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Chapter 5 IT Infrastructure and Emerging Technologies 227

Total Cost of Ownership of Technology Assets
The actual cost of owning technology resources includes the original cost of
acquiring and installing hardware and software, as well as ongoing adminis-
tration costs for hardware and software upgrades, maintenance, technical
support, training, and even utility and real estate costs for running and hous-
ing the technology. The total cost of ownership (TCO) model can be used to
analyze these direct and indirect costs to help firms determine the actual cost
of specific technology implementations. Table 5.3 describes the most important
TCO components to consider in a TCO analysis.
When all these cost components are considered, the TCO for a PC might
run up to three times the original purchase price of the equipment. Although
the purchase price of a wireless handheld for a corporate employee may run
several hundred dollars, the TCO for each device is much higher, ranging from
$1,000 to $3,000, according to various consultant estimates. Gains in productiv-
ity and efficiency from equipping employees with mobile computing devices
must be balanced against increased costs from integrating these devices into
the firm’s IT infrastructure and from providing technical support. Other cost
components include fees for wireless airtime, end-user training, help desk
support, and software for special applications. Costs are higher if the mobile
devices run many different applications or need to be integrated into back-end
systems such as enterprise applications.
Hardware and software acquisition costs account for only about 20 percent
of TCO, so managers must pay close attention to administration costs to under-
stand the full cost of the firm’s hardware and software. It is possible to reduce
some of these administration costs through better management. Many large
firms are saddled with redundant, incompatible hardware and software because
their departments and divisions have been allowed to make their own technol-
ogy purchases.
In addition to switching to cloud services, these firms could reduce their TCO
through greater centralization and standardization of their hardware and soft-
ware resources. Companies could reduce the size of the information systems
staff required to support their infrastructure if the firm minimizes the number
of different computer models and pieces of software that employees are allowed

TABLE 5.3 TOTAL COST OF OWNERSHIP (TCO) COST COMPONENTS

INFRASTRUCTURE COMPONENT COST COMPONENTS
Hardware acquisition Purchase price of computer hardware equipment, including computers, terminals, storage, and printers
Software acquisition Purchase or license of software for each user
Installation Cost to install computers and software
Training Cost to provide training for information systems specialists and end users

Support Cost to provide ongoing technical support, help desks, and so forth
Maintenance Cost to upgrade the hardware and software
Infrastructure Cost to acquire, maintain, and support related infrastructure, such as networks and specialized equipment
(including storage backup units)
Downtime Cost of lost productivity if hardware or software failures cause the system to be unavailable for processing
and user tasks
Space and energy Real estate and utility costs for housing and providing power for the technology

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