Total Cost of Ownership


What does it really cost to purchase an application? Sample applications may be database systems, medical management systems, or a PC package. Regardless of the application, in each case, buyers need to consider all the variables in order to be well-prepared for the true total cost of ownership .

Some people may wait to purchase a product until the 'perfect solution' comes to market. Others may rush into purchasing the first product that seems applicable. Both are extremes and can present challenges. Those who wait too long may miss opportunities to enhance their work processes and become more efficient to reduce paper work, help make staff work more efficiently, and process business data and communications with customers more quickly.

At the other end, those who rush to purchase without sufficient planning may cause havoc. The planning process helps an office to prepare the manual or legacy systems processes for migration to the new application. Consider the efforts to re-evaluate the critical business processes, train staff to use the new application, migrate data from the old to new application, create new reports with the new system, 'suddenly' upgrade other components such as hardware to support the new application, set up connectivity requirements, and, of course, troubleshoot arising problems.

A more successful approach would be to first analyze current processes, evaluate the priorities and needs of each process, redefine necessary definitions to your processes, assess level of staff expertise and train in advance.

Some tips: Visit an office that has already implemented the product. Involve your technical support team to ensure that you understand the specifications and implications of the new system. Ask for vendor demos after you have seen the system live at another site; you will be better able to understand what to ask the vendor. Document your requirements and your technical office environment and have your vendor review this specification. This may help clarify the true features and implications of the new system as well as any upgrade requirements for your office technical environment. With you still in the driver's seat (you have not bought the application yet), the vendor will be willing to spend more time on your questions especially for an expensive system. Before buying a new system, look at your existing system to see if you can modify how you work with it to compensate for its flaws. That may give a very big savings over migrating to a new system. Sometimes one can simplify an approach or process to make the current solution effective.

In summary, the total cost of ownership includes the following samples:

  • Software,
  • Hardware,
  • Connectivity requirements,
  • Migration time,
  • Integration with other products and interfaces,
  • Installation,
  • Development and implementation of new / modified processes and procedures, for example, reporting, backup / restore, change management,
  • Documentation,
  • Alignment and implementation of the business process to the technology solutions,
  • Maintenance, for example, ongoing software and hardware upgrades, running utilities such as backups, updating subscriptions to software such as antivirus products,
  • Cleanup of old files,
  • Troubleshooting problems.

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Source by Dahlia Benaroya