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TCO Means More Than TCP/IP




In the alphabet soup of acronyms that surround the world of IP communications, there is one that is potentially more important than all of the others: TCO. It stands for total cost of ownership, and it’s the real motive behind the drive toward converged IT and security systems, IP networks and digital video. A lot has been written about how to analyze and set up the technology of a network, but the business case — and TCO is a big part of that — needs equal attention.

The total cost of ownership can be written as an equation: TCO = cost to buy + cost to install + cost to operate + cost to maintain For most commercial purchases, the primary factor is the cost to buy. Thinking about the purchase price typically dominates decision-making because budget cycles usually look ahead only one year.

When it comes to security systems, the cost to install and cost to operate have traditionally been similar from system to system. Apart from discussions centered on labor rates, the installation and operation costs have not offered much opportunity for savings.

Cost to maintain is often calculated as a fixed percentage of the purchase price frequently included for the first year, and so can be easily overlooked.

It’s little wonder that the initial purchase price of system components has been so important. In the networked world, though, the terms of the equation change significantly. It is still true that budget cycles run on year boundaries, keeping the cost to acquire equipment important. However, the installers and end users now have choices when it comes to the other terms in the TCO equation.

Breaking Down the Costs

The cost of installation is probably the easiest term to understand.

It seems intuitive that pulling less wire ought to cost less. With the cost of installation usually incurred in the same budget cycle as the system purchase, the case for network cabling becomes more compelling. But is this really where the savings come from?

Working in favor of network cabling is the fact multiple devices can share connections. Working against it is the more points of connection there are, the more network equipment is needed.

Certainly, network cabling can be less expensive than proprietary twisted-pair wiring, but the real value is in the two terms that are so often overlooked: operating cost and maintenance cost.

IP networks influence operating cost by making it unnecessary for a system to be operated from the facility in which it is installed. Breaking the bonds of geography this way adds tremendous value by permitting multiple facilities to be monitored from a single location and allows users to administer their systems from remote offices or even their homes.

Less Maintenance, More Profits
The biggest positive factor in the total cost of ownership improvement in networked systems is in their maintenance.

We’re used to computer systems that have replacement cycles of three to four years. Forrester Research, an organization that surveys IT trends, estimates that in corporate settings, PCs are replaced about that often.

Security systems, however, have much longer lives — typically from 10 to 12 years or more. That means the systems spend the vast majority of their lives in the maintenance phase.

That situation is even more pronounced when you consider all of the other equipment beyond the PC. It begs the question, which costs more: the acquisition of a security system or its maintenance?

Forrester estimates a typical corporate PC costs $120 to $150 per month to maintain. If we say that a system spends 11 years in the maintenance phase of its life, which comes down to between $15,800 and $19,800 per PC (it’s much more for servers and managed environments).

The purchaser of a typical small to midsized security system that runs on a PC is adopting this maintenance cost for each PC in the system.

Cutting the Fat From Systems
The best advantage comes from IP-based systems that deliver their user interfaces through Web browsers. Such systems have maintenance costs that are much lower than those of traditional, “fat” client server systems. There is little or no software to maintain on these so-called “thin” client machines.

The advantage improves further if dedicated PCs can be eliminated altogether, as in the case of the so-called network appliances.

Network appliances are purpose-built devices that connect to IP networks and are controlled through Web browsers. While they are computers, network appliances are not general purpose PCs and do not have the costs associated with operating system upkeep.

The situation becomes better still if the network appliance uses solid-state design or relies on network-attached storage because the mean time between failures (MTBF) of solid-state systems is superior.

For more on reducing costs with IP-based systems, look on the chart on page 90 of the May issue.

Time to Harvest IP Cost Benefits
IP network-based systems have been rapidly adopted by the information technology world precisely because of the TCO benefits. With a little planning, we in the physical security world can take advantage of this technology to reap the same rewards.

Moss is CEO of S2 Security Corp., a Wellesley, Mass.-based company that develops security network appliances that capitalize on the convergence of IP networks and physical security systems. A 25-year veteran in the security industry, Moss is the founder and former CEO of Software House, now a unit of Tyco Int’l and a member of the SSI Hall of Fame. Moss can be reached through E-mail at jmoss@s2sys.com.

 


Article Topics
Business Management · Building Your Business · TCO · All Topics
Building Your Business, TCO


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