With the advances in technology comes complexity. In the past (before computers), a manager who wrote a check for a typewriter knew that there were other necessary expenses associated with its use, such as typewriter ribbons and electrical hookups. Savvy business owners watched these expenses closely, years before the acronym "TCO" (Total Cost of Ownership) was in use. They had to justify the costs with savings on the bottom line, judging improved efficiency or increased work volume, and make purchasing decisions based on these judgments.

Watching over the TCO of computer systems in corporations is usually the responsibility of the Information Systems (IS) Manager or the Chief Finance Officer (CFO). Networks are necessary to run even the smallest companies. Those without such officers can easily be unaware of the importance of controlling their TCO. A poorly maintained network or troublesome workstation negatively affects a company's bottom line in many ways, ways which are not always apparent.

In a typical office with a local area network, staff arrives early one Monday morning to find that they can't log in to their workstations. The manager keeps later hours, but gets a call at home, since there are several workers upset that they can't start working. She hurries in and finds that indeed, no one can get into the network. Further investigation shows the server is up and running, but the backup has failed. A call to the local computer servicing vendor brings a technician on-site an hour later, who starts his diagnostics. Bringing down the entire network and powering off the hubs, the tech slowly brings the network back to life and staff can finally work. The backup, however, must be re-done, resulting in further delays from the staff. In the meantime, more diagnostics is necessary to find out why it failed.

How much money did this network glitch cost the firm? Ten staffers and a manager doing virtually no work for three and a half hours, then working overtime to catch up that evening, amounted to quite an expense. Yet the office manager may point to the technician's bill as the sole cost of the computer network failure.

There are many types of costs related to the operation of computers in an office. Some of these include:

• Initial purchase price
• Installation and distribution of PC's
• Purchase of software and training of staff
• Cost effectiveness of purchasing equipment at the right time
• Time lost by users when the server is down or the PC fails
• Time lost by key employees when a staff member's PC is having difficulties
• Cost of administering users (login info, security, etc.)
• Cost of space, security and environment for server (i.e. air conditioned server room)
• Cost of administering and maintaining backups
• Cost of employing technicians to diagnose and repair network or PC's
• Cost of office staff trying to correct a problem and actually causing further problems
• Cost of auditing all equipment; which user has what and where is it?
• Cost of constant hardware evaluation when new technology is developed, etc.
• System and server upgrades as increased performance is required by applications
• Cost of additional insurance on the increased value of server-based network and more expensive workstations

"The Gartner Group has stated that a typical enterprise with 2,000 PC’s currently spends an average of $19M per annum in direct and hidden costs for computing - that is $9,500 per PC, " explains Fujitsu Computers Ltd. This number includes the cost of staffing of IS departments required to administer a great number of workstations.

Smaller firms may have an on-site technician or administrator full-time, at an average cost of $50,000 per year, or may have part-time or service company techs available. My own TCO estimate for firms of less than 50 users is closer to $2,000 per year per PC. Thus a 15-user network costs, on the average, $30,000 per annum, including all the factors listed above.

You may wonder what a company can do to minimize their TCO. Reducing bandwidth (volume of network traffic) and administration can be a key in shrinking the TCO. Network failures are much more likely the higher the usage is in the network cabling system. Unfortunately, business applications have been growing in size and bandwidth requirements as companies need more and more sophistication in their software in order to compete.

Switching to an Application Server Provider, such as WorldPOINT, can greatly diminish your TCO by minimizing network traffic and shifting the burden of administering and monitoring the applications to the host company. Only Internet access is necessary from the network, rather than the transfer of the myriad of files necessary to run a bulky application. As performance becomes an issue, the ASP is responsible for its improvement. User and backup administration is also a burden relieved.

Thin client technology (a thin client is a computer without drives whose sole function is to act as a terminal) not only greatly reduces bandwidth, but is less expensive. This implementation can be accomplished through a Citrix server either at the company's own site or on an ASP's site. As before, it makes sense to shift as much of the costs as possible to an ASP.

Total Cost of Ownership should be calculated by all companies, not just large corporations. Even a single PC has cost factors associated with it and one must be aware of the effect of purchasing on the TCO. At the very least, using an average cost per computer, like $2,000 per year, will give a manager the means to plan for expenses and allow comparisons in the decision-making process. You may well find that modifying network schemes, such as utilizing an ASP or updating to higher quality wiring or equipment, can quickly pay for itself.