A bit like an iceberg…

Arcus Global

Arcus Global
May 25, 2011

When buying a car, apart from all the comfort and flexibility that it brings, we expect further expenses, beyond the initial list price of the vehicle. With expenses such as road tax, insurance, MOT tests, servicing and parking, the costs can soon build up, especially for car enthusiasts. This example is something many people can relate to when highlighting the difference between the initial purchase price and the actual long term cost of ownership.
It seems to me, that similar to the cost of a car, the cost of IT services are built up from various expenses over time. But how can we collect the various “bills” for an IT service? The established way of finding out lifetime costs is total cost of ownership (TCO) analysis.

During recent project work, I continued to find a common theme in that the difference, between the initially paid price (for the software licences, for example) and the resulting cost shown by TCO analysis, was significant. There were just so many cost of ownership categories to factor in, rather than just the initial cost price.

I found cases where costs were caused by the fact that the product was an in-house solution, but often costs were not just limited to the price and maintenance of the hardware or software. For example, what if the Service Desk is receiving a number of support calls from users regarding the product? How would you transfer this effort into monetary costs? What about upgrades, which may be required every five years and can be rather pricey and effort consuming. I must admit, I was surprised by the influence expenses such as these had in the overall TCO.

The TCO model in reality can look a bit like an iceberg, with license costs being immediately seen on top of the water and all the other costs below the waterline, hence often invisible.

Yes, the final figures produced through TCO analysis can be surprising, but it is always useful to know how much things really cost us, both for now and for the future. IT buyers should always consider ongoing maintenance costs for the business, just as we do when choosing a car in our personal lives.