This is a very important concept to consider as it may save you financially. While consumer grade computers sold at retail locations cost less to initially purchase, over time these devices will cost you significantly more due to their Total Cost of Ownership (TCO).
What does TCO include?
TCO calculations include a combination of both direct costs (hardware, software, operations and administration) and indirect costs (end-user operations and downtime).
Direct Costs + Indirect Costs = TCO
Let’s take a real-world example, your company needs to replace five workstations that are no longer under warranty. You must first consider the direct costs starting with the upfront cost of purchasing the hardware. There are a few options to consider such as a consumer grade device costing anywhere from $500 to $2500 or a business grade device costing between $1500 and $3500.
But what is the difference between consumer and business grade devices?
Computers intended for home use represent a false economy for businesses. Whilst they may be inexpensive to buy, they do not compare with their business-grade counterparts, as you need to pay for IT to integrate the new computer system into your corporate network each time. Over four years, you might need to repeat this process three or four times as you continually repair or replace the cheaper computer, each time interrupting your staff and productivity while it occurs. With a computer designed for business, you only do this once.
Additional direct costs include any software licensing the device requires, in addition to the setup of the hardware. This cost arises from configuring the hardware and setting up the user’s custom profile, as well as migrating data from the user’s old devices. As highlighted above, setup costs are often greater for consumer grade devices.
Once your team have their new workstation, this is when indirect costs come into effect. In some cases, the user may require training on the new device. Maintenance and support costs will also be of relevance, this includes the cost of both labour and parts. Consumer grade devices are likely to have greater maintenance and support requirements over their lifetime as a result of both their lower quality and capability.
If a device is needing frequent maintenance this will have an impact on the productivity of your team. Slow performance and operating speeds can be frustrating for users and lead to diminished productivity. Technical issues and hardware failure will lead to further lost productivity and downtime for the user. In this scenario we do have loan workstations available to get you up and running as quickly as possible.
Let’s look at this in dollar figures, say a user is losing an hour everyday due to performance issues. If an hour of their time is worth $30, this equates to a lost productivity cost of $150 a week or $7,800 per year.
As highlighted, indirect costs are often greater in consumer grade devices when compared to business grade devices. This means that although consumer grade devices require a lower upfront investment, over time the associated costs may be significantly higher.
Making the shift to value-driven procurement starts with understanding the total cost of ownership. This understanding can then be put to good use when planning and road mapping your IT expenditure. When accounting for both direct and indirect costs, you can make confident decisions and get the best possible return on every dollar spent.