Integrated Technology Education Group, LLC

Total Cost of Ownership

Total Cost of Ownership content is not often considered in the context of an education technology program. The technology equipment tends to be emphasized while the continuing cost of ancillary products and services and other necessary investments such as building modifications, teacher training and incremental energy costs are of secondary consideration.

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 that the money is being well managed.

The Importance of Understanding and Using Total Cost of Ownership Analysis

The application of a total cost of ownership philosophy adds quantifiable data to a difficult decision process.

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.

The use of TCO will aid school administrators as they attempt to build and sustain the best possible technology systems that limited budgets will support.

Education technology budgets are under stress. During times of budget constraint there is an increasingly urgent need for all parties to be able to accurately forecast multi-year costs against various outcomes so that the use of available funds can be optimized. Schools throughout the country are being asked to make do with less. Without increased budget forecast and control the implication is clear: a (downward) trend toward an inventory of older equipment, and an inadequately trained staff.

A well organized TCO process provides all members of the school community with heightened awareness of how technology, construction, professional training, equipment procurement and replacement, and energy consumption (among others) impact each other.

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. Lower total school costs, increased financial control and more efficient integration of technology into the school's operations can (and will) result from the early application of a TCO program .

To determine the true total cost of ownership, not only must all initial costs be included, but also the multi-year costs necessary for support, replacement, and servicing. Analysis has shown that those items usually defined as "technology" 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.

TCO References:

Taking TCO to the Classroom developed by COSN http://classroomtco.cosn.org/

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 additional sources of information offered by Tech-Learning http://www.techlearning.com/story/showArticle.jhtml?articleID=60402206

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

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.

2/23/10