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Shootout at the TCO Corral

Bill Kirwin | Aug. 14, 2014
A few weeks ago VMware released a blast at Amazon's recently released total cost of ownership (TCO) bake-off model that compared AWS cloud services with the on-premise vSphere suite of virtualization products. VMware called the AWS online tool "biased and inaccurate."

2. Challenge the models. The definition of IT TCO is: A holistic view of IT costs across the enterprise over time. If the model does not consider relevant line items, such as your installed base, your current skill sets, or change management maturity, ask where they are and work with the vendor to provide a complete picture.

3. Determine if an objective third party has vetted the models. Most models are created by marketing, sales or field engineering that may introduce biases and inaccuracies. Models developed by a contracted specialist are still subject to biasing by the paying party.

4. Spend the time needed to have a defensible model that can be sold up the line as part of a business case justification. Ask for the spreadsheet model to internally review and test. These are also great for what-if analysis that might not be part of the original presentation. If the vendor won't leave the model, lock the vendor's value modeler in a room and do a full cavity inspection of the tool.

5. Follow up on the costs and benefits through the projected life of the business plan, or at least through the projected payback period. This is both validating the model and a valuable tracking tool for the implementation where corrections can be made to keep the project on track.

Most, if not all, large IT investments are scrutinized at the highest levels and even smaller spending requests are challenged by finance, procurement or other stakeholders. Regretably, most IT departments do not have the in-house resources to develop TCO or ROI analyses for their projects. Nor do they often bring in outside consultants to create business cases. Therefore, the vendor is charged with running the numbers, which they will be happy to do. I am amazed at how often the actual numbers are unknown by the customer, vendor defaults are taken as gospel, and they often fail to pass muster in the enterprise sign-off process.


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