Tech Talk: Total Cost of Ownership
Sep 1, 2006 12:00 PM, C. William Day
Does anyone really know what technology costs? Does anyone really care about total cost of ownership (TCO) when it comes to technology?
TCO includes hard and soft costs of owning technology systems. Hard costs include the wiring infrastructure, data networking systems, computer hardware and software, telephone and voice mail, multimedia products, security systems, maintenance contracts, support contracts and direct labor. These are considered hard costs because they are tangible and easily accounted for. Initial hardware costs are a relatively small portion of total costs.
Even more significant in the education sector are the soft costs related to systems administration, the help desk, staff development and training, repairs, configuration management and downtime. Because they aren't incurred at acquisition time, these costs often are overlooked and many times lead to unexpected budget increases or worse, a transfer of management and support responsibility to end users.
Much of the literature concerning technology tends to focus only on computer and software costs. Why? Many education institutions avoid TCO analysis because often it is easier to sell a project to the administration based on purchase price rather than on the much larger numbers entailed in TCO.
Buying hardware is one thing; getting it running, and keeping it running is another. From a cost perspective, consider the purchase of the equipment. In this case, purchasing costs also would include installation and maybe some initial training. Once an institution has a clear idea about what to purchase, calculating the cost is simple because the numbers are fixed and the amounts are relatively accurate. So, buying hardware is pretty easy.
But consider the people factor; this is more difficult to calculate. How many people will it take to manage, maintain and support the technology for an institution? Determining an estimate of how many people will be required can be troublesome. Often forgotten, but part of any total cost of ownership, are the costs for the internal employees — those who keep equipment and systems operating the way faculty and staff expect.
The main thrust of TCO is to identify all of the primary elements required to make the technology tools succeed. By laying down all the cards from the start, schools can avoid surprising the powers-that-be later on with a request for more funding.
TCO is a complex topic, and although it is an important concern, few technical papers are available on the subject. The literature that does exist tends to focus on the private sector and can be proprietary. It is interesting to note, however, that as a rule of thumb, the private sector provides one full-time equivalent (FTE) technician for each 50 users. Five years ago, this number was about one per 150. In the education arena, that number still remains about one FTE for every 500 pieces of equipment.
Day is senior analyst at KBD Planning Group, Young Harris, Ga., a firm specialized in education facilities and technology planning. He can be reached at bday@kbdplanning.com. www.kbdplanning.com
