enterprise solutions
Many large organizations and government departments are moving towards a Total Cost of Ownership (TCO) model. The TCO model not only takes into account the costs of hardware, software and peripherals, but also compiles the total cost of computing, including installation, administration, upgrades, user support and disposal. This is one of the most complete and accurate models available.
One of the key goals of the TCO model is to provide consistency and standardization among users, while effectively lowering the organization’s cost of computing.
Asset Management is another key practice used by large organizations to reduce the cost of ownership. In today’s business environment, managing information technology assets is becoming increasingly difficult. The CIO’s of these organizations are the ones who must effectively manage the reduction of PC lifecycle costs. They must also effectively manage the operational complexity that with this whole process.
Why not consider a equipment rental solution that can assist in solving a number of these challenges and achieve a number of these objectives? This solution is closer than ever with Spartan!
Defining TCO:
Total Cost of Ownership (TCO) is defined as all of the possible costs incurred in the life cycle of a workstation, from acquisition to disposal. Be aware that there are both direct and indirect costs.
The cost of ownership of networked workstations is an important issue facing many organizations which have extensive networks and a large number of personal computers. For many years, the focus has been on the purchase of personal computers with a high performance/price ratio. However, various surveys conducted by major consulting groups such as the Gartner and Forrester Group indicate that the initial purchase price represents only between 20 and 25% of the total cost associated with owning a PC over its lifetime.
Direct Cost
For the direct cost, there are seven key cost components that contribute to the TCO:
- Hardware Acquisition - purchase of the user’s computer equipment
- Software Acquisition - purchase or license the software for each user
- Installation - cost supported by owner or charged by the vendor to install computers
- Training - cost supported by owner or charged by the vendor to provide training to users. This also includes a portion of the user’s time that is spent in training
- Support - cost that comes from Information Systems Department support areas, Help Desks, and Distributed Systems
- Maintenance - costs to replace or upgrade the user’s computer equipment, vendor’s maintenance contracts, supplies, Disaster Recovery costs. Keep in mind that the average life of even the most advanced system is just five years.
- Infrastructure - costs to acquire, maintain and support the Local Area Network environment and specialized equipment shared by department staff
HARDWARE includes, but is not limited to, Desktops and mobile computers, Servers, Peripherals, Network communications equipment (hubs, routers, bridges and switches, etc.), Memory, Storage devices, CDROM drives, UPS devices, ‘Cards’ of any kind, Cabling, etc
SOFTWARE includes, but is not limited to, new and upgraded software for any client computers, servers, peripherals and communication devices, operating systems, and off the shelf application software such as word processors, spreadsheets, etc.
Indirect Cost
Indirect cost includes the following:
- Downtime
- The futz factor
- Retrofitting. If you are building a new network, keep in mind the costs of upgrading electrical systems, cooling systems, and ventilation.
- Overheads
TCO Breakdown
A “typical” set of ratios of costs for 5 years for workstations connected to a network is:
- Capital Costs 21%
- Technical Support 21%
- Administration Costs 13%
- End User Support 45%
In this case, a rental solution is the most effective way to proceed. It helps reduce the total cost of ownership by placing all of the expenses regarding ownership under one single payment. Not only does this bring the ownership cost down, it greatly simplifies the management of these essential technology items. So why not consider Spartan’s Enterprise solutions?
Spartan’s Enterprise solutions include:
- Disposal / Buyback
- Asset Lifecycle Management (ALM)
- Short term equipment rental
According to IAS 17 (the generally accepted accounting practice with respect to leases), in order for a transaction to be truly off balance sheet, a number of conditions need to be met. The IAS 17 Act distinguishes between an operating lease (i.e. a rental) and a financial lease.
Examples of situations which would normally lead to a rental / lease being classified as a finance lease are:
- The lease transfers ownership of the asset to the lessee by the end of the lease term
- The lessee has the option of purchasing the asset at a price, which is expected to be sufficiently lower than the fair value at the date the option becomes exercisable such that, at the inception of the lease, it is reasonably certain that the option will be exercised
- The lease term is for the major part of the economic life of the asset even if the title is not transferred
- At the inception of the lease, the present value of the minimum lease payment amounts to, at least, substantially all of the fair value of the leased asset, and the leased assets are of a specialized nature such that only the lessee can use them without major modifications being made
Indicators of situations, which individually or in combination could also lead to a rental / lease being classified as a financial lease, are:
- If the lessee can cancel the lease, the lessor’s losses associated with the cancellation are borne by the lessee
- Gains or losses from the fluctuation in the fair value of the residual fall to the lessee (for example in the form of a rent rebate equaling most of the sales proceeds at the end of the lease)
- The lessee has the ability to continue the lease for secondary period as a rental, which is substantially lower than market rental.
