time and train your staff, or just let them fend for themselves, while wasting time learning the new system?
Russ Bellew is an IT consultant whose office is in Broward County, Florida. He helps businesses minimize TCO while maximizing their ROI through russbellew.com/computer_networks.aspx">careful network planning. Learn more by visiting russbellew.comrussbellew.com
