Compaq Computer Corporation on TCO

Why Measure TCO?

A survey conducted by Compaq of hundreds of financial executives and IT managers responsible for IT decisions reveals that only one out of every twenty-five financial decision-makers realized that costs incurred after initial deployment comprise the largest component of IT cost. Costs incurred after the initial deployment can comprise up to 80 percent of IT cost, yet many decision-makers focus on controlling IT capital costs rather than the post-deployment cost. Understanding where IT costs are incurred is a first step in developing the necessary awareness of total cost of ownership (TCO) including its importance and the potential benefits.

Accurately identifying and tracking IT costs can be challenging since cost definitions vary between TCO models, multiple departments incur costs, and some costs, although real, may not be obvious. Further, accounting mechanisms typically aren't in place to capture both the identifiable and hidden costs within the enterprise.

Factors Driving TCO

Organizations reduce IT lifecycle costs most effectively when they make three complementary investments: training people, streamlining processes and acquiring technologies that are easy to Companies that aggressively implement such initiatives report large gains in IT efficiency and, as a result, significant reductions in TCO. For best results, a balanced focus is required on all three primary factors driving TCO:

1. People - training end-users and IT staff to make optimal use of cost-controlling processes and technologies.
2. Processes - automating some tasks and streamlining others, ranging from asset tracking to software updating.
3. Technologies - deploying information technologies that minimize and in some cases eliminate the widest range of labor-intensive tasks.

Benefits of the Lifecycle Model

Implementing a TCO Lifecycle Model requires enterprise wide commitment, time, tools, services, personnel and IT skills, but companies report huge paybacks. The process:

• Reveals costs and enables accurate measurement
• Improves decision-making; makes justification more rational
• Sharpens forecasting and improves change control
• Improves IT cost management and budget controls
• Improves performance
• Enhances productivity and functionality
• Generates higher customer satisfaction
• Provides standard, consistent data
• Mitigates risks encountered within the IT environment
• Raises business value

Twelve Best Practices for Controlling TCO:

1. Asset Management
2. Server Based Client Image Control
3. User State Management & Restore
4. Systems Management
5. Managed PCs
6. Automated Software
7. Distribution Scalability
8. Business Protection
9. Service Desk
10. User Management
11. Standardization
12. People Improvement

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