Total Cost of Ownership (TCO) of a PC

by Raymond Poon
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When we talk about the cost of a PC on campus, it is common that only the price of the PC is considered. In fact, this amount alone is far less than the Total Cost of Ownership (TCO) of the PC as other types of costs associated such as installation, software, networking, communications, applications and services provided on the campus network, maintenance and technical support etc. will inevitably be incurred when the PC is put into use.

Without the TCO in mind, most departments or end users tend to purchase their PCs individually and make the purchase decision based simply on the initial price tag or on their individual preferences without considering either the additional associated costs incurred to the University or the impact brought about to the central as well as departmental IT servicing units. Without their understanding of the TCO and full cooperation, it will be very difficult for the University to fully leverage the economies of scale, and for the IT servicing units to develop the necessary expertise, to perform any kind of capacity planning, and to provide acceptable service level for the support. Consequently such purchase practice will unnecessarily incur higher cost to the University in the long run.

The intent of this article is therefore to help departments and end users understand the meaning of the TCO of PCs so that they can all work together to save the University's money and at the same time be benefited by the much improved service and support from their IT units. In fact, the CSC already made a start in reducing the TCO of the central computing facilities years ago with the aim of cutting cost and focusing the already limited manpower on value-added services. To learn about the CSC's approach, please refer to the section on Challenges for Reducing the TCO below.

The TCO of PC

So what exactly is the TCO of a PC? It is defined as the costs for acquiring, activating, using and keeping the PC running. It consists of costs directly and indirectly associated with owning and using the PC throughout its life cycle. The TCO of a PC, as detailed below, can be thought to be the sum of all large and small costs associated.

A) Initial Costs

C) Networking Costs

These costs are incurred from providing network services to client PCs, namely, the cost of connection to the network, servers and the Internet, maintenance and support etc.

Challenges for Reducing the TCO

The Computing Services Centre (CSC) has been drained in the last few years to reduce the TCO of central computing facilities with the aim of cutting cost and enabling the scarce manpower resource in the CSC and departments to be freed from mundane and non-productive work. The following explains CSC's approach in reducing the TCO of computer facilities in the University so far and, at the same time, allowing our IT support staff to focus more on value-added services to our users:

A) The establishment of the server farm, network storage and back up system has successfully achieved the consolidation of platforms for servers, software and storage. The standardised environment has greatly enhanced the effectiveness of our management and operations. It also increases the capacity of central computing for meeting the envisaged increasing needs of departments.

B) It is commonly recognised that the key factor for success in TCO is the standardisation of PCs as the provision of services and support to a PC consists of more than 80% of its TCO. The benefits of standardisation of PCs are manifold:

1. Central tendering is possible. Apart from lowering the purchase price through volume discount, it can reduce costs for repeated procurement administration, testing and evaluation, imaging (for quick recovery without re-installation of operating system and application software), training for users and support staff etc.

2. Central maintenance and support scheme become possible. With a sheer volume, we can get much better maintenance terms such as:

  • On-site engineers to provide speedy services
  • Simplified management of maintenance contracts
  • Easier to prepare management statistics and analysis on problems, repairs, service and inventory

3. Campus or site software licenses become negotiable.

4. Value-added services from vendors (courses for obtaining professional certification, technology transfer, special ownership programmes, seminars, tailor-made disk image, free PC system management tools, etc.) can be arranged through Vendor Partnership Program.

Despite the lack of a standardisation policy in the University, the CSC had been trying hard in the past few years to minimise the proliferation of differently branded PCs and had succeeded in benefiting from standardisation. Given the support from the CIO, we are now working on a policy paper in the hope that the issue can be addressed very soon so that we will be ready for the challenges of the rainy days ahead.

Conclusion

In today's distributed IT environment, understanding the TCO can undoubtedly help us effectively evaluate alternatives for acquisition, deployment, maintainence and support of PC. Many studies of the TCO have already shown that indirect costs are always far more than the direct costs. At City University, we have been enjoying first-class, state-of-the-art network and central services. It is estimated that the TCO of a PC on campus will be over $20,000 per year. Therefore, any uncontrolled or un-coordinated purchase of new PCs or even simple requests of connecting redundant or seldomly-used PCs to network without paying special attention to the organisation, process, technology, and support issues will definitely drive the TCO out of control. With limited manpower and further budget cut looming ahead, we must try to reduce the TCO of PCs university-wide in order to ensure that they are affordable, serviceable, and always available for our good use. Hence, the key to successfully reduce the TCO of PCs is not merely to understand the concept but to have departments and end users to fully cooperate with us to realise it.

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Initial Costs

Sourcing and Tendering

Cost is incurred from searching the possible products to buy; short-listing; hardware and software compatibility and performance testing; negotiating, evaluating and selecting the best buy (may not be the cheapest) based on a pre-defined set of criteria, and writing the evaluation report. This also covers the study of documentations and the preparation work for the subsequent technical support and, of course, the considerable time and work for going through the tendering procedures.

Perchance Cost of the PC

It is the payment, based on the PC hardware configuration, to the vendor in return for a new computer. Unless "requested" otherwise, the purchase price normally will bundle with the installed operating system.

Initial Installation of the PC Hardware

Usually bundled with hardware purchase by the supplier, and sometimes it is excluded in order to reduce the apparent initial cost for maintaining competitiveness.

Initial Operating System License

This is the purchase price of the operating system for a new PC, usually an OEM version. We need to cover this separately as in our campus we have to use the version licensed by CityU.

PC Application Software

This covers the license(s) of application software to be run on the PC. Some of these are centrally provided and some funded by departments. Many of them need annual payment.

Initial Installation and Porting of Existing Application Software

This covers the manpower required to do the installation or re-installation of application software on a new PC.

Customisation and Transferring Data

This cost arises from developing and customising batch, script, disk imaging file (for recovery use) on the new PC and servers as well as from migrating data from the old PC to the new one.

Deployment Cost

The time for learning the new features of the new PC by the end user as well as by the support staff.


Recurrent Costs

Hardware Maintenance

This covers the hardware maintenance charges, usually including parts and labour.

Software Maintenance and Upgrade

This cost refers to renewal or upgrade of operating system as well as application software, both license and work required.


Networking Costs

UTP Cabling and LAN Port Cost

If the PC is a newly added machine, it will need to cover the labour and material cost of laying the UTP cable, and the port cost of the access-layer switch to which the PC is directly connected.

The Departmental Servers

This cost covers the hardware and software (including development costs of application software and/or the related software license costs, if any) of servers in departments (e.g., file servers, FTP servers, application servers, Web servers, etc.), of their backup devices, and of their local and network storage equipment. These servers provide departmental Local Area Network services to PC clients.


The Operation and Maintenance of Departmental Servers

The cost arises from operating the departmental servers. The operation work carried out by computer operators or technicians includes activation and shutdown, job control, backup, computer account management, device input/output management, disk allocation and changes, change of system configuration, performance tuning, etc. Of course we will also need to pay for the hardware and software maintenance charges for file servers, printer servers, routers, access-layer switches, etc. installed on LAN serving PC clients.

LAN Management Cost

The cost for managing the problems of LAN, enforcing departmental security policy, managing LAN servers and access layer switches, managing print queues for shared printers, making shared disk accessible, performance tuning, etc.

Backbone Network Equipment

The cost covers the hardware and software of the devices on the backbone network including core routers, core and distribution layer switches, wireless access points, firewalls, VPN gateways, traffic shaper, etc. This backbone equipment allows all PC clients to exchange data with one another or those on the Internet.

Backbone Network Equipment Maintenance

This cost covers the hardware and software maintenance charges for backbone network equipment.

Backbone Network Management Cost

This is for managing the backbone network equipment (including the Internet and Internet2), performing traffic monitoring , trouble-shooting, changing router and switch configuration, conducting performance tuning, etc.

Rental Cost of Communication Lines

This includes the rental costs of local and international Internet links, modem pool, ISDN lines, ATM links, lease lines, etc.

Central Servers and Storage Systems

The cost covers the hardware and software (including development costs of application software and/or the related software license costs, if any) of central servers (e.g., email server, file servers, FTP servers, database servers, application servers, Web servers, video servers etc.) and their storage and backup systems (SAN, NAS and Tape Library). These servers provide central applications and services to all networked PC clients.

The costs of central servers are huge investments as sufficient capacity must be provided to support all central activities including teaching, learning, administration, research, communication, email and many public services etc.

The Maintenance of Central Servers

The cost covers the hardware and software (systems and applications) maintenance charges for central servers mentioned above.

The Operation and Management Cost of Central Servers

The cost arises from operating the central servers. The operation work carried out by computer operators includes activation and shutdown, job control, backup, computer account management, device input/output management, disk allocation and changes, etc. The management work normally carried out by system administrators include managing problems of server equipment, enforcing security, change of system configuration, performance tuning, etc.

End-user Support Cost

The cost arises from the manpower costs for on-going user training, regular meeting with users, managing and running the Help Desk, etc.

End-user Self-Support Cost

The cost arises from the end users doing their own self-support and self-learning such as installation of personal software, tailoring their own desktop environment, doing local backup, experimenting with different fonts, re-installing system when being hacked or infected with virus, resolving user self-inflicted problems, acquiring and developing computer skills, etc.

Environmental Cost

The cost covers the air-conditioning, electrical power, floor space, etc.

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