Escape the total cost of ownership (TCO) trap

If you are planning a new IT infrastructure, the first question you will ask yourself, as the CFO, is whether the investment will pay off. The answer lies in the calculation of the total cost of ownership (TCO). If the TCO calculation is carried out correctly, you will not only know the acquisition cost but also what costs the IT estate will incur over its lifetime. Factors such as usage patterns, servicing requirements, loss or damage, process costs, and location-specific influences must also be considered in the calculation. But many companies overlook these costs.

Let’s say you want to equip your field staff with smartphones. It is not enough to add up the acquisition cost of the required number of devices. You have to consider many cost factors that have an impact on TCO, including:

• the cost of rollout and device management (tools and process costs)
• measures to protect devices (cases and screen protectors)
• fees for protection software (mobile security apps)
• repair costs in the event of damage
• replacement costs in the event of theft or loss 
• device remarketing 
• certified data deletion

If the TCO calculation is for more complex IT infrastructures, possibly operated internationally, then even greater experience is required to get it right.

Most major IT vendors provide TCO calculations, but you cannot be absolutely certain that they are neutral. They may be biased in favor of the vendor.

It is not unusual for more than one supplier to be involved in a project to avoid dependence on a single vendor. Where this is the case, the question is how the individual TCO calculations fit together. This is where the expertise of a non-captive external partner can be invaluable. This partner should have the necessary experience, be familiar with your sector and with the technology you plan to use and be able to provide benchmarks that are appropriate for your project and your company. The partner should be independent of IT vendors to ensure that they make the best decisions for your project.

There is another factor that is easily overlooked when considering TCO: the cost calculations can change at any time throughout the lifetime. All phases of the IT lifecycle must be considered, from infrastructure planning and device procurement to rollout, contract management, process costs, maintenance, and asset management, and finally rollback and secure data deletion.

Your non-captive partner of choice will provide the data and pragmatic values you need to make an informed choice regarding procurement, operation, funding, and services, and to accurately assess the feasibility of the planned capital expenditure. This will give you the IT infrastructure you need for your innovation project along with all relevant data required for your financial management.

A comprehensive TCO calculation provides the basis for the right finance strategy. The strategy that suits your specific project must be flexible and consider the entire lifetime. This requires transparency and tight control over IT and finances. Just like the tools/software you use to manage your IT projects, a suitable partner can keep close track of the financing. CHG-MERIDIAN’s solution is TESMA®, a technology and lifecycle management tool that allows you to manage and coordinate contracts, services, and vendors in a single location. Complete TCO calculations, transparent projects, and clearly documented financing strategies can help you to drive forward digital innovation without losing sight of the costs – not just at the time of purchase, but across the entire lifetime.