Determining the cost of owning and operating your business network requires more than totaling hardware and software expenditures. Your analysis also needs to include the value and expenses associated with installation, configuration, and maintenance. These "hidden" costs greatly affect the total amount of money your company will spend on its network, otherwise known as its "total cost of ownership" (TCO).
TCO takes into account the indirect costs of a network--money spent on system design, installation, administration, and support--along with intangibles such as lost revenue resulting from the failure of mission-critical network functions. Figuring indirect costs allows a company to take into account the price tag on lost productivity suffered from system crashes, ineffective repairs, and recurring problems.
To minimize system downtime, your business needs effective processes for setting up and maintaining its network--either internally or through an outsourcing arrangement. Selecting your business' best network service option is a matter of determining the expense and value associated with technical assistance as well as analyzing how much network support your business will need. These costs will stretch from the initial design and installation of your network to its configuration and day-to-day operation. This information will help you pinpoint your TCO.
To see the TCO principle at work, consider that while one piece of equipment may have a lower purchase price, a TCO analysis might reveal that it takes longer to configure and is not as reliable. Therefore, the actual cost to the company to operate the inferior product, taking into account hardware and software expenses and network downtime, might be higher than it would be for the more expensive equipment. If a network manages mission-critical tasks, the costs associated with any downtime skyrocket.
According to a survey conducted by The Gartner Group, the miscalculation of labor costs involved in setting up and managing wide-area networks has left many organizations underestimating network TCO by half. The study suggests labor accounts for 43 percent of some networks' TCO, with the rest of the money covering such items as training, end-user downtime, disaster prevention, and information recovery.
Each new user, application, and peripheral added to or removed from a network affects its TCO. The larger the network, the more an organization should expect to spend on system design and installation. Expanded networks also increase the potential cost of lost productivity because network downtime affects more users. Average users lose an estimated six days of work per year due to network problems. That kind of downtime is like paying each employee for an extra week of vacation each year.