There are many expenditures in your business. In order for you to be a good steward of the business finances, you must know the cost of doing business which includes understanding the total cost of ownership of the hardware and software you utilize within your business.
There are a whole list of costs that are associated with creating and supporting an organization’s information systems. Many of the obvious costs are from programming for custom software as well as purchase, configuration, and licensing costs for packaged software, but there’s much, much more.
The costs associated with design and documentation (both for programmers and for users) are top of the list. Then there are testing costs. All new programs should be tested thoroughly across the various types of hardware and architecture the enterprise uses, and in conjunction with existing software and systems, before being deployed throughout the organization. Errors that aren’t caught early can slow down a business or lead to costly issues that could ripple throughout an organization.
Total Cost of Ownership (TCO) is a commonly used calculation designed to help businesses assess the direct and indirect costs of all the systems used within the business.
Total Cost of Ownership (TCO) is a commonly used calculation designed to help businesses assess the direct and indirect costs associated with information technology purchases. By doing a TCO analysis, you can make more informed purchase decisions.
When evaluating the TCO of hardware, software, or networking equipment, you should consider:
- The initial costs of the hardware and software.
- Costs for the initial deployment and employee training.
- On-going maintenance fees for software updates and upgrades as well as help-desk support.
- Expenses related to system and network maintenance, backup and other data protection services.
- Costs associated with downtime.
Use a TCO calculator
Hardware is easy, you can do your own Total Cost of Ownership analysis on any piece of equipment, from laptops to printers.
Standardize your hardware and software configurations
You can lower your TCO of your hardware by standardizing, software and PC configurations. To do so, you may have to spend more money up front to get everyone on the same system. Ultimately, you can save money by eliminating “one-of-a-kind” troubleshooting and support and by creating an environment where users can easily move from one device to another. In addition, this approach generally makes installation, repair and maintenance less expensive.
Use asset management software
With IT asset management tools, you can audit and manage your company’s PC and software. By doing so, IT managers can quickly identify noncompliant systems (for instance, systems that don’t meet your security standards or have out-of-date operating systems) and upgrade them. Using asset management tools will often help you improve your company’s IT support and response time, decrease down time and reduce TCO.
- It’s important not to base buying decisions completely on TCO. Sometimes more expensive products offer benefits that make them a better fit for the long run.
- To get a full understanding of ongoing costs associated with an application or new system, experts recommend calculating TCO over a three-year period.
- Don’t get sidetracked by TCO and prioritize projects based on lowest cost. In certain cases, technology investments that cost more should take precedence because they deliver more value to your business.