Total cost of ownership: One step forward, one step back

Total cost of ownership (TCO), the concept that has long had CIOs tearing their hair out, all started with Gartner Group. Since the mid-1990s, embattled CIOs have been trying to get a handle on their organizations' proliferating desktop computer TCOs. But to what effect? In 1996 when Gartner announced the average Windows 95 desktop cost a whopping $10,000 a year to own, businesses began to wake up to the fact that the machines were costing five times the purchase price to maintain.

And today? That figure remains unchanged. Although the desktops in question are easier to manage and have more efficient operating systems with a lower TCO, the corporate world in which those desktops are used has grown more complex. The result is one step forward, one step back.

But does it matter? Heresy though it might appear, the most important aspect of TCO may not be the actual dollar value that it appears to cost an organization, but an awareness that there is a cost. CIOs need to keep looking for methods to reduce it, such as seat management, where the provision of end user computing facilities is outsourced to a third party that takes on the task of procurement, installation, configuration, maintenance and help-desk support, all at a fixed price-per-seat. In some ways, TCO is a bit like the federal budget deficit: It's a big number, but the exact size doesn't matter as much as whether it's going up or down.

There's another fundamental problem with trying to attain a black-and-white amount. "To actually get a true TCO figure is extremely difficult," says David Masding, director of operations at the Manchester, England, headquarters of the National Computing Centre, a British independent nonprofit research institute. "There's an almost inexhaustible list of things you have to include."

Just look at all that gets rolled into TCO: the direct costs of user support, hardware maintenance, software updates, training, lost productivity while users (and coworkers) try to figure out what's gone wrong, security, downtime, administrative costs and a host of other headings -- including depreciation and finance charges. With a laundry list that long, coupled with the increasing cost of hiring, it's no surprise that a business's TCO quickly climbs to about $10,000 a year. Technical advances drive it down, but the people-related costs in the calculation push it obstinately back up.

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