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clude not just the initial purchase price of an item or service, but also the funds allocated toward implementation, training, support, and so on. Specific costs are determined by the item in question and the environment in which it will be used. Of course, a complete TCO analysis can itself be costly in terms of money, time, and other business resources. On the whole, however, TCO-based planning can actually save a great deal of money. Companies that can properly identify and reduce their areas of high costs have an edge, in the long run, over their less efficient competitors. If you d like more detailed information on TCO in IT environments, here are some good resources: w Microsoft TechNet TCO Information Microsoft has been placing a lot of emphasis on the TCO model. As more and more IT decision-makers are looking at overall expenses, Microsoft can provide information about the cost of incorporating various Windows-based solutions into an overall IT strategy. For more information on tools, technologies, and cost studies, go to www.microsoft.com/technet/tco. The Gartner Group The increasing industrial emphasis on TCO can be largely attributed to the research, studies, and methodologies proffered by the Gartner Group. For more information, visit www.gartnergroup.com. This website (much of which requires a paid subscription) includes helpful information designed to help you analyze TCO in your own environment. Included are tables of cost areas that you should take into consideration when measuring the total cost of your own environment. Using industry-standard benchmarks, you ll be able to see how your organization s business practices and costs compare to the efficiency of others. Windows NT Network Management: Reducing Total Cost of Ownership (New Riders Press, 1999). This book (written by your author) includes a lot of information on measuring and calculating TCO, and describes the various technical tools, utilities, and practices available for controlling costs in a business environment. Technical solutions (Virtual Private Networks, for instance) are discussed not for technology s own sake, but rather with direct focus on how they can help you overcome the financial challenges in your own business.
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Now that we ve completed our very brief overview of TCO analysis, let s look at how we can apply this information in conjunction with another common business acronym...
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Often, the results of a TCO analysis will reveal that the true cost of an item or technology is far higher than initially realized. The logical question then becomes, Is it worth it This is where the idea of Return on Investment (ROI) comes in. Simply put, ROI is mea-
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sured to help determine whether the implementation of specific technology is worth the expense. Typically, ROI is calculated in terms of time or money, and is expressed as a ratio. It is a number that measures how quickly you will break even on an investment (and start seeing tangible benefits from it). The more accurate your TCO information, the more accurate will be your ROI. To calculate ROI, you should start by dividing the expected financial benefit (the return ) by the amount invested. A good investment will have a value above 1 (the higher the value, the better). It may also be meaningful to express ROI in terms of time and/or money. The ROI on a new tape backup device, for example, might be one year. That s the time it will take you to recover the costs of purchasing, installing, and using the unit for one year vs. keeping your old device. Again, you should factor in items related to TCO, such as training and implementation. However, be sure that you also emphasize the benefits (e.g., reduced administration cost, downtime prevented, etc.). The information presented in this section can be quite useful in several ways. First, if you re an IT support provider, you ll probably need to get sign-off from management and executives before you can implement a company-wide backup strategy. By emphasizing TCO and ROI figures, you ll have a good way to justify your technical solutions. You ll get a lot of mileage out of statements like: We ll start seeing savings on IT support issues three months after we deploy Product X company-wide. Otherwise, if you are the decision-maker, you ll have a good way to measure the quality of certain business decisions. Either way, continue to keep these ideas in mind as we start looking at backup solutions in more detail.
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