In Education,
as in Business, there is a Willingness to Pay if the Goal
is Clear, the Total Cost is Known, and there is Confidence
in Management
The Importance of Understanding and Using Total Cost of
Ownership Analysis
Technology systems
are
complex. In addition to the initial
determination of how and what to purchase, there is
the difficult task of determining what to replace,
what to add and when. Given the many variables
involved each decision will have long term
implications which will affect the total system
configuration and its operation.
Education technology budgets
are being cut at all levels: federal, state and
local. During times of budget constraint there is an
increasingly urgent need for all parties to be able
to accurately forecast technology costs against
various system outcomes so that
the use of available funds can be optimized. Schools throughout the
country are being told to make do with less. The
implication is clear: a trend toward an
inventory of older equipment, and/or a staff with
less than adequate training.
-
A well organized TCO process provides all members of the school community
with heightened awareness of how technology,
construction, professional training, equipment
procurement policy and replacement, and energy
consumption (among others) impact each other, and
ultimately the cost of and results obtained from the
technology program.
Many school
administrators and other members of the education
community have not had the opportunity to apply Total
Cost of Ownership analysis. As a result the
multi-year cost linkage
between technology, building construction, personnel
training and other
school functions is often over looked.
The result is lower total school costs, increased
financial control and more efficient integration of
technology into the school facility.
|
The
figure above represents just several of the sub-systems
that are impacted by, or impact, a technology system.
To ascertain the total cost of technology all of the
costs associated with these items must
be taken into account.
|
To determine the true total cost of ownership, not only
must all initial costs be included, but also multi-year costs
necessary for support, replacement, and servicing.
Quantitative analysis has concluded that those items
usually defined as "technology" will account for only
about 50% of the total system cost, and the computers,
which are often considered the core of the system will
account for less than 25% of the total over 5 years.
It has also been found that the total cost to obtain and
support all the systems necessary for a fully equipped
education technology program can be in excess of $500 per
student per year. It needs to be recognized however,
that this figure is for the "ideal" configuration.
In reality, an adequate and appropriate system
can be obtained and supported for a cost of $300 to $350
per student per year. Multi-year budgeting needs to
take into account the cost of product life-cycle
replacement.
A
FREE TCO calculator can be found at
http://www.iaete.org/tco.
(Version 2.0 ) The calculator was
developed by ITEG and AEL, with the sponsorship of the Department
of Education.
This calculator has a high degree of customization
available to the user such as pricing for multiple schools
in a district, the ability to modify product prices, and
the ability to define student/equipment ratios, and more. It
also addresses the goals of NCLB and the new National
Education Technology Plan.
If additional customization is desired
such as changes in the
assumption set, or the addition of special products or
services contact: ITEG at azee@iteg.com. Capabilities that ITEG can offer include the ability to
address unique school
district needs, support the modification of output data to enhance
presentations, and lend assistance to the technology team in
developing a total system view of the edtech program. TCO guidance for school administrators
is also offered. There will
be a nominal fee for this additional support.
TCO References:
Turbo-charge TCO analysis to get more bang for your
technology buck by Al Zeisler
and John Ross
August 1, 2005 - eSchool News (free
registration required)
http://www.eschoolnews.com/news/showStory.cfm?ArticleID=5810
Total Cost of Ownership information developed by Compaq
http://h18000.www1.hp.com/tco/
Taking TCO to the Classroom developed by COSN
http://classroomtco.cosn.org/
Why is TCO important – Darwin Magazine
http://www.darwinmag.com/read/110103/question74.html
Total Cost of Ownership developed by TRANE (concentration on HVAC)
http://www.trane.com/commercial/financing/tco.asp
Why TCO matters by the Gartner Group
https://k12tco.gartner.com/home/homepagepromo/files/TCO_Overview.pdf
Total Cost of Ownership by Dell Computer
http://www1.us.dell.com/content/topics/global.aspx/tco/en/tco?c=us&cs=28&l=en&s=dfb
TCO developed by British Communications Educational and Technology
Agency
http://www.becta.org.uk/research/research.cfm?section=1&id=544
http://whitepaper.informationweek.com/cmpinformationweek/search/viewabstract/62644/index.jsp
Total Cost of Ownership: Why the price of the computer means so little
http://www.thebusinessmac.com/features/tco_hardware.shtml
TCO additional sources of information offered by Tech-Learning
http://www.techlearning.com/story/showArticle.jhtml?articleID=60402206
Wireless LAN TCO
http://www.cisco.com/en/US/products/hw/wireless/ps430/products_white_paper0900aecd801bb7d4.shtml
Investing in Palm handhelds: understanding total cost of ownership
http://www.palmpowerenterprise.com/issuesprint/issue200109/tco.html
The strengths and weaknesses of Total Cost of Ownership
http://www.nucleusresearch.com/research/a21.pdf
Technology’s real costs by Sara Fitzgerald writing for Electronic-School
http://www.electronic-school.com/199909/0999sbot.html
American
School and University: the total cost of ownership
http://asumag.com/mag/university_total_cost_ownership/
State of Colorado: An introduction to Information
Technology Total Cost of Ownership
http://www.oit.state.co.us/resources/docs/TCO_an_introduction.pdf
Follow the money: Understanding the total cost of
ownership can prevent districts from blowing their tech
budgets
http://www.scholastic.com/administrator/feb05/articles.asp?article=tco
(note: search on term 'TCO' if page does not
appear)
ITEG, LLC
makes extensive use of the capabilities of Microsoft
Excel, and can apply these capabilities to financial
studies of all kinds. We look forward to
discussing your needs.