Total cost of ownership (TCO) is about analysing and managing costs. It can be applied in any context - for example, to a service, a system or a product, or even to owning and running your own car! Our interest here is how it could help to determine and manage IT costs within the business. The cost analysis is usually based on a service or system lifecycle and must include all running costs. TCO is a useful tool for comparing different options, solutions or scenarios and providing key information to help with decision making.
Determining the TCO for IT is often not straightforward. There are well defined direct IT costs associated with hardware, software, networks/communications, support, service contracts, etc. There are likely to be numerous other indirect costs, usually people related, such as IT training, additional support and other intangible things.For example, you might expect that deploying off-the-shelf standard applications will have a lower TCO than in-house developed applications.
There are further benefits - the TCO result allows some other valuable parameters to be derived:
Determining the TCO for IT is often not straightforward. There are well defined direct IT costs associated with hardware, software, networks/communications, support, service contracts, etc. There are likely to be numerous other indirect costs, usually people related, such as IT training, additional support and other intangible things.For example, you might expect that deploying off-the-shelf standard applications will have a lower TCO than in-house developed applications.
There are further benefits - the TCO result allows some other valuable parameters to be derived:
- IT costs per user
- IT costs as a percentage of revenue
- Number of IT staff as a percentage of total users
These are independent of business size and can make useful comparators between different businesses or industry sectors. This is the basis of TCO benchmarking where averages are used to assess whether IT is cost efficient and is offering value for money. Depending on the nature of business, the IT costs as a percentage of revenue are typically within the range 2 - 10%.
TCO is applicable where a new service is being planned or procured; even a simple scenario may have numerous options that require detailed analysis and comparison of costs. For example, in exploring alternatives - whether to buy or lease servers or go with some form of hosted solution, or perhaps adopt cloud services.
In summary, TCO is a valuable tool for getting a better understanding of your IT costs whether you are reviewing existing services or scoping new services. Remember the aim is always the same - to save money!
If you would like to talk about TCO for your business, please do not hesitate to contact me or call 07966 158965.
TCO is applicable where a new service is being planned or procured; even a simple scenario may have numerous options that require detailed analysis and comparison of costs. For example, in exploring alternatives - whether to buy or lease servers or go with some form of hosted solution, or perhaps adopt cloud services.
In summary, TCO is a valuable tool for getting a better understanding of your IT costs whether you are reviewing existing services or scoping new services. Remember the aim is always the same - to save money!
If you would like to talk about TCO for your business, please do not hesitate to contact me or call 07966 158965.
