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I don't think that the tco calculation is as simple as you're implying as it implies that the supplier's delivering what you need (unless that's in your risk factor).

From what I've seen across many market segments and geographies, the gap between what one has and what one needs for ICT dominates any cost equation.


The Dynamic Redhat TCO Calculator is very useful.I tried this out.Math is very simple and looks great

Umesh Harigopal

TCO, ROI are always top of mind as you figure out how to manage your top and bottom lines. As a CIO looking to make a difference for your company, your IT desktop investments is surely one area to focus on, more so given your decisions on Windows 7 and Office 2010 migration initiatives.
Probably many of you might have seen the IBM Client for Smart Work announcement that hit the press yesterday. One of these solutions is on Red Hat Enterprise Linux desktop software. Is it just 50% reduction in TCO. Actually a lot more.
Check out this dynamic TCO calculator from Red Hat here:
The math is simple. You start seeing results by just entering the number of users. Do the math. Share it with your CFO. Save the results if you want to get back to it later on.

Best Regards,
Umesh Harigopal
Ecognize LLC

John Suffolk

Hi Paul a couple of things:

Firstly I wasn't trying to detail all the gubbings behind a TCO, just bring out a few points, so this does cover the supply side. If you are outsourced it can go a fair way to show you the TCO of the service though.

You may not be missing anything as all I am trying to bring out that lurking within a TCO (or the cost a supplier is looking to charge you) is a wealth of knowledge that will help you make a better informed decision.

So where you quote you would select a supplier on the basis of the benefit received per pound spent, all you really need to know is how will you put a cashable amount on the benefit, as you can't calculate a positive ROI without one, and secondly the pound spent, is that fair value? It might be the lowest quoted but that does not mean it couldn't be 50 pence.

Tell me something, do you think we should be doing a better job having this information at our fingertips, rather than crafting it everytime we do another bid?


Paul Johnston

Sorry to comment again, but clearly your post puzzled me and I am keen to understand where you are coming from. Let's see if I can explain what I don't understand and then you can set me straight! Suppose you had 3 suppliers: Supplier A where the price charged is 10% Research; 80% "inefficiency" and 10% profit; Supplier B where the price charged is 80% Research; 10% inefficiency and 10% profit; and Supplier C where the price charged is 10% R&D, 10% inefficiency and 80% profit. Which supplier would you be inclined to favour? My initial answer would be: on the basis of the information given so far, I have no basis for choosing between them. My choice would entirely depend on which supplier was offering the most benefit to my organisation per pound I spent with them. I suppose I might have a slight preference for the one doing all the R&D spending on the grounds that there are more likely to enhance their products in the future and I suppose you could a preference for the high profit margin supplier on the grounds that it is unlikely to go bust and leave you with a product that is unsupported! However, none of these are very strong arguments and it would make more sense simply to adjust the initial calculation of benefits per pound spent by something factoring in likelihood of future product enhancements (which may or may not related to R&D spending) and likelihood of long term (and good quality) product support (which again may or may not related to profit margin!). So I am back to thinking that issues such as R&D spending, "efficiency" and profit margin have no direct relevance for my purchase decision with R&D probably having some indirect relevance but the other factors no relevance at all. So what am I missing?

Paul Johnston

A fascinating post, but you seem to be mainly talking about total cost of supply or something like that. what about total cost of ownership? What are your views on that?

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