Digital-led COVID-19 Recovery Strategy - Why it is important to re-examine Total Cost of Ownership (TCO) now more than ever.

Mar 26 2021
Stone Forest IT
Lower your TCO_AvailEase Managed IT

The COVID-19 pandemic has forced businesses to accelerate digital adoption and this trend will not slow down in the foreseeable future. As Microsoft CEO, Satya Nadella puts it, “We’ve seen two years’ worth of digital transformation in two months.” While technology has greatly aided businesses in an increasingly digital-based normal, the rapid changeover has also left businesses exposed to new challenges.

Many businesses lack a structured and sustainable IT management approach that addresses the information security, cybersecurity, and compliance challenges digital transformation brings. To thrive in this post-COVID world, it is therefore critical to re-examine ones Total Cost of Ownership (TCO) to maximise the value IT brings to the business and minimise IT risks.

Understanding TCO

Do you know 80% of total IT costs occur after the initial purchase? (Gartner)

 

Investopedia defines TCO as the purchase price and the operating cost of a product. Gartner states that for IT, TCO includes hardware and software acquisition, management and support, end-user expenses, the opportunity cost of downtime, training and, other productivity losses.

For most people, they focus only on the upfront IT costs and neglect the other indirect key components that would add up over time. This simplistic understanding of TCO often leads to over-inflated expectations of benefits and frustrations from hidden costs.



TCO


Importance of TCO Analysis

A TCO analysis helps businesses differentiate between short-term (purchase price) and long-term (TCO) costs of a product or service. It helps make an informed decision when selecting the right option from multiple alternatives. In general, a lower and stable TCO offers better value in the long run.

As you jump on the digital bandwagon for survival, it should not distract you from the constant need to align IT to business needs and question the ROI. Even before the pandemic, businesses that had an accurate handle on TCO were more agile and prepared for unexpected surprises and demands.



Re-examining TCO in IT Management

Technology investments have wide impact and must not be considered lightly, especially now when prudence is key. While the components of TCO may vary depending on your industry and business needs, be sure to consider the following while analysing the TCO for your IT management strategy. 

IT hardware & Software

 

Initial hardware and software costs

Cost reduction and agility pressures have made operational expenditures (OPEX) are more favourable over capital expenditures (CAPEX). Outsourcing IT to a managed services provider makes IT spending more predictable and manageable with a subscription-based and modular IT approach. This allows for easy scaling up or down of IT, based only on what you need and use.

 Backup  

Backup and recovery cost

Viewed as an insurance policy, backup is a necessary expense. Beyond the backup software cost, TCO includes ongoing maintenance, storage costs, monitoring, and testing. Cost also rises with the demand for rapid recovery. Today, many are turning to cloud backup due to its accessibility and cost effectiveness but it still takes a competent IT team to effectively execute and manage it according to ones backup and disaster recovery objectives, and budget.  

 Business continuity  

Downtime and business continuity cost

The concept of remote work has added extensive complexity to IT management and impact on TCO.  Downtime can causes tremendous monetary losses and other collateral damages like data loss, loss of customer trust, and bad customer experience; which all magnifies business loss in the longer term. To fulfill service level agreements, boost customer service reliability and reduce the cost of unplanned disruptions and uncertainties from trial-and–error resolutions, the implementation of proven IT standards and frameworks, and routine preventive maintenance are important.

 Compliance  

Regulatory compliance cost

Keeping up with the ever-changing regulatory requirements and monitoring risks is an expensive and resource-draining critical task. TCO analysis here involves understanding and categorising the risks of non-compliance and agreeing on your preferred risk profile. Compliance must be managed as a continuous program, and not as a one-off project where issues are been responded in an ad-hoc manner. Having effective IT standard operating procedures and regular reviews are key for a long-term, proactive adherence approach.

 Cybersecurity  

Cybersecurity cost

It is a challenge to internally build and maintain a cybersecurity solution that cost-effectively provides adequate, ongoing protection against sophisticated cyber attacks. The question you should ask is - Do you want to be a security company, or do you want to be a secure company? Having your own SOC is just not viable for most, due to the high costs from talents, maintenance, monitoring, etc.  Managed Security provides the prefect affordable solution because you get a single, comprehensive and fully supported service, that is also modular and flexible to your unique protection needs.

 IT talent  

IT talent retention cost

Lastly, a common problem that businesses face in maintaining a high-performing IT function is finding and keeping skilled technology professionals. Today, the demand for IT talent far exceeds the supply and the cost of recruitment and continuous training is high. To reduce TCO, many businesses leverage on an Managed IT partner for access to technical domain experts to support when there are unexpected and ad-hoc IT emergencies, and for technology advisory.   

 

In today’s challenging business environment, where spending is being scrutinised repeatedly, knowing where your ‘big buckets’ of costs are is vital. There is also a growing trend on Fixed vs Variable IT cost analysis, with more favouring the latter as it can be dialed up or down at times of need. 




Find out how AvailEase Managed IT can help you manage all the above for a more predictable TCO and cost-effective, flexible IT management strategy. 

 

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