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Total cost of ownership: an expensive red herring

By   |  June 20, 2005

In the brand war between Linux and Microsoft, the value propositions inherent in both platforms have become lost in a pointless debate over which platform costs less. Microsoft\’s emphasis on total cost of ownership (TCO) has been blindsiding IT executives to the point where technology decisions are made without adequate analysis of the problem space or business need.

\”To first make claims around the intrinsic cost of ownership of a particular platform and then choose that platform regardless of how it is implemented is ridiculous. The way a platform is deployed directly affects the cost of ownership,\” says James Ainslie, MD of Clue Technologies.

\”The cost of a particular platform is only a small part of the far more complex issue, which starts with understanding the actual problem space and ends in the successful deployment of a solution.\”

Ainslie says the war of words in the business community around the adoption of technologies to solve business problems misses the crux of the far more important issue, because different technologies have different strengths and specialise in different areas of focus. The \”which is better\” battle has long been taken up by the marketing departments of various software vendors, and an entire language has emerged to fuel the debate over something that, says Ainslie, is intrinsically irrelevant.

Analysis of software should be firmly grounded on a \”right tool for the job\” approach. To achieve this, a clear understanding of the job must first be established, followed by the technology.

\”The issue around TCO is a meaningless metric that\’s impossible to gauge. People tend to see TCO as a measurement derived from implementation cost and maintenance cost. This doesn\’t factor in the cost of lost opportunity, constraint and innumerable other important facets,\” he says.

\”TCO is what Microsoft is using to attempt to pull down the Linux value offering. It is on shaky ground when it comes to making claims from a superior technology perspective, so it\’s hinging its marketing strategy on a drive to make the Microsoft operating system appear to have lower TCO than Linux. It\’s all about spin-doctoring and nothing to do with the underlying principles of business, since TCO is a misnomer.

A clear understanding of the business problem is the critical starting point when considering investing in a technology to solve a business problem. The IT director is the person in the organisation responsible for translating the business problem into a technology solution.

Predictably, the decision-making capabilities of the IT director are constrained by factors that encourage a leaning towards following the pattern of what has been done historically within the organisation. This bias towards maintaining the status quo restricts the objective evaluation of a range of potential solutions in the market and may be reinforced by a threat to job security perceived by the IT director for not appearing to be at the technology coalface in the potential alternatives.

\”Part of the problem is that IT executives are not generally skilled enough. The IT director needs to balance techno geek with solid business-orientation, and have a clear understanding of the business role technology plays in the enterprise space,\” says Ainslie.

Inevitably the IT director will judge the range of available solutions using the allotted budget as a starting point. This immediately adds to the constraints surrounding the search for the most effective technology solution.

The next predictable step is the IT director heading to respected solutions vendors for advice, based on what has been done historically in the organisation.

\”This adds another angle to the mix, as the IT director first has to decode the value proposition from the sales pitch of the vendors, which is virtually impossible. These vendors operate off a very well funded marketing channel that is supported by proprietary software, which further reinforces the bias,\” says Ainslie.

When evaluating solutions, the IT executive must consider the efficacy of the solution, how well it is likely to integrate with the organisation\’s existing software, its underlying reliability and, importantly, understand the licensing paradigm, which is likely to be laden with complex pricing models and various hidden costs. These costs not only include the initial implementation but the ongoing costs to the business, including vendor lock-in and whether the solution is augmentable and customisable as the organisation grows.

\”Evaluating software solutions thoroughly is virtually impossible for the IT director to do without being extricated from the restrictions of a technology bias. Historically there have only really been a few platforms to choose from, so the technology bias is long established,\” says Ainslie.

Ainslie sees a need for architectural consultancies to evaluate business problems in the organisation, understand its needs and recommend a solution implementer as an emerging trend in the market.

\”The strength of such consultancies hinges on their absence of technology bias and their lack of stake in the implementation of a solution,\” he says.

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