Total Cost of Ownership for your business

How often have you faced a situation when the amount calculated to the last penny for repair or construction suddenly doubled or even tripled as the work was being done? Suddenly it turned out that the project of the house requires revision or you did not take into account a lot of little things in its maintenance.

The same kind of surprises that businesses face when choosing an IT company, according to Emat ltd experts At first glance, everything is simple: find a team of developers, agree on the cost of the project, and get the finished product. But this is only the tip of the iceberg. At this stage, most customers rarely think about what will happen next.

The customer is often attracted by the low price of the project. And he does not suspect that after some time the developed product may need: additional licensing, refinement, adjustment of integrations, staff training or even replacement of the solution that did not meet expectations. All these ‘hidden’ costs often come as a surprise! This is why it is so important to consider Total Cost of Ownership (TCO) - the total cost of ownership (operation). Let's explore why TCO is the key to successfully developing large, high-volume IT challenges.

What is TCO and why is it important?
When negotiating the project TOR with a customer and calculating the cost of developing a software product (application or service), IT companies usually take into account the key stages: development, customisation and launch. The future costs of operating, maintaining and upgrading the product are often left out of the picture. However, it is these hidden costs that can turn into a serious expense over time. And a seemingly inexpensive solution can turn out to be ‘golden’ and end up costing more in the long run.

TCO is not just the amount you pay for a product. It's all the costs associated with buying, using, maintaining, and even replacing it. TCO helps you evaluate how cost-effective a software or IT solution is in the long run.

TCO calculation requires in-depth knowledge of finance, technology and project management, experience in forecasting hidden costs. That's why few IT companies offer it. It is not a task of one day. Emat EOOD it company at the stage of TOR preparation studies your business, estimates long-term costs and offers effective solutions, evaluates the economic prospects of the software product being developed.

How to avoid financial pitfalls?

• Compare TCO, not just the purchase price. Always ask: what costs might be incurred in 3, 5, 10 years?
• Ask the right questions to the development company: maintenance costs, warranty, scalability
• Consider the cost of technical support after the implementation is complete. This cost item is often significant and has a big impact on the overall budget.
• Some IT products may require the purchase of additional licences or modules. If not considered during the planning phase, the costs can be significant.
• Don't expect your system to work without change. Technology evolves and many IT solutions require upgrades and adaptation to new conditions. This costs money, and it's important to consider this up front.

Microsoft and Interpose TCO calculation methodology
The Microsoft and Interpose TCO calculation methodology takes into account: initial development and implementation costs, technical support costs, employee training, additional hardware purchase costs and integration with other systems. This approach focuses on creating a detailed financial forecast. Quantitative forecast of future costs helps to choose optimal development solutions.

Gartner Group methodology
Technology and research company Gartner Group has proposed its own methodology. When calculating TCO, they suggest dividing the company's expenses on IT systems into two groups: capital (CAPEX) and operational (OPEX). These categories are closely related, because the amount of operating expenses directly depends on the decisions made in the company during the implementation of the IT system.

Gartner Group's TCO calculation methodology takes into account initial implementation costs (licence and hardware purchases), operational costs (support, upgrades, maintenance), integration and training resources, as well as additional costs such as data migration and security. Gartner also takes into account hidden and uncertain costs, including possible downtime or underestimated operational features. This approach allows for a more accurate assessment of all risks and future costs.

TCO - a professional approach
When buying new hardware or ordering software, many companies, especially at the start, focus solely on price. But in business, it rarely happens that one new solution works in a vacuum. More often than not, software products must be integrated with other systems - accounting, warehouse, CRM systems. These integrations require additional effort, and often their cost is not included in the initial product price.

The full calculation of Total Cost of Ownership is a complex process of analysis and planning. At the customer's request, Emat development calculates TCO at all stages: from solution selection to its implementation and further operation.