Databus Issue: 2003 3 07/15/2003
The Total Cost of Ownership
Sara Fitzgerald and John A. Vaille, EdD -
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In times of tight budgets, it becomes even more critical for school districts to plan for the long-term costs of operating their networks and to consider strategies for managing them in a more cost-effective way.
Welcome to the concept of Total Cost of Ownership (TCO)!
TCO -- which takes into account all costs associated with operating and maintaining a network of computer -- emerged as an analysis tool in the mid-1980s, as businesses were moving from a mainframe computer environment to a client-server environment and discovering that their technology support costs were skyrocketing. TCO analysis helped companies determine what technology investments they should make to help save costs or to gain a competitive advantage that would result in a positive return on investment.
A K-12 school district is a different animal from a business, but it still faces many of the same challenges when it comes to managing an ever-growing computer network. Using TCO analysis, school leaders can plan for technology improvements in the same way they would plan for an additional school bus. Budgeting for a new school bus means anticipating additional costs for gasoline, maintenance, labor, insurance and the like. Similarly, each new computer requires additional spending on such items as tech support, staff development, utility costs—and a plan for replacing it at the end of its useful life.
Much has happened in the four years since the Consortium for School Networking published its first white paper on the topic of TCO in K-12 schools. Schools have begun implementing new approaches to technology beyond the wired classrooms and computer labs that had been envisioned as the education technology solution in the mid-1990s. Portable labs, wireless networks, low-cost alternatives to desktop computers, technology leasing, and the use of Application Service Providers (ASPs) to run particular kinds of applications on third-party servers, are all being explored as ways of controlling costs and maximizing flexibility. School leaders have also learned important lessons about the importance of tech support staff and relevant professional development.
And, yet the need for financial analysis is greater than ever. Over the next few years, school districts will be called on to do more with their networks—in terms of data gathering, assessment and communications—at the same time that many of their computers will be coming to the end of what is generally regarded as a useful life. In this era of tight budgets and decreased grant funding, the danger is that technology may be viewed by some as “the thing we did in the years when we had money.”
Fortunately, for schools committed to applying TCO analysis to their technology planning, there are a growing number of resources available. A number of states, for example, have implemented annual technology inventories to help schools benchmark where they stand in terms of the state’s overall technology goals, as well as their peer school districts.
And now CoSN has teamed up with Gartner, widely recognized for its work on TCO, the North Central Regional Education Laboratory (NCREL) and the U.S. Department of Education to develop a Web-based TCO assessment tool. The purpose of this tool is to enable school districts to objectively measure their spending on distributed computing.
For most school districts, the amount of spending per computer is a mystery because many of the costs are hidden or dispersed among different budget line items. Some challenges in fully quantifying costs include a lack or coordination in hardware and software purchases by different schools and departments, “underground” procurement of non-supported software and teachers taking on second jobs as support staff. The consistent methodology provided by this application will enable districts to begin making decisions based on data and not opinions or emotions.
As an example, Gartner has found that the average business ratio for client computing devices to support personnel is about 42 to one. This ratio is calculated by taking into account the fact that some organizations choose to outsource operations rather than hire in-house personnel. It is important to remember that this ratio is an average and can vary widely depending on the complexity of an organization’s distributed environment and the types of services it provides.
Financial and political restraints prevent many schools from providing the same formal staffing levels as their corporate counterparts. The requirements necessary to support a school, however, are not significantly different from a corporate environment. School computers must be acquired, deployed, maintained and retired just as computers in any other enterprise. When appropriate formal staffing is not provided, informal (hidden) support networks begin to arise, or the utility of the investment is compromised.
Establishing a TCO baseline, that includes such hidden costs, can help schools view their budgets--and their financial liabilities--in a more realistic fashion. The measure of success in any TCO exercise isn't how a district "performs"--low costs do not always mean “better.” Success is achieved if a district learns what its level of spending is, how it can change its spending profile (increase, decrease, reallocate) and what costs will be unavoidable.
The new tool is available through a link from the home page of the CoSN TCO project, at www.classroomtco.org. School leaders are advised to first review the documentation that is available there, including the definitions of the data that should be collected before the tool is used. The more accurate the data that is collected, the more accurate and useful the tool’s calculations and measurements will ultimately be.
Case studies of individual school districts in four states, including California, are also provided. Information from the case study school districts was reviewed and validated by Gartner for inclusion in the project. Those who use the tool will be able to the range of metrics that were produced for the case study districts. The districts range in size and provide a snapshot of the kinds of technology issues that often confront school districts today.
This article is excerpted from “Smart Budgeting: What Every School Should Know about TCO,” part of The COSN Compendium, a new technology guide published by the Consortium for School Networking. More information about how to obtain copies of the full compendium is available at http://www.cosn.org/initiatives/compendium.html.
