If someone tells you that you can reduce your Network cost of ownership by picking up the cheapest product in the market, they are actually advising you to be counterproductive. Networks have to conform to reliability, cost effectiveness, value driven integration and most important of all - longevity of relevance of the solution.
The economic downturn has done us another big favor; apart from bringing in austerity into our organizational behavior it has also made a significant change in our organizational purchasing behavior across the region.
From a premise where, the initial cost of a hardware would determine the purchasing decisionand every other cost including maintenance being rendered as incidental; we have now moved on to a model where the decisions are not only based on the initial cost but also on additions, upgrades, maintenance and management.
The Total Cost of owning a technology today consists of the costs, both direct and indirect, incurred throughout the life cycle of an asset, including acquisition, deployment, operation, support and retirement.
So what are your direct costs when you acquire an asset for your network?
1. 1. Hardware and software: Typically involves the initial purchase price. The cost of associated hardware (network equipment, option modules, spare systems, spare parts, and the annual costs of needed supplies and materials). Include warranties, firmware upgrades, software upgrades, and maintenance contracts. These costs can be divided by the expected life of the asset, in years, to get an annualized figure.
2. 2.Operations: Resource costs for technical operations, support, and help desk. Service and maintenance contracts, personnel such as network administrators or software maintenance staff. Operations costs also typically include the facilities costs for the appropriate share of the floor space used, as well as furniture, capital assets purchased for the project.
3. 3.Administration: IT planning costs ,training costs of IT Department and users
And what are your Indirect costs?
1. 1. End user operations: Ongoing end user support within the organization.
2. 2. Downtime: When end users are interrupted from their regular work due to equipment malfunction or network issues. Regular maintenance can also cause downtime.
How does an organization work with the above factors and ensure an effective strategy of reducing the total cost of ownership.
1 Select an appropriate vendor: Ensuring that your vendor has the capability to cater to your organizational needs can deeply impact your bottom line in a positive manner. Value added vendors with a sound long term business model will always go an extra mile to support, upgrade and maintain your network at minimal and low cost.
2 Keep a track of innovation in the market place: Find reliable and feature rich, value driven solutions hitting the marketplace and embrace these to ensure low upfront costs and a lower TCO. Try the Cloud. It slashes your capex and makes indirect costs of ownership extremely low.
3 Want to save serious Dollars? Focus on Firmware updates and maintenance contracts. Some network equipment manufacturers require you to pay for firmware updates as a part of your maintenance contract. Look for vendors who do not require you to pay for this or negotiate with your vendor or reseller to absorb this cost. Depending upon the number of hardware devices that you have purchased, this could be a huge saving.
4 Scrutinize your Warranty contracts: Negotiate and renegotiate for longer period of warranty coverage.
5 Choose to work with System Integrators that carry skill sets to understand and execute projects in varied and competing technologies. Resellers, system integrators and vendors with a value added focus will always provide alternative solutions to your network requirements. A technology neutral implementation partner, with no agenda in selling only one particular technology, will always give you the most competitive and suitable options. Most of such multi-technology system integration companies will also stock spares for you. Explore local stocking options with your System Integration/ Reseller.
6 Assess your organizational requirements carefully and don’t buy complex, high end products if your requirement can be met by a lower configuration. Be sure to assess your organizational plan on growth and ensure that the growth perceived can be met by what you are buying
7 Network Architecture: Plan your network with careful consideration. A simple network will grow in complexity quickly when the organization grows. Each new device added , you will require backups, spares, maintenance contracts, upgrades, integration and more rack space.
8 Integrate: Many leading network equipment manufacturers have begun integrating the functionality of multiple pieces of network equipment into one device. Go for these products. If your the network has four devices for LAN/WAN connectivity: DSU/CSU, router, firewall, and switch. Reevaluate. Many vendors now include firewall and VPN functionality in routers, thus eliminating one device from the network architecture and bringing down your cost of ownership substantially directly as well as indirectly. Fewer devices do not mean single point of failure. In fully integrated networks, a single point of failure is desirable rather than multiple points.
9 Human Resources: Your next big cost. Trained technology resources are expensive. What’s more, regulatory and immigration laws in most countries in our region sometimes make it difficult for us to attract the most competent resources and retain them. In short, cost of hiring and retaining highly skilled and trained resources are high. Experiment with skill sharing with your vendor or system integrator on SLA basis. Outsourcing these skill sets from technology outsourcing companies further reduces the cost of human resources as there are savings in recruitment, training and retention costs to your organization.
10 Contract Managed Services Providers to support your network. Incident based billing and proactive monitoring of your network is the biggest cost saving remedy of your support and maintenance costs.