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How to reduce IT cost?

18/01/2023Webmaster

The actual question should be do you know how much your IT infrastructure cost you before thinking about reducing its cost? Let’s analyse the actual cost of having a small IT infrastructure in your business.

As you see above, there are many factors effecting your annual TCO. In addition to above you will have to pay for IT staff, electricity, cooling system, asset management software, monitoring and support , staff awareness and much more. Total cost of ownership (TCO) is the only way to accurately assess the true lifetime value of your technology. Failing to factor TCO into your decisions can hamper your company’s success and hurt your personal performance.

When TCO is calculated thoroughly to account for a tool or stack’s entire lifetime, it often reveals opportunities to optimize your people, processes, and products while significantly cutting costs. All in all, TCO-informed decisions create efficient, user-friendly, and cost effective IT environments where you and your team can thrive.

TCO Formula

TCO can apply to a single tool, a stack, or an entire infrastructure. Lifetime TCO includes past and future costs. TCO itself can be broken down into a simple formula but calculating TCO isn’t always as simple as it looks. Applying that formula correctly and to the right components is critical to determining the lifetime TCO of a solution.

TCO = Purchase Price + Costs of Operations

Devices [D]

(Purchase Price)

Software & Apps [S]

(Purchase Price x Time)

Infrastructure & Equipment [E]

(Purchase Price)

Labour [L]

(Hourly Wage x Hours Spent on Task)

Data Center & Hosting [H]

(Purchase Price x Time)

Rollout [R]

(Labour + Downtime)

Total Cost of Ownership [TCO] =

Purchase Price [PP]

Cost of Operations [Op]

Purchase Price (PP) refers to the direct costs that you pay at the time of acquiring the new solution. For legacy

infrastructure, this is the initial price paid to acquire the hardware and software.

For cloud-based or subscription based items, this is the yearly cost of

the solution multiplied by the time period you are calculating for TCO.

Purchase Price includes the following components:

— Infrastructure and Equipment (E)

— Software and applications (S)

— Devices (D)

Operational Costs (OP): Operational Costs refer to the costs that go into hosting, maintaining, and managing a solution. Because these costs are indirect, this is often where

people forget or omit components. Operational Costs include the following components:

— Labour (L)

— Data centre/hosting (H)

— Rollout (R)

Legacy systems require a significant amount of complex internal support, which factors heavily into Operational Costs. This is largely because legacy infrastructure incurs costs to host, run, manage, maintain, and support it, while most of these functions are provided by cloud vendors and baked into their monthly price. A Microsoft Active Directory (AD) server, for example, would require licensing, real estate space (including rent, HVAC, power, physical security, and more), an IT professional to configure and manage it, updates and patches, and certifications to keep staff’s knowledge up to date. Conversely, a cloud-based alternative could skip the majority of those costs, allocating expenses to licenses instead.