There is a perception in the marketplace that technology seems to get cheaper and better every year. In fact marketing initiatives of many purveyors of technology are very good at creating buzz about what is the latest and greatest and what is the “must have” technology items.

For a lot of small business owners that I work with, it seems that the price-point for technology is usually the selling point. However, I am always quick to point out to my business partners that there is a lot more to the message than the marketing. No matter how attractive pricing becomes, it is very important to focus on the total cost of ownership or TCO.

There are many factors to consider when trying to determine the total cost of ownership of a piece of technology. For example, let’s say we are looking for a desktop workstation for our business — there are a wide variety of additional potential costs that should be taken into account.

Finance Charges – During a typical 3 – 4 year product life cycle of a desktop workstation, many small businesses will find it advantageous to lease for the term of the entire product life cycle. You don’t pay for the entire product up front, but over the course of your lease, you will pay additional finance costs that are built into the lease — that increases your TCO.

Migration or Setup - If your new workstation is a replacement for an existing workstation, there will need to be a migration of your data and environment to the new system. If the workstation is a new system, there will need to be a setup of your required software, environment so that everything works with your systems.

Software Licenses -Software licenses are a significant portion of the TCO of any desktop workstation. In fact, in many small businesses, the cost of software licenses alone can exceed the initial cost of the hardware.

Energy - This is one factor that many businesses don’t take into account, but should because of the increasing costs of energy. For a system that is run 8 hours a day during a 3 – 4 year product life cycle, your additional electricity costs may add another 50-60% to the cost of an entry-level workstation. For servers that are left on 24 hours a day / 7 days a week, energy costs usually exceed the initial cost of the server hardware.

Infrastructure & Resources - Sometimes overlooked is the actual infrastructure and resources costs. The type of infrastructure you should consider is the cabling costs (network or otherwise), power management (surge suppressors and uninterruptible power supplies) and security solutions (desktop locks or other anti-theft devices). In terms of resources, a typical cost to factor in would be the cost of the personnel that operates the technology.

Service and Maintenance – For many small businesses that do not have an I/T person on permanent staff, service and maintenance issues are of critical importance and usually cost more on an on-call basis. The amount of service calls vary from business to business, but in my experience, on average, I see about 3 – 6 service calls per workstation over its four-year life cycle. This may seem high to some people, but for many small business owners that do not have technical people on staff, it is common to get a contractor in to do simple maintenance, data restoration or other functions.

If you’ve gotten this far, you should have a better understanding of the additional costs that increase the total cost of ownership of technology you acquire for your small business. Careful planning in the research and purchasing phases of your new technology will allow you to better control your costs by buying right-sized technology for your application.

This entry was posted on Monday, December 1st, 2008 at 10:09 pm and is filed under Technology Solutions.You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.