It is the amount denoted on invoices as the price and recorded in bookkeeping records as an expense or asset cost basis. Opportunity costalso referred to as economic cost is the value of the best alternative that was not chosen in order to pursue the current endeavor—i. It represents opportunities forgone. In theoretical economics, cost used without qualification often means opportunity cost.
Many IT professionals conveniently factor in only the costs of purchasing Cost control principles and software when doing TCO analysis.
In the relatively easy-to-manage world of mainframes and big centralized computing systems, hardware and software accounted for much of the cost factors. What should go into the computation of the TCO of any system? We can group these costs into direct and indirect costs.
Direct costs pertain to the acquisition expenses or the cost of buying the system, and cover all of the following activities: Researching possible products to buy, which is essentially a labor cost but may also include materials cost, such as purchase of third-party research reports or consultant fees.
Designing the system and all the necessary components to ensure that they work well together. Naturally, this cost component will be higher if a move to a totally different system platform is being considered. Sourcing the products, which means getting the best possible deal from all possible vendors through solicited bids Cost control principles market research.
Purchasing the product swhich includes the selling price of the hardware, software, and other materials as negotiated with the chosen suppliers. Include all applicable taxes that might be incurred. Delivering the system, which includes any shipping or transportation charges that might be incurred to get the product into its final installation location.
If the installation of the system will result in downtime for an existing system, relevant outage costs must be included. Any lost end-user productivity hours during this activity should also be factored in.
Developing or customizing the application s to be used. Training users on the new system. Deploying the system, including transitioning existing business processes and complete integration with other existing computing resources and applications. Include here the costs to promote the use of the new system among end users.
Indirect costs address the issues of maintaining availability of the system to end users and keeping the system running, which includes the following: Operations management, including every aspect of maintaining normal operations, such as activation and shutdown, job control, output management, and backup and recovery.
Systems management, such as problem management, change management, performance management, and other areas. Maintenance of hardware and software components, including preventive maintenance, corrective maintenance, and general housekeeping.
Ongoing license fees, especially for software and applications. Upgrade costs over time that may be required. User support, including ongoing training, help desk facilities, and problem-resolution costs. Remember to include any costs to get assistance from third-parties, such as maintenance agreements and other service subscriptions.
What support costs did you incur last month? How much time did each user spend in solving computer-related problems? How much work was lost due to downtime on desktop PCs? Additionally, companies rarely have accurate inventory and asset information regarding their computing systems, especially in large, multi-location computing environments where PC, server, and local network purchasing decisions are often handled at the department level.
Obviously, our objective is not to calculate exact figures. Rather, you need to understand what these costs could reasonably be in your organization. You must plan for these costs, even if you can only roughly estimate them. A fair amount of intelligent "guesstimation" is much better than blindly deciding on an IT solution on the basis of sticker price alone.
In addition, TCO analysis provides a good basis of comparison between alternative system-deployment strategies, between platform choices, and between competing products.
PC systems have much higher indirect costs than direct costs. TCO analysis is never going to be an exact science, due to the many assumptions and unknowns that have to be taken into account.
As you provide more functionality and capability to end users, TCO rises.
As you install more software or provide more complex hardware at the hands of end users, you pay increasingly more for support and maintenance. Of course, TCO cannot be your sole determining factor for choosing a computing system. At the same time however, you must always balance the costs of providing a system versus the benefits it brings to the business and the end users.
Many decisions you make will not be due to cost-avoidance but rather on the basis of business advantage. Case in point is having Internet connectivity.Greenheck Fan is the worldwide leader in manufacturing and distributing air movement, air conditioning and air control equipment.
PRINCIPLES OF COST CONTROL Introduction Cost is important to all industry.
Costs can be divided into two general classes; absolute costs and relative costs. Absolute cost measures the loss in value of assets. Relative cost involves a comparison between the chosen course of action and the course of action that was rejected. The Principles of Disease Elimination and Eradication.
Walter R. Dowdle* The Dahlem Workshop discussed the hierarchy of possible public health interventions in dealing with infectious diseases, which were deflned as control, elimination of disease, elimination of infections, eradication, and extinction.
The Principles of Earned Value Management: A Cost and Schedule Control System 1st Edition. Ashford University's online accounting courses and classes allow you to earn your Bachelor's degree in Accounting or Master of Accountancy.
Cost control by management means a search for better and more economical ways of completing each operation. Cost control is simply the prevention of waste within the existing environment.