Total Cost of Ownership (TCO) – the easy (and the hard) way
TCO analysis is the right tool to evaluate the real cost of technology alternatives for your network. The issue with TCO analysis, however, is that it can easily become a GIGO (garbage in, garbage out) tool, and as such, it demands quite an effort to collect all the relevant, customer-specific information needed to run a proper analysis.
An easy way to understand how TCO works in our industry (service providers and telcos) is to read an analysis authored by a vendor. Naturally, any paper coming from such a source is likely to be biased towards that vendor’s solution, so a better choice would be to reach out to independent, well-known, research analysis companies. These companies run valid comparisons between technology alternatives that can help you, the service provider, understand the overall cost structure (CAPEX and OPEX) associated with each technology.
This is especially important when it comes to new, disruptive technologies (such as the Network Cloud, obviously), which require a paradigm change in the way you view the network and services’ TCO.
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The biased, the objective and the sponsored types
Guess what, though?
Some of those papers are sponsored by a vendor (yes, even DriveNets, from time to time), and while they do contain an extremely professional analysis, their conclusion might be, well, skewed in favor of the sponsoring vendor.
How can you identify a sponsored paper? How should you read it?
In collaboration with…
First, look for the “in collaboration with…” clause. It is usually included in the introduction section, hinting at the sponsor’s identity. At DriveNets, when sponsoring such an article, we make sure this information is there, for the sake of fairness and professionalism.
Again, this does not mean the sponsor was heavily involved in the creation of the piece of content. It does mean, though, that the results should be reviewed knowing the analysis has been sponsored by a vendor and could be biased…
The hard numbers
What you can use, however, from a sponsored TCO analysis are some firm numbers regarding sizing and cost (CAPEX, in particular). Those numbers can help you as a market benchmark for various vendors and solutions.
This is not enough to run the full analysis you need to make a strategic decision, but it will save you some time and effort in collecting the required data for such an analysis.
The ignored numbers
You should pay special attention to the numbers that are not taken into account in such a calculation. Since those papers are led by professionals, you will probably find references to parameters of the solution that may significantly affect the outcome of the analysis. These are sometimes left out of the calculation due to “insufficient information”, “lack of technology matureness” or, in some cases, without a specified reason. Just – “this parameter was not included in our analysis” clause. What you need to do here is think – “is this relevant to me?” In most cases – the answer is “yes”, and you should, unfortunately, do the math yourself.
The soft numbers
It is not all about hard numbers or left-out numbers. There are also “soft numbers” – those that reflect hard-to-calculate parameters, predominantly from the OPEX side of the equation (e.g., labor, real estate, and time-to-market numbers). Those are the most likely to be skewed numbers and the ones where you should apply the most scrutiny.
This is where you need to work hard(er) and gather the real numbers, relevant to your network and to your organization, and do the math yourself…
The bottom line
Eventually, any analysis paper ends up with a conclusion. When it comes to a TCO analysis, this is usually a summary of the TCO of each option reviewed, showing a clear “winner”, with a much lower TCO.
There is no easy way around it: You could ignore this section of the paper, or read the conclusion with an open mind. This is due to the potentially biased soft numbers, the ignored numbers, and the fact that the calculation is usually done for a configuration that is optimal for one technology (and vendor) and, well, suboptimal for the non-sponsor-backed technology.
What you should do is gather the hard number, insert the ignored numbers, personalize the soft numbers, and find the right working point that reflects your network and business. Then do the math, the real math, yourself.
True, this is a lot of work, but it is the right way to end up with the right decision.
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DriveNets Total Cost of Ownership