Leveraging TCO to Justify an IT Proposal

Rejection always stings. But getting a great idea shot down after you and your team worked tirelessly to come up with it? An idea that you know will work? That really burns.

No matter how good an idea is, it generally can’t move forward without a stamp of approval from the powers that be (whether that’s a director, C-suite member, board, or all of the above). When it comes to driving positive change for your team, getting leadership on board is half the battle. Every good idea needs a clear and compelling proposal to back it up. 

Total cost of ownership (TCO) is a strong — yet often overlooked — figure that can help quantify and contextualize proposed IT initiatives. When applied to proposals, TCO can act as the hard numbers that clarify an initiative’s cost-effectiveness — a critical selling point. 

This blog covers best practices around leveraging TCO in proposals to help you improve the likelihood of getting initiatives approved. It assumes a basic understanding of how to calculate TCO — if you’re not sure how to do so, we recommend starting with the IT Professional’s Guide to Calculating TCO.

Proposal Best Practices

Before diving into the specifics of using TCO in a proposal, let’s establish a baseline of proposal best practices. These are the foundational elements of a clear and compelling proposal. 

1. Communicate costs clearly and lead with hard numbers.

Summarize the key takeaways from your TCO analyses with a few hard numbers. 

• Example: Our company will save about $15,000 in the next five years by switching from on-premises file servers to a cloud storage solution.

2. Communicate business benefits explicitly with hard numbers where possible. 

Business benefits are sometimes underrepresented in proposals. But when explicitly stated and contextualized with hard numbers, they can be highly compelling. 

• Example: Investing in this single sign-on solution will allow us to reduce our support ticket requests by 40%. 
• Example: This capability improves our security posture by putting us one step closer to ISO 27001 compliance.
• Example: By consolidating disparate products into a single platform, we can reduce our licenses, integrations, and operational costs by $30,000 per year.

3. Anticipate and address objections. 

It’s rare that a proposal is approved without a hitch — leaders will almost always have questions and points of hesitancy. Try to anticipate what they might be and head them off by explicitly bringing them up and refuting them. 

• Example: A common objection to cloud migration is that the company has already spent a considerable amount on their on-premises hardware, but this argument ignores future expenses. The reality is that legacy systems are expensive investments with costly upkeep. High upfront costs don’t mean that costs will be lower over time, nor that using the technology for its full lifespan will save the company money. Legacy infrastructure maintenance, management, and support costs will only rise as the technology gets older, eventually requiring additional hefty investments to keep it going once hardware inevitably needs to be replaced. 

4. Include objectives and measurable KPIs in your proposal.

Including objectives and KPIs will help leaders visualize the plan’s potential. Follow the SMART goal-setting method:

• Example: Upon adopting a cloud-based directory, we will phase out Active Directory within three months.
• Example: By adding zero touch enrollment, IT will reduce average employee onboarding time from one hour to 15 minutes within one month of adoption.

5. Set a timeline to keep estimations realistic and contextualized.

• Example: This proposal includes a projection of the proposed solution’s TCO over the next five years. 

6. Clearly communicate the cost and risk of not moving forward with the proposal. 

While communicating the benefits of a proposed solution is critical to a successful proposal, it’s also important to clarify the downsides of not moving forward with it. Clarifying these risks — and quantifying them where possible — helps create urgency and another compelling reason for leadership to approve the initiative.

• Example: If we do not switch to a cloud-based directory, we will have to pay roughly $25,000 in on-premises directory infrastructure upkeep within the next five years. This cost would be eliminated with the cloud-based alternative. 
• Example: If we do not invest in an off-site backup, we run the risk of losing business-critical data and incurring irreparable damage.

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Using TCO in Your Proposal 

Representing TCO

When it comes to actually representing TCO in a proposal, it should be clear, impactful, and easy to follow. Try to strike a balance between providing enough detail and not overwhelming your audience with information. Identify the most important and compelling numbers — i.e., initial costs, decreased costs per user, and projected savings over a period of time — and highlight them throughout your proposal. Don’t forget to include these numbers when communicating benefits and the bottom line. 

Visually representing data is a great way to keep the audience engaged. Keep spreadsheets and lists of numbers short, bold or highlight important figures, and include graphs and tables where appropriate. For clean charts and comparisons, try out JumpCloud’s TCO calculation template — it generates graphs and visual summaries of data that work great in proposals. 

Create a Compelling Comparison

If you’re proposing an alternative to existing technology, the most compelling TCO argument will be that your proposed solution offers lower TCO than your current one. In these cases, include a TCO comparison in your proposal for context, and consider the following methods for highlighting TCO wins.

1. Include every line item in both solutions, and zero out the ones that don’t apply. 

A side-by-side comparison helps show how a proposed solution reduces complexity and expenses. For example, when comparing legacy and cloud solutions, the cloud option could zero out most line items for infrastructure equipment and data center hosting costs to create an impactful visual of its cost savings.

2. Account for any features and capabilities that would be a result of a proposed switch.

If a proposed solution includes more capabilities than your current one, highlight these additional benefits by making them separate line items. If your current one achieves these capabilities with a separate tool, note the cost of the separate tool; if it doesn’t have these capabilities at all, mark them with an N/A. 

For example, if a proposed directory solution includes mobile device management (MDM) and your current one does not, include an additional line item for MDM in your TCO calculation of both solutions. For the proposed directory solution that includes MDM, it would not incur an extra cost; for your current solution, mark the cost of the MDM tool you use, or “N/A” if you do not have an MDM tool.

3. Highlight each solution’s projected future TCO. 

Often, “sunken costs” arguments come into play when solution alternatives are proposed: leaders don’t want to part with solutions they’ve already invested heavily in. Showing them that your proposed alternative will yield significant future savings regardless of their past expenses can help counteract this hesitancy. Do this by defining a time period of at least a few years, and highlighting the total savings your proposed solution would generate within that time period in your proposal. 

Consider All Angles

Do all your tools’ features provide value?

• When comparing tools’ TCO, look beyond a basic feature-by-feature comparison. You may get more immediate “bang for your buck” with certain products, but challenge yourself to consider if and how you will leverage premium features. Are they necessary and worth the additional cost? 

• Consider each product’s long-term viability. Will it become redundant as you invest in more comprehensive platforms over time? 

• Don’t forget to quantify elements like additional software to backfill features already included in an alternative. For example, if one directory solution offers built-in multi-factor authentication (MFA) that your company would use and the other option doesn’t, include a separate MFA solution as part of the TCO of the option without MFA. 

Have you accounted for risk? 

TCO includes the costs of what it takes to acquire and maintain solutions, but it doesn’t typically extend to the costs associated with the solutions’ risk. Accounting for these risks adds context to your proposal, offering a deeper analysis and fuller picture of the environment. Sometimes, a solution that reduces risk may be worth a higher cost. Identifying these risks — and quantifying them where possible — helps justify a high-cost solution that reduces risk.

• Example: On-premises infrastructure does not have an expense for 24/7 monitoring; however, this leaves the infrastructure unmonitored for 16 hours a day. On the other hand, cloud services come with 24/7 monitoring, which significantly reduces the risk of a breach. 

Get the Data and Visuals You Need

Most IT professionals aren’t also mathematicians, writers, or designers, so developing a proposal might be a bit outside your comfort zone. That’s okay! We’ve designed a comprehensive template designed to help you calculate, summarize, and visualize the TCO data you need to both analyze and propose initiatives to leadership. 

Download the TCO Calculator Template →