Technology is now an indispensable tool in the work of every office. Sometimes with top-of-the-line equipment, and other times even with second-hand computers, it is unthinkable for small and medium-sized businesses to carry out their activities without "smart machines" and keeping up with the times.

Undoubtedly, the choice of IT solutions and equipment depends on the field of activity in which you develop your organization and the potential benefits you expect from this investment. In some businesses, connectivity, traceability, transparency, hierarchy, security are characteristics of the working IT environment, without which practical activity is impossible. For others, it is enough that the disparate type of equipment, procured in stages over time, simply works as a whole, and that the individual devices can "communicate" with each other.

In any case, the scope of the process - from the objective need, through purchase and implementation to subsequent operation and regular maintenance of the system, requires an analysis that can save you not only funds for the purchase itself, but also a lot of accompanying and hidden costs, for which you didn't guess. TCO for IT comes to the rescue.

What is TCO for IT?

TSO (Total Cost Of Ownership) or the total cost of ownership is the total cost of using and maintaining an IT investment over time. It is also one of the most up-to-date and objective scales for calculating and planning costs for IT solutions and equipment. In the management of corporate IT systems, TCO is estimated using different methodologies, but the goal is always to reduce costs and increase efficiency.

TCO calculations analyze the mix of direct costs (hardware, software, operations and administration) and indirect costs (end-user operations and downtime). This value includes the entire life cycle from the moment of purchase. TCO is often neglected precisely because of a misunderstanding of what the process of using IT technologies in the office is and, accordingly, what investments it involves.

The scale of the companies is different and, together with the subject of activity, outlines an invariable framework of the working IT environment. In the context of this, we will look at the types of expenses by category - a basis for analyzing your specific situation and priorities.

TCO and types of IT costs:

Research shows that the base price of a computer is usually about 30% of its TCO. The most is spent on managing the computer park and on staff salaries. Running costs related to security measures, software updates, computer repairs and general maintenance make up the rest of the 70%. These costs are also the largest share of TCO and therefore worth being aware of and effectively controlling.

In the TSO methodology, it is assumed that the costs are grouped in the following areas:

• Acquisition costs
• Hidden costs
• Current costs

Acquisition costs:

Introducing a new technology requires an initial analysis and good planning to choose the right technology and implement it in the best way, which includes the following main points:

Planning and Design Costs: 

• To consider the current and future needs that the technology will provide 

• To consider what are its limitations

• Research other solution options/providers

• To prepare the necessary project documentation

• To calculate how much the system would cost

Costs of equipment selection:

• Software: This is the price of the software, whether it's a one-time, monthly or annual fee, owned by you or on a subscription basis
• Hardware: If you use cloud, most likely the hardware is not the problem. However, if you decide to build your own infrastructure, this would definitely be an expense to consider.
• Execution: This is the cost of commissioning and tuning your new system to your business needs.
• Personalization: If you need specific customizations built into the software, this often involves additional developer tools.
• User Licenses: Some systems require each user license to be purchased separately
• Data migration: Migrating data from your current system can be an unexpected expense, so ask your provider what the process is and how much it costs.
• Training: This is one of the biggest expenses. Your system is practically useless if no one knows how to use it properly. Investing in training is one of the most important things you can do to increase your success rate.
• Systems integration (API) of third parties: If you need to connect several systems and want them all to talk to each other, this development will require an investment. It is wise to choose a system with the functionality you need or use ready-made platforms to avoid this kind of expense.

Hidden costs:

• Reduced performance: This column covers the whole process of moving to the new system, regardless of whether you had a previous one that you are upgrading or you are just starting to work with one. Here we will also add the result of all non-productive, non-optimized processes. Every novelty, every change, requires adaptation, i.e. time i.e. is an expense.
• Improvements: Even the best planned and customized solutions and equipment will require time to adapt to the new technology. Additional purchases or rent of premises, preparation of the infrastructure: back-up power supply, alarm system, ventilation and everything related to security, again fall under the "expenses" column.
• Network Upgrades: This is an expense that can be specified in advance and agreed with the contractor of your project. In case this is not done, it is a hidden cost.
• Insurance: In certain situations it is good to insure your new equipment. Anticipate costs for equipment damage/theft and replacement.
• Decommissioning: These are costs associated with the disposal of the old equipment. It sounds strange, but regimes for decommissioning old equipment are becoming increasingly strict from an environmental point of view. Recycling, disassembly and removal, termination of agreements, contracts and maintenance fees - consider whether you have such a commitment.

Operating / Running Costs:

This category includes expenses related to maintaining the new technology. It is relatively easy in terms of prediction.

System Support: includes the maintenance itself, including backups, file analysis, storage restructuring, security

System Upgrades: any additional integration and system settings, new user licenses of newly hired people

User Changes: ongoing modifications to technology to address changing user requirements, personalization/application additions, change of password, access or location

System Management: regularity on a time basis, identifying upcoming issues, optimizing productivity and operations.

Ongoing training of the team (and users): administrative training for new or modified processes and functionalities

Software support also falls into this cost category. If you have your own servers and associated hardware, add the cost of their maintenance and security again here.