TCO is usually calculated at purchasing time and when comparing offers from potential suppliers, and sometimes a supplier will give their own version of TCO.
Yet, the useful side of calculating TCO is after acquisition and during lifecycle, since the operation and maintenance of the system is typically the biggest component of TCO. Starting with an expected TCO, during lifecycle the actual TCO changes. Operation and maintenance costs add up. An unexpected failure in a system and repair will make the TCO Index go up, while efficient use of a system, with no problems, will improve the expected TCO Index. Also, if the lifecycle of a system is extended, the TCO Index will get better (decrease).
Monitoring and calculating TCO over the lifecycle of a system requires proper financial accounting practices and cost allocations and this data is typically readily available. Generating TCO reports for each family of systems on a monthly basis provide excellent KPIs . Management can appreciate such information and it develops a good history for making educated decisions during the next purchase and capital expenditure for a system .
Developing TCO models such as the one shown in the above figure, as simple as it seems, it will require commitment towards project execution excellence, since the TCO modeling approach behind it can get complex. Yet, the benefits can be substantial, since proper management of TCO KPIs can lead to very attractive savings.
Monitoring and calculating TCO over the lifecycle of a system requires proper financial accounting practices and cost allocations and this data is typically readily available. Generating TCO reports for each family of systems on a monthly basis provide excellent KPIs . Management can appreciate such information and it develops a good history for making educated decisions during the next purchase and capital expenditure for a system .
Developing TCO models such as the one shown in the above figure, as simple as it seems, it will require commitment towards project execution excellence, since the TCO modeling approach behind it can get complex. Yet, the benefits can be substantial, since proper management of TCO KPIs can lead to very attractive savings.
