1 Presented by: Sharon Pearson, Chief Business Officer 2 A - - PowerPoint PPT Presentation

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Presented by: Sharon Pearson, Chief Business Officer

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A financial es>mate intended to help buyers and owners determine the direct and indirect costs of a product or service. Calculates the total cost of purchasing or subscribing to and

• pera>ng a technology product or service over its’ useful life.

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To save money To improve efficiency To grow a healthier organiza>on To raise awareness of real costs

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The people involved in the decision process The processes The technology The budget

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Provides a cost basis for determining the total economic value of an investment Provides a way to evaluate technology costs that may not be apparent in purchase or upfront pricing. Quan>fies the financial impact of purchasing and opera>ng an IT product

• ver its’ life cycle.

Gives you a framework to evaluate compe>ng solu>ons Provides your employees with informa>on to make beMer buying decisions for your organiza>on, as a whole, while saving you >me, money and aggrava>on

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Three key components in TCO calcula>ons: Acquisi>on costs The cost of equipment or property as well as any one->me costs needed for the installa>on or u>liza>on of the equipment. Opera>ng Costs Subscrip>ons or services needed to put the equipment into business use, but not the ongoing opera>ons costs. Examples are facili>es costs, ini>al training costs and direct labor costs involved with implementa>on. Personnel Costs Administra>ve staffing, housing of the equipment and

• ngoing opera>ons, labor and maintenance costs.

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Ownership brings purchase costs but it can also bring substan>al costs for installing, deploying, opera>ng, upgrading and maintaining the equipment. Most of these are hidden costs are easily forgoMen in the calcula>on: Purchasers oQen underes>mate the hidden costs which leads to problems and nega>ve consequences. Lack of resources can lead to solu>on/equipment not running securely or at peak performance Misjudged the >me and expense to train employees on new product

• r services can lead to never u>lizing the solu>on/equipment at the

expected level of performance.

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These hidden costs are said to make up as much as 85% of the TCO with the “visible” costs making up the remaining 15%. For every dollar spent on training, three to five dollars go into the

• ngoing support of the product/process

1 out of 25 decision makers, aQer the fact, realized that costs incurred aQer the ini>al deployment compromised the largest component of the project costs.

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Hidden subsidies are oQen not included in the TCO Costs that are not aMributed to the people who benefit thus providing a subsidy to those people. Cost to house equipment, power to run equipment and the power to cool equipment are examples of subsidies. TCO is based on the “total” cost of ownership to the organiza>on as a whole and not just to the department Nothing is free. A department within the organiza>on is paying for those services.

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Takes all cost elements into considera>on Reflects the real cost of purchasing rather than the pure acquisi>on cost Helps define a purchasing policy for the organiza>on Can be used in a cost benefit analysis Can be used to evaluate outsourcing deals Can be used in nego>a>ons with vendors

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Complex system and not easy to implement It requires input from all departments involved in the en>re life cycle of the product/service Sta>c system It is the total cost at that point in >me the decision is

• made. Internal/external factors may change that will not

be reflected. System ignores elements beyond the mathema>cal calcula>on For example, opportunity cost, business risk, etc. Most accurate when historical data is available

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The first year is the most >me consuming. Each year thereaQer it becomes easier. It is a completely different mindset and requires understanding from all staff members involved There is never too much documenta>on The benefits outweigh the costs or pains in implemen>ng a TCO process Historical data becomes an important part of the process.

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NWRDC Raised Floor Space Rate Managed Services Rate

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E X A M P L E

Revised: April 30, 2015 Approved: Description: Salary & Fringe Benefits 418,473.48 $ Note 1 General Expenses: Repairs & Maintenance 164,616.00 Note 2 Fuel (for fuel tank-2) 5,000.00 Utilities 265,319.22 Note 3 IT Supplies (cables, fiber and racks) 1,600.00 Facilties 115,404.64 Note 11 Workstation costs 495.05 Note 4 Contracting/Consulting Services

• Note 5

Travel & Training 7,200.00 Note 8 Total 978,108.39 $ 205.83 $ per sq ft per yr cost Note 9 17.15 $ per sq ft per month cost 19.04 $ with 11% Indirect Note 10 Rate 20.00 $ per sq ft per month Notes: (1) This is based FY 15/16 Budgeted Salaries & benefits for the Operations staff. This is based on FY 15/16 Operating Budget. Staff 1 318,516.00 $ 100% 318,516.00 $ Staff 2 57,081.07 90% 51,372.96 Staff 3 124,248.90 15% 18,637.34 Staff 4 59,894.36 50% 29,947.18 Total 418,473.48 $ (2) This is based on FY 15/16 Operating Budget for Repairs and Maintenance (93% raised floor and 7% admin). Repairs and Maintenance 140,786.00 $ recurring R&M Repairs and Maintenance - projects 28,830.00 new projects 169,616.00 $ (3) This is based on the period of July 1, 2014 through March 31, 2015 and extended to 12 months. The total power is split between the floor space rate and electrical circuit surcharge rate. The number used in the floor space rate is the a percentage of power that is calculated in the electrical surcharge rate. 265,319.22 $ (4) Workstation costs: Computer 800.00 $ Computers - 4 Phone 880.20 $24.45 per month for local service per employee (3 phones in Operations) Supplies 300.00 1,980.20 $ Operators 495.05 $ 100.0% 495.05 $ (5) Consulting/Contracting Services: Consulting Services

• Remedy annual
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(8) Staff training on Facilities Operations 8,000.00 $ (9) This is based on 4,752 square feet used floor space. (10) This includes the 11% indirect cost for FY 2015-2016. (11) Facilities, amortized over 10 years, floor space at raw rate (prior to adding) and VM's: UPS (2 500 KvA) 10 315,000.00 31,500.00 PO 613765 12/10/2010 UPS (single 500 KvA) 10 101,153.88 10,115.39 PO 411139 11/20/2008 Generator (1 MW C32) 10 154,014.70 15,401.47 PO 700406 7/5/2011 A/C unit 10 33,100.00 3,310.00 PO 622899 6/14/2011

Raised Floor Space

Workspace costs (Operations per year) Environmentally controlled raised floor space in the computer room with up to two (2) single phase 30 amp electrical circuits, two (2) three phase 30 amp circuits or one (1) three phase 60 amp circuit per standard 19" rack. Additional power charges apply for additional circuits at the current "Electrical Circuit Surcharge" rate. Each standard rack uses 16 sq ft of raised floor space. 15

E X A M P L E

Revised: April 30, 2015 Approved: Description:

Raised Floor Space

Environmentally controlled raised floor space in the computer room with up to two (2) single phase 30 amp electrical circuits, two (2) three phase 30 amp circuits or one (1) three phase 60 amp circuit per standard 19" rack. Additional power charges apply for additional circuits at the current "Electrical Circuit Surcharge" rate. Each standard rack uses 16 sq ft of raised floor space. A/C unit 10 33,100.00 3,310.00 PO 627547/701998 6/10/11 and 7/19/2011 HVAC control system 10 36,941.00 3,694.10 PO 707619 1/17/2012 PDU (2 qty) 10 13,500.00 1,350.00 PO 614914 1/25/2011 PDU (3 qty) 10 24,860.01 2,486.00 PO 119637 4/20/2006 1 Gb Network Ports 4 130.31 6,254.88 Floor Space CMB (4) and Floor Space DR CMB's (3) 7 2,688.84 18,821.88 Nessus Renewal 2 1,200.00 2,400.00 Unusuable floor space (sqft) due to rack placements 484 34.63 16,760.92 Raw floor space rate prior to adding this line 115,404.64 $ 100.0% 115,404.64 $ Note: Administrative HVAC depreciation charged to Administration cost center 16

E X A M P L E

Revised: April 13, 2015 Approved: Description: This rate is used for Managed Services for Network Services, BaaS, STaaS, physical and virtual servers and hosts Salary & Fringe Benefit 3,326,610.80 $ Note 1 Travel & Training 68,235.00 Note 2 Workspace Costs 70,613.31 Note 3 Cell phone stipend 27,325.00 Note 4 Software (time tracking) 15,000.00 Note 5 Total 3,507,784.11 77,111.10 $ Per annual FTE Note 6 85,593.33 $ with 11% Indirect Note 7 Rate: $7,133 Per month Note 6 Notes: (1) This is based on 45.49 employees using FY 2015-16 budgeted Salaries & Related Benefits. (2) This is based on $1,500 per employee and a total of 45.49 employees. 45.49 1,500.00 $ 68,235.00 $ (3) Workspace costs: Using 100% Computer 200.00 $ Phone 293.40 $24.45 per month for local service per employee Desktop programs 536.99 * Furniture 221.89 Supplies 300.00 1,552.28 $ * The cubicle build out total (phase 1 & 2) amortized over 5 years and divided by 39 employees. Operators (11) are removed as they have their own workspace costs (in Support & Monitoring rate) Jan-11 Phase 1 43,268.94 $ done in 1/2016 Apr-10 Phase II

• done in 4/2015

43,268.94 $ 8,653.79 $ per year 221.89 $ per employee per year (4) Cell phone stipends are only for those positions in this rate. (excludes Administration and Mainframe) (5) (6) Total annual expenses is divided by 45.49 employees. (7) This includes the 11% indirect cost for FY 2015-16. (8) Rate allocated as follows: Per physical/virtual server per month (80) 99.45 $ Per host per month (20) 362.55 $ Managed Network services percentage needed of rate above Managed Storage services percentage needed of rate above

Managed Services Rate

This is for time tracking software in order to document the time spent on Managed Services customers and compare to the amount we bill those customers.

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Falconfastening.com

Total Cost of Ownership: A Second Look at the Hidden Costs

Educause.edu

Hidden costs and Subsidies Complicate TCO

hMps://www.mobile.smallbusinesscompu>ng.com

What is TCO and Why should you care?

hMps://www.business-case-analysis.com/total-cost-of-

• wnership.html

Total Cost of Ownership TCO explained

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TCO affects the organiza>on’s boMom line and therefore the customers and organiza>on’s mission Avoid focusing on reducing the s>cker shock Focus on reduc>on of the ongoing costs more than the upfront costs

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Sharon_Pearson@nwrdc.fsu.edu

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