TCO remains in the eye of the beholder

Total Cost of Ownership is what you say it is, says Neil McAllister

If you think that the manufacturer’s sticker gave you a reliable estimate of the city mileage for that new car of yours, you should try negotiating traffic on the hills of San Francisco. You’ll discover pretty quickly that in my town, the old adage, “Your mileage may vary” has never been truer.

It’s the same with TCO (total cost of ownership) estimates for enterprise software. Commercial vendors such as Microsoft continue to use TCO as one of the biggest weapons to hammer Linux and open source — despite the fact that it’s virtually impossible for a single TCO estimate to match every possible usage case.

There are no hard and fast numbers for TCO but discussing it brings to the table the topic of hidden costs. It acknowledges the fact that sticker price is never the whole story. The problem is that no matter how hard they try, neither vendors nor analysts can ever fill in all of the variables of the TCO formula.

What they can tell you is what’s for sale. Whether it’s IBM, Microsoft, Oracle or Red Hat, a software vendor will always offer a certain amount of software, plus a certain level of customer support, for a certain length of time at a certain price.

Most TCO studies also try to factor in the probability of additional, unknown costs. For example, there have been 19 incremental patch releases to the Linux 2.6 kernel so far this year and each one would mean downtime for a Linux server. Similarly, hundreds of new Windows viruses appear each year.

What this kind of TCO analysis can’t give you is the remaining piece of the puzzle — namely, your piece. The unique combination of resources, both machine and human, at work within your organisation is something only you can fully understand.

Whenever you need to buy hardware, to operate a solution at peak efficiency, that’s additional cost. Whenever that hardware means an upgrade to your datacentre’s power and cooling facilities, that’s additional cost. Whenever your team isn’t well versed on a new software platform and needs training, that’s additional cost. Whenever you have to hire new IT personnel, that’s additional cost. And so on.

The upshot is that although you may not be able to convince your CFO to stop asking for TCO figures — and you certainly won’t stop the analysts and the software industry from serving them up — you can learn to live with TCO as a tool for justifying IT purchasing decisions. The key is to make sure the TCO figures under consideration in your organisation are your own and not the vendors’, because only you can see the whole picture.

McAllister is an associate editor at InfoWorld. Contact him at neil_mcallister@infoworld.com

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