{"id":66117,"date":"2023-06-21T10:55:58","date_gmt":"2023-06-21T14:55:58","guid":{"rendered":"https:\/\/jumpcloud.com\/?p=66117"},"modified":"2023-08-30T08:40:17","modified_gmt":"2023-08-30T12:40:17","slug":"it-tco-optimize-strategic-initiatives","status":"publish","type":"post","link":"https:\/\/jumpcloud.com\/blog\/it-tco-optimize-strategic-initiatives","title":{"rendered":"How to Analyze and Leverage IT TCO"},"content":{"rendered":"\n
Often, when we think cost<\/em>, we think price<\/em>. <\/em>But that\u2019s only part of the story. Total cost of ownership (TCO) encompasses not just initial costs, but all<\/em> the expenses associated with owning and supporting something over time. TCO is comprehensive, which makes it a far better indicator of total expenses than working with face-value prices alone. <\/p>\n\n\n\n Calculating TCO can help you make better strategic decisions and find ways to do more with the IT you have. This blog explores the basics of analyzing your IT TCO and how to identify opportunities to create a more cost-efficient tech environment. <\/p>\n\n\n\n Note:<\/em><\/strong> This blog assumes a basic understanding of how to calculate TCO \u2014 if you\u2019re not sure how to calculate TCO, we recommend starting with the <\/em>IT Professional\u2019s Complete Guide to Calculating TCO<\/em><\/a>.<\/em><\/p>\n\n\n\n To conduct a strong TCO analysis, you\u2019ll need to start with the right figures and information. There are many ways to go about calculating IT TCO, and important elements like scope and time period can significantly change your analysis. Determining these elements at the start will help make sure your analysis shows you what you want to know.<\/p>\n\n\n\n First, determine what you want to learn by calculating TCO. TCO can help you analyze things like:<\/p>\n\n\n\n There are many uses for TCO. It\u2019s a flexible but powerful metric that can help you analyze spending on many levels. Start by defining a goal to stay on track.<\/p>\n\n\n\n TCO calculations typically include the past and current costs associated with an item or group of items. However, you can also project future TCO costs, and you can add them together for a projected lifetime cost. <\/p>\n\n\n\n Pro tip: <\/em>Future TCO is often used in proposals to switch solutions.<\/p>\n\n\n\n Pro tip: <\/em>there are ways to calculate future costs that account for expected company growth, upgrades, end of life (EoL) costs, and even expected inflation. We\u2019ve developed a calculator that has built-in formulas that account for these variables as well as many others \u2014 try it out<\/a> to see how much your tools may cost you in the future. <\/p>\n\n\n\n TCO can be calculated for a single tool or a suite of tools. You might also choose to compare the TCO of different toolsets. <\/p>\n\n\n\n TCO calculations can even include things like support costs, equipment hosting costs, rollout costs, and more. Consider your goal when deciding which elements are appropriate to calculate.<\/p>\n\n\n\n Consider the following examples:<\/p>\n\n\n\n Calculating IT TCO can help you make strategic decisions and improve your resource allocation. TCO-informed decisions can unlock:<\/p>\n\n\n\n When looking at your company\u2019s TCO, look for the following indicators of areas that could be optimized.<\/p>\n\n\n\n Calculating the TCO of your IT infrastructure can help you identify opportunities to consolidate tools without losing needed functionality, ultimately lowering costs. To identify redundancies, try the following exercise: <\/p>\n\n\n\n TCO calculations also allow you to examine your highest costs, which can sometimes be reduced. To find areas where you might be overpaying, try the following exercises:<\/p>\n\n\n\n Look for the highest-cost items:<\/strong><\/p>\n\n\n\n Compare your highest-cost hardware to the TCO of a cloud alternative.<\/strong> Cloud-based infrastructure is almost always more cost-effective than legacy, as it eliminates recurring hosting, maintenance, and management costs for the equipment. <\/p>\n\n\n\n We conducted this exercise on a fictional company as an example \u2014 <\/em>check it out in the TCO calculator<\/em><\/strong><\/a>. The <\/em>Executive Dashboard \u2013 Projected TCO<\/em><\/strong> tab shows the projected savings the company would gain by switching to cloud-based infrastructure. <\/em><\/p>\n\n\n\n While TCO calculates the costs of what it takes to acquire and maintain solutions, it doesn\u2019t account for the risks each solution poses. For an even fuller picture of your environment, consider including risk factors in your analysis \u2014 especially when comparing two solutions. Sometimes, a solution that reduces risk may be worth a higher cost.<\/p>\n\n\n\n For example, organizations that house their own legacy infrastructure typically provide their own physical security, which may not amount to much when accounting purely for TCO. However, the typical office\u2019s on-prem security system can\u2019t compare to the security global cloud providers have in place. In this case, the risk factor of in-house cameras and door alarms is significantly higher than that of a global data center monitored by security staff, protected with least-privilege physical access, and built to withstand everything from floods to seismic activity. <\/p>\n\n\n\n This difference in risk adds dimension to comparisons and proposals. Often, the risk factors of cloud solutions are notably lower than in-house risks, which can help build a case for moving to the cloud. <\/p>\n\n\n\n IT sprawl<\/a> is extremely common in organizations today \u2014 in fact, only 15% of SME<\/a> employees need one or two accounts to do their jobs, while 43% need at least six. Sprawl is one of the biggest cost inefficiencies in many small and medium-sized organizations (SMEs), and IT consolidation is the best way to counteract it. <\/p>\n\n\n\n IT sprawl is a natural side-effect of growth: the need to move quickly and adequately equip employees sends IT teams into ad hoc purchasing patterns to solve problems as they arise. However, short-term fixes can create long-term problems. Environments often become tool-heavy, which makes them cluttered and sluggish with complex integrations, roundabout processes, and too many vendors to manage. <\/p>\n\n\n\n Predictably, more vendors and tools lead to higher direct costs. For example, paying for an MFA tool, SSO tool, and directory platform separately would typically cost more than paying for one solution that offers all three.<\/p>\n\n\n\n Tool sprawl also drives up indirect costs. More tools means more time and effort demanded of you and your team. The complexity, unstable integrations, and convoluted processes that result from a cluttered tool environment decrease efficiency and obfuscate reporting. <\/p>\n\n\n\n Consolidating sprawl removes the excess while optimizing your existing architecture for better team efficiency, lower maintenance costs, and clearer data.<\/strong><\/p>\n\n\n\n Consolidating tools lowers both direct and indirect costs incurred by sprawl. For one, meeting your needs with a few robust solutions will almost always be more cost-efficient than doing so with a series of point solutions. Even when the robust tool is more expensive than a more limited counterpart, the benefits it provides, combined with the point solutions it allows you to eliminate, usually mean it will have a lower TCO in the long run. <\/p>\n\n\n\n Further, eliminating the overhead required to bounce from tool to tool in a crowded stack means significant time back for your team to work more strategically \u2014 which means better cost-efficiency for the business. It also means better visibility, more flexibility to make changes as needed, and a better experience for you, your admins, and your users.<\/p>\n\n\n\nCalculating TCO<\/h2>\n\n\n\n
1. Start with a Goal: What Do You Want to Know?<\/h3>\n\n\n\n
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2. Set a Time Frame <\/h3>\n\n\n\n
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3. Determine Which Elements to Include<\/h3>\n\n\n\n
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Analyzing Findings<\/h2>\n\n\n\n
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1. Look for Redundancy<\/h3>\n\n\n\n
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2. Look for High Costs <\/h3>\n\n\n\n
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3. Accompany TCO with Risk Calculations<\/h3>\n\n\n\n
4. Look for Areas to Consolidate by Combating Sprawl<\/h3>\n\n\n\n