When you’re considering buying a car, normally you also examine the related operating expenses; registration, maintenance, gasoline, repairs. You calculate the actual cost of your purchase, which is the total cost of ownership (TCO).
The same principle applies for the implementation of IT equipment in your company. Beyond the cost of acquisition, you must consider all the associated expenses. This will help you establish a more accurate budget, which better reflects reality.
What is Total Cost of Ownership (TCO)?
TCO includes all costs related to the acquisition and use of a computer system: from initial purchase cost, to installation, through training and updates. It allows you to better understand the value of your investment.
When calculating the TCO, it is necessary to include the direct costs, but also the indirect costs.
Direct costs are the purchase of hardware and software, the costs for technical operations and support, as well as administration.
Indirect costs are more difficult to calculate. They include user learning curve and potential downtime caused by failure, bugs or system updates.
Why Calculate TCO?
By measuring the true costs of your investment, TCO allows you to make better business decisions. This will help you better understand the impact of implementing a system on the cost structure of your business.
TCO provides a financial framework to effectively analyze your IT investment. It makes it possible to better compare the solutions presented by different suppliers by showing a much more realistic view of the all costs.
An analysis that does not take into account all the variables could lead to erroneous decision-making. Indeed, the cost of purchase is usually only a small portion of the overall investment!
3 ways to reduce TCO
While useful for all businesses, TCO is of particular importance in the automotive, engineering and aerospace industries. Indeed, their profitability is largely based on the efficiency of the technology they use throughout their launch cycle, from workstation performance for the initial concept and design of new products to the reliability of the manufacturing process. Ultimately, optimizing your complete IT infrastructure will reduce your total cost of ownership and increase your profitability.
1. Choose Reliability
Opting for reliable equipment avoids unexpected failures that can lead to downtime, decreased productivity and repair costs. While often initially more expensive, reliability quickly pays off. Not to mention that you will take advantage of a longer equipment lifecycle.
2. Opt for Standard Components
When it’s possible to do so, choose standard components over custom ones. They are not only less expensive, but can also be obtained more quickly in the event of a failure to minimize downtime.
3. Take Advantage of Vendor Managed Inventory (VMI)
Some vendors can manage your inventory to reduce downtime duration. In addition to allowing you to reallocate your resources to more productive tasks, VMI provides better turnover, eliminating the time required to order and deliver parts.
We understand the importance of reducing TCO when implementing a new system. Whether it’s a high-performance KRONOS workstation for design or a scalable MAGMA storage solution for Big Data, CIARA’s enterprise-grade IT equipment is assembled using high-quality, standard components and our production centers comply with ISO 9001 standards, guaranteeing long-term reliability.
Contact us to find the best solution for your organization.
This post is also available in: FR