TCO is a technology acronym that stands for Total Cost of Ownership, which ideally should be low. It is a very interesting phrase that is quite difficult to interpret. This is because of how much goes into a TCO calculation.
So let’s say you are evaluating two different laptops:
- Type:Lenovo ThinkPad T14 (2020)
- Memory: 8 GB
- Hard Disk: 256 SSD
- Processor: Core i5
- Price: $1,604.99
- Type: Lenovo ThinkPad T14 (2020)
- Memory: 16 GB
- Hard Disk: 512 SSD
- Processor: Core i7
- Price: $1,866.99
Which one has a lower TCO? The 2nd one. Because of web based Office 365 applications and memory creep on virtually every program (Firefox and Chrome use much more memory than they did five years ago), it is easy to consume the 8 GB of memory. When that happens, performance is affected very adversely. Probably at least 5 minutes of productivity a day. Multiply by five days a week is 25 minutes. Multiply that by 50 weeks and you have 1,250 minutes which is 21 hours. If they are making 20 dollars an hour that is $420. But the reality is that they bill out at 60 dollars an hour and cannot bill when they are not getting work done so that is another $1,260. The total is $1,680 for the first year. Let’s go out three years which would be $5,040. So, by saving $262 by going with the first laptop it will cost you $5,040.
Now let’s talk warranties
Having owned a Managed Services Business, Allen Technology Advising, Inc, for over 20 years we have seen that about 1 out of 50 computers have warranty issues. On the CDW website you can pay $98 for Accidental Damage Coverage. For 50 computers that is $4,900. You could buy 2.6 computers for this amount. It is important to note that there is still time to build up the new computer. Note: If data is lost that can cost a company thousands of dollars so a good backup plan for all computers is critical to keeping a low TCO for an organization.
What about a second monitor?
According to this article at business.com adding a 2nd monitor can make you 20-30 percent more productive. It goes on to say that if you have 30 employees making minimum wage it can save the company $136,481.25 in one year!!! The cost of a second monitor, which can be used or refurbished…they tend to last forever these days, can cost under $150. So for 30 employees the cost would be $4,500.
So what is the point of TCO?
To evaluate business decisions based on keeping costs low and productivity high. There is an intersection between the two that should be evaluated in order to get the biggest Return on Investment (see our page at http://manufacturingroi.com).