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Managing the Total Cost of Ownership

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  1. Managing theTotal Cost of Ownership Tim Landeck

  2. Presentation Focus • TCO: What’s in it for me? • Identifying TCO costs • Strategies to reduce TCO • 5 stages of the Tech Life Cycle • Additional Resources

  3. The Problem • When schools invest in computers and networks, they often fail to plan for the long-term costs of using them effectively and efficiently • Schools need to evaluate the role of technology—and their goals • Schools need to budget accordingly…That means, planning for Total Cost of Ownership

  4. This is really nothing new… • If the district buys a bus, they must also budget for: • Gasoline • Maintenance • Personnel needs (training) • Repairs • Increased Insurance Premiums • Another Driver and training

  5. Similarly… • If you build a network or purchase computers, you must also budget for: • Software • Maintenance & Repairs • Increased Utility Costs • Support • Staff Development • Replacement Costs

  6. TCO Definition • Total cost of ownership (TCO) is a financial estimate designed to help consumers and enterprise managers assess direct and indirect costs related to the purchase of any capital investment, such as (but not limited to) computer software or hardware • All of the costs associated with deploying, operating and maintaining a computer network • Analysis tool used by businesses since the late 1980s • Used to identify real costs and make good decisions, based on that understanding

  7. What will be gained by addressing TCO? • Understand all of the costs that will need to be covered to support technology adequately • Understand the potential long-term costs of a particular approach • Understand direct and indirect (“hidden”) costs • Help develop a technology vision you can support for the long term • Continue to evaluate the choices you’ve made

  8. Why Should Schools Monitor TCO? • Provide management oversight • Document direct and indirect costs • Measure and improve technology initiatives • Develop budgetary guidelines • Articulate the business case for technology investments • Reassure policy makers that dollars are being used wisely

  9. When purchasing a computer, which is the most expensive? • Administration • Technical Support • End-user Operations (Training) • Capital outlay (Software & Hardware)

  10. Obvious Costs of a computer • Hardware purchase costs • Software license purchase costs • Hardware warranties • Hardware and Software installation • Maintenance • Replacement Costs

  11. The not-so obvious Costs of a computer • Training your support personnel • Training users of the system • Costs associated with failure or outage (planned and unplanned) • Diminished performance incidents (i.e. if users are kept waiting or are inefficient) • Costs of disaster preparedness and recovery

  12. Morenot-so obvious Costs of a computer • Software license tracking costs • Infrastructure (floor/desk space) costs • Network hardware and software costs • Server hardware and software costs • IT Personnel Salaries and Benefits • Theft/fire Insurance Costs

  13. Strategies to reduce TCO • Purchase hardware / software from one vendor • Volume Discounts • Efficient relationship • You can always find a cheaper computer… • Standardize on Software licenses • Easier to support • From installation to troubleshooting • Hardware warranties: 3 or 4 year extended • Age of a machine correlation to support needs

  14. Costs Associated with Older Machines • Increased costs for maintenance and support • Bigger inventory of replacement parts to keep • More models for support staff to master • Older the machine, the harder to keep it in service

  15. Strategies to reduce TCO • Perform Regular Maintenance • Image desktops annually • Feronics’ DeepFreeze, Apple Remote Desktop, Norton Ghost • Upgrade OS as appropriate* • Install patches and virus definition files • Plan for Replacement Costs • Replace 1/4 of all computers each year = no computer older than 4 years

  16. Strategies to reduce TCO • Planned and unplanned Outages • Communication with users • Plan for data recovery • Backup strategies • Train IT staff • Keep up-to-date with latest technologies • Don’t place all your eggs in one technician • Efficient support is critical to reduce TCO • Train users of the system • Staff Development offerings • Efficient use of soft/hardware Escalator Mov

  17. Strategies to reduce TCO • Network hardware and software • Fast and reliable networks and servers • IT Personnel Salaries • Ratio of technician to computer • 1:8 Vs. 1:500 • Hire them, train them and keep them • Invest in Energy Saving strategies • Buy LCD Monitors instead of CRTs • Energy control panels: Sleep mode • Verdium’s Surveyor

  18. Strategies to reduce TCO • Inventory • Keep up-to-date Hardware and Software inventory Records • Spreadsheet Vs Database Vs. Special Programs • Ram, HD, Processor, CD, Tech Support Issues • Who will inventory & Enter Data

  19. Donations We all get them but…

  20. Dilbert

  21. Strategies to reduce TCO • Donations • If it isn’t viable for you any more, it likely will not be of assistance to us • Exceptions: Key Boarding, Word processing • Set minimum specifications for donations • Identify Good Donation Sources • Politely Decline & Provide Alternatives

  22. Strategies to reduce TCO • Setting the standard! - Software • Nomenclature • Bug Fixes Vs Feature Enhancements, Free Vs Fee • 5.1 or 5.0.1 Office 2007, etc • Vendor Web Sites, • Avoid 1.0 or maybe even any .0 • Software Suites • PC & Mac, Old & new Hardware Compatible • Funding Issues - Who’s going to pay? • Operating Systems • Make sure it is worth the expense and support • Standardizing on one version creates consistency Terry Tate: Enforcing the standard Movie 

  23. Enforcing the Standard

  24. Strategies to reduce TCO • Setting the standard! - Hardware • Platforms - Mac vs. PC vs. Unix, etc • Specifications for new purchases • How far do you plan into the future? • Life of the machine…3 yrs?[.com] 6 yrs?[k-12] • Manufacturer

  25. Standardization vs. Diverse Operating Systems • Extreme diversity drives other costs • Loss of economies of scale • Staff development issues more complex • Hard for tech support to be expert on everything • Moves tech support personnel to niche experts • Diversity makes security more difficult • 60% of computers in district lacked virus protection • Imaging of computers more difficult

  26. Sometimes you have to keep moving forward even though you don’t have it all in place….

  27. Equipment Disposal • Locate a “User friendly” Recycling center • Easy Pickup/dropoff • Take it all • Reuse Vs Recycle • Recycle: Grind and melt • Political/Enviro Issue with Night Dumpster Dumping • Remove inventory tags and delete from inventory • Don’t recycle other people’s stuff (i.e. donations)

  28. Technology Life Cycle Stages • Bleeding edge - any technology that shows high potential but hasn't demonstrated its value or settled down into any kind of consensus. Early adopters may win big, or may be stuck with a white elephant. (i.e. WiMax, modular robotics) • Leading edge - a technology that has proven itself in the marketplace but is still new enough that it may be difficult to find knowledgeable personnel to implement or support it. (i.e. iPhone, Vista, Leopard)

  29. Technology Life Cycle Stages • State of the art - when everyone agrees that a particular technology is the right solution. (i.e. WinXP, Tiger, 802.11g, Blackberries, VoIP Telephones) • Dated - still useful, still sometimes implemented, but a replacement leading edge technology is readily available. (i.e. Win2K, OS X.3, radios) • Obsolete - has been superseded by state-of-the-art technology, maintained but no longer implemented. (i.e. Coax cable, Win98, OS9, dialup modems)

  30. The Bottom line Educational institutions and agencies should routinely conduct TCO evaluations to: • Manage and assess technology investments and initiatives in the context of organizational goals. • Use TCO to assist in developing budgetary guidelines. • Identify and document spending for individual technology services. • Inform stakeholders of the solid analytical management practices being followed when making funding requests.

  31. Additional Resources • Taking TCO to the Classroom • • TCO_Overview.pdf • • K12 TCO Calculator • • Optional: The Evolution of Tech Support movie

  32. Thank you for your attention Tim Landeck