More recently, Cloud4Y conducted dedicated to the issues of TCO, that is, the total ownership of equipment. We received a lot of questions on this topic, and this shows the desire of the audience to understand it. If you are hearing about TCO for the first time or want to understand how to correctly evaluate the benefits of using your own or cloud infrastructure, then you should look under the cat.
When it comes to investing in new hardware and software, there are often disputes about which infrastructure model to use: on-premise, cloud platform solutions, or a hybrid? Many choose the first option because it is "cheaper" and "everything is at hand." The calculation is very simple: the prices for "their" equipment and the cost of services of cloud providers are compared, after which conclusions are drawn.
And this approach is wrong. Cloud4Y explains why.
To correctly answer the question βhow much does your equipment or cloud costβ, you need to evaluate all costs: capital and operating. It is for this purpose that TCO was invented - total cost of ownership. TCO includes all costs that are directly or indirectly associated with the acquisition, implementation and operation of information systems or the company's software and hardware complex.
It is important to understand that TCO is not just some fixed amount. This is the amount of money that a company invests from the moment it becomes the owner of the equipment until it gets rid of it.
How TCO was invented
The term TCO (Total cost of ownership) was officially introduced by the consulting company Gartner Group in the 80s. Initially, she used it in her research to calculate the financial cost of owning Wintel computers, and in 1987 she finally formulated the concept of total cost of ownership, which began to be used in business. It turns out that the model for analyzing the financial side of using IT equipment was created back in the last century!
The following formula for calculating TCO is generally accepted:
TCO = Capital cost (CAPEX) + Operating costs (OPEX)
Capital costs (or one-time, fixed) include only the costs of acquiring and implementing IT systems. They are called capital, since they are required once, at the initial stages of creating information systems. They also entail subsequent ongoing costs:
- The cost of developing and implementing the project;
- Cost of services of external consultants;
- The first purchase of the basic necessary software;
- First purchase of additional software;
- First purchase of hardware.
Operating costs arise directly from the operation of IT systems. They include:
- The cost of maintaining and upgrading the system (staff salaries, external consultants, outsourcing, training programs, obtaining certificates, etc.);
- Costs for complex management of the system;
- The costs associated with the active operation of information systems by users.
It is no coincidence that a new way of calculating costs has become in demand by business. In addition to direct costs (the cost of equipment and salaries of maintenance personnel), there are also indirect ones. These include the salary of managers who are not directly involved in working with the equipment (IT director, accountant), advertising costs, rental payments, entertainment expenses. There are also non-operating expenses. They are understood as interest payments on loans and securities of the organization, financial losses due to the instability of currencies, penalties in the form of payments to counterparties, etc. These data must also be included in the formula for calculating the total cost of ownership.
Calculation example
To make it clearer, let's list all the variables in our formula for calculating the total cost of ownership. Let's start with capital expenditures for hardware and software. The total cost includes:
- Server equipment
- Storage
- virtualization platform
- Information security equipment (crypto gateways, firewall, etc.)
- network hardware
- backup system
- Internet (IP)
- Software licenses (antivirus software, Microsoft licenses, 1C, etc.)
- Disaster recovery (duplication for 2 data centers, if necessary)
- Accommodation in the data center / rent additional. areas
Associated costs include:
- IT infrastructure design (hiring a specialist)
- Installation of equipment and commissioning
- Infrastructure maintenance costs (staff salaries and consumables)
- Lost profit
Let's do the calculation for one company:
As you can see from this example, cloud solutions are not only comparable in price to on-premise, but even cheaper. Yes, to get objective numbers, you need to calculate everything yourself, and this is more difficult than it is customary to say that βyour own hardware is cheaper.β However, in the long run, a scrupulous approach is always more effective than a superficial one. Effective management of operational costs can significantly reduce the total cost of ownership of IT infrastructure and save part of the budget, which can be spent on new projects.
In addition, there are other arguments in favor of clouds. The company saves money by eliminating one-time purchases of equipment, optimizes the tax base, gains instant scalability, and reduces the risks associated with owning and managing information assets.
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Source: habr.com