Ironically, one of the most important issues facing IT departments today is also one of the most difficult to measure. Total Cost of Ownership (TCO) defines the expense involved in deploying, maintaining and troubleshooting computing resources in the enterprise. For companies striving to make the most of limited IT budgets—particularly as departments battle Year 2000 issues—TCO has become a vital measuring stick.
The problem is there are many ways to measure and express TCO. In 1997, market research firm Gartner Group pegged the average annual cost for maintaining an unmanaged Windows* 95 PC at $9,784. International Data Corp. (IDC), however, placed the figure for a similar system at $5,713. That $4,000 difference adds up. Over the typical three-year depreciation life cycle of a PC, Gartner Group warns that you'll spend nearly $30,000, while IDC estimates your cost at over $17,000.

What accounts for this huge gap? In its study, Gartner Group cast a much wider net, incorporating "soft" costs such as lost end user productivity and so-called peer support (when users with a problem ask knowledgeable co-workers to help them out). IDC's survey didn't account for lost productivity from personal troubleshooting.

The Hard and Soft of TCO
Who's right? Nathan Brookwood, an analyst at consulting firm Insight64, thinks IDC may be closer to the target.

"Where the Gartner Group gets in trouble is with all the reputed time that non-IT staff spend on support activity, either for themselves or their coworkers," says Brookwood. "I think you have to measure the hard stuff. I don't think you can measure in a meaningful way the amount of time that gets consumed frivolously or less productively on the PC."

Brookwood points out that the knowledge workers who choose to tinker with their PCs will get their work done whether they burn a half hour on a new application or not. And because these salaried employees cannot collect overtime, says Brookwood, the financial impact on the company is negligible.

Vaughn Frick, research director at Gartner Group, disagrees. He says that the only way to realistically assess TCO is to zero in on the total cost impact of PCs in the workplace by using a metric known as activities-based costing.

"What activities-based costing does is ask, what are the activities we are doing that cause us to consume resources, and what are the cost of those activities," says Frick. "If they're missing that, they are really missing a lot."

Lorraine Cosgrove, research manager in Asset Management for IDC, says that regardless of whether or not you factor in end user productivity, the cost associated with IT staff make up the bulk of system TCO. In fact, IDC estimates that IT salaries, overtime and consulting fees account for 75 percent of total system operating cost.

The disparate TCO findings from well-respected research firms like Gartner Group and IDC should send an important message to IT managers: TCO figures are not set in stone. In fact, TCO really boils down to what your business considers it to be.

A marketing manager might spend 90 minutes exploring formulas in Microsoft* Excel, for example, and devise a way to save untold hours through automation. Experimenting with a word processor, meanwhile, can yield unmeasured gains by enhancing the quality of a presentation with internal documents. In both cases, what can be interpreted as unwanted costs actually end up providing benefit to the business.

At the same time, if your IT department is understaffed, the expectation of slow response can motivate users to aggressively pursue self-help. The result: Any savings that you realize in IT salaries could be offset by lost productivity and extended downtime.

What Is Important to You
"The key is you have to model your own environment," advises Frick. "Don't assume from something you read from the Gartner Group or IDC or someone else that your numbers are going to measure what is published. We typically measure the numbers to show trends."

One of the best ways to control and reduce TCO is to aggressively implement management across the network. A complete management solution requires a Wired for Management (WfM) compliant system, a WfM capable network adapter, such as the Intel® PRO/100+ Management Adapter, and software like Intel® LANDesk® Management Suite or other management applications from vendors such as Computer Associates, Hewlett-Packard, IBM, ON-Technology, PLATINUM and Tivoli. Software like the Intel LANDesk Management Suite and Client Manager, coupled with integrated Wired for Management technologies, enable IT staff to perform system inventory, routine maintenance, and software upgrades over the network. Administrators should specify compliance with the latest version of WfM on all new purchases whenever possible.

Companies have seen significant gains through the deployment of management tools and WfM-capable equipment. When Prudential HealthCare deployed WfM-capable systems and tools, it not only cut costs, it enhanced end user productivity as well. "The Wired for Management platform allows us to really focus our team on the most valuable services for our business," says Myles Trachtenberg, chief information officer of Prudential HealthCare.

One thing Brookwood, Vaughn and Frick all agree on is that management tools do more than lower TCO—they deliver enhanced productivity. "If you can deploy technologies faster, it gives you a competitive edge," says Frick. "It's not just about cost, it's about the ability to improve your competitive business environment."

With that in mind, says Frick, IT managers need to be careful to balance their desire for lower costs with the need to enhance productivity. "Reducing cost is a benefit, but you have to look at both sides of the equation."