This is a brief presentation about TCO, a subject that should be addressed by all CIO's. A lot of savings can be realized when one gives TCO a careful look ..

1. Ashraf Osman
October 2012

2. Total Cost of Ownership, AKA ,True Cost to Own
 General definition: Estimate of all direct and indirect costs
associated with an asset or acquisition over its entire life
cycle.
 Depreciable life (The number of years over which an asset
will be depreciated).
 Economic life ( he number of years in which the acquisition
returns more value to the owner than it costs to own, operate,
and maintain).
 Service life ( The number of years the acquisition will actually
be in service).

3.  Budgeting & planning.
 Asset life cycle management.
 Prioritizing capital acquisition proposals.
 Vendor selection.
 Lease vs. buy decisions.
 Identify "hidden" costs of ownership.
 Put the spotlight on potential cost problems
before they become problems.
 Know the service provisioning
cost(chargeback)

5.  Responding to growing dependence on IT, the UK Government's
CCTA ( Central Computer & Telecom. Agency) in the 1980s
recognized that without standard practices, government
agencies and private sector contracts had started independently
creating their own IT management practices.
 Information Technology Infrastructure Library ITIL was created
and ITIL V1 was published 1989-1996 in 30 books.
 ITIL V2 was published 2007
 ITIL V3 was published 2010
 CCTA became OGC ( Office of Government Commerce) then
became part of UK Cabinet.
 ISO20000 is the International ITIL compliance standard for any IT
facility aiming at performance excellence.

6.  ITIL is a set of procedures to handle
situations that any IT organization would
come in contact with.
 Using a series of check lists, tasks and
procedures, an IT organization can take what
is available to it and implement it in such a
way that ensures the company’s success.

7.  Service Desk/Service Request Management
 Incident Management
 Problem Management
 Change Management
 Release Management
 Configuration Management
 Service Level Management
 Capacity Management
 Continuity Management
 Availability Management
 AND …

8.  Financial Management
 ITIL Financial Management is about getting
the job done within budget.
 Budgeting:
◦ Predicting how much money is needed to deliver
and support IT services
 Accounting:
◦ Keeping track of where, when, how much and by
whom the money is being spent.
 Charging:
◦ Optionally recover (some of) the money incurred.

9.  Initial hardware
 Initial software
 Implementation, including system downtime
 Management
 Research of vendors & contracts
 Service
 Support & training
 Administration
 Upgrades & related re-training
 Capital purchases
 Direct and indirect labor
 Subscriptions
 System integration
 Maintenance

10. Software Staff Infrastructure Services Other
Acquisition DBA Server SW Implementation Cost of capital
Implementation Sys. Admin. Server OS Data conversion Third party content
(clinical decision
support)
Maintenance LAN/WAN Workstations Interfaces Downtime
Reporting PC support Data center Education Service disruption
Upgrades Communication H/W maintenance Project mgmt. Energy
consumption
Third party content Temporary Internet Upgrade support Comm. Lines cost
(clinical decision manpower
support)
BI Analytics Hiring cost Remote admin. Upgrade re-
training
Employee churning Server Maint.
Employee ramp-up HW renewal
Security

11. Real life example of actual
operational savings.
Source International Technology Group ITG

12. IT services
company

13. Manufacturing company

14. Distribution company

15. Retail company

16. Real life example of actual
operational savings.

17. $ in 1,000s
Acquisition Operating Change Total % of
Costs Costs Costs TCO
Software 274 82 138 494 2.9%
Hardware 539 97 71 707 4.1%
Personnel 55 8,873 5,952 14,879 86.2%
NW & Comm 146 543 459 1,149 6.7%
Facilities 0 15 15 29 0.2%
Total 1,104 9,610 6,634 17,258 —
% of TCO 5.9% 55.7% 38.4% — 100.0%

18. $ in 1,000s Acquisition Operating Change Total % of
Costs Costs Costs TCO
Software 444 121 220 785 5.5%
Hardware 874 222 122 1,218 8.5%
Personnel 188 5,699 3,925 9,812 68.8%
NW & Comm 255 1,082 892 2,229 15.6%
Facilities 60 46 106 212 1.5%
Total 1,821 7,170 5,264 14,256 —
% of TCO 12.8% 50.3% 36.9% — 100.0%

19. $ in 1,000s Acquisition Operating Change
Costs Costs Costs
Software 170 38 83
Hardware 335 125 51
Personnel 133 (3174) (2027)
NW & Comm 109 539 432
Facilities 60 31 91

20.  IBM proposes to conduct a TCO workshop at
no charge on KFSH.
 At the end, you will understand the costs of
operating your mainframe or distributed
platforms for business applications over a
period of five years.

21.  Project preparation
◦ The IBM TCO team works with KFSH IBM account team to prepare for the
on-site customer meeting, gathering information in advance to minimize
time requirements.
 On-site Customer Meeting
◦ Gathering business information (business goals, growth strategies, current
costs and pricing information.
◦ Gathering of technical information (details and costs of current IT
infrastructure, applications, workloads, utilization, quality of service
requirements, and approaches under consideration for improving the IT
infrastructure.
 Report Preparation
◦ The report is prepared offsite by IBM (in approximately two weeks), during
which time the customer is available for phone/email consultation and
clarification.
 Report Presentation
◦ In a follow-up customer meeting, the IBM team will deliver the final report
to include all inputs, assumptions and the financials, reflecting key
operating costs for all alternatives discussed. The full analysis is made
available to you.
