The Total Cost of Software Ownership (TCO)

Though most of you may never be directly involved in a software purchase for your organization, you do need to appreciate the cost implication of IT as part of your organizations cost structure and operating overhead. From this perspective, it is important to bear in mind that the true cost of ownership goes beyond obtaining access to the software itself. Any given acquisition might include any or all of the following but you will find that when it comes to application specific software:

the original leasing price (licensing) you never own software, you pay for the right to use based on either the number of users in your company, the number of servers on which the software is running, or the enterprise location where the software is running.

software maintenance agreements since business rules change, industry practices change, and problems emerge in the use of the software, you pay an annual maintenance fee based upon a percentage of the licensing price; systems with a lot of updates tend to have higher annual fees.

implementation and integration costs putting applications into actual use within the business sometimes require a great deal of set-up and configuration; applications also share data with one another, therefore there are integration costs (sometimes quite substantial costs) associated with setting this up as well.

software customization and enhancements if you change the code so that the software better aligns with your business process that comes at a cost and may very well void your license with the vendor, requiring you to do your own software updates to the product going forward. In some instances you will not change the code but you may add on programming of your own to extend the capabilities of the licensed software. These so-called system enhancements you will also need to update yourself.

hardware upgrades if your hardware can no longer run the upgraded versions of your software, the hardware must be replaced.

related business process changes rather than change the code, most companies reengineer their business processes to achieve alignment but this too comes at a cost.

training of technical and end users an ongoing process of strengthening end user skills in using the software.

support of end users typically the cost of help desk (call-in) and desk-top (visit) support and problem solving.

hiring additional MIS/IT personnel as you add more software, you will require the services of technical experts to keep them running and to install updates provided by the software vendor.

the subsequent acquisition of additional licenses or system modules as your company grows.

which may in turn require other costs cited above.

Q. List eight elements of the Total Cost of Ownership for computer hardware and software. Then discuss how you would manage these elements to minimize their financial impact on your company. backup your answers with examples.

Hardware and/or Software TCO Elements:	Cost Control Strategy:

Q. Identify four different types of computers at Boeing and explain how these particular devices help enable Boeings core business activities. backup your answers with examples.

Type of Computer	Operational Uses: