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Total Cost of Ownership

Total Cost of Ownership encompasses budgeted direct costs and unbudgeted direct costs. Every time you use your computer, send an e-mail, or print a document, there is a cost involved. Many organizations are paying too much for these basic services. This guide aims to help the small business owner understand what costs are involved in information technology and how they can be analyzed and managed.

Following are the different types of direct costs and indirect costs:

Direct CostsIndirect Costs
Purchase Price and/or monthly feeProcurement Cost
Warranty CostsUser Training
Extended Technical SupportBasic Support Fees
 Downtime
 Maintenance

The purchase price or the monthly fee is the most obvious choice. It is what most people use to make their purchasing decision.

Procurement costs include the time spent researching the product, deciding which is best, and purchasing it. Commodity items such as monitors and printers have low procurement costs, while customized software and specialty products such as payroll and accounting systems have higher procurement costs.

Most products come with a basic warranty that allows free access to support online, via e-mail, and phone for a limited period of time. Many vendors charge an extended support fee for support after the warranty period has expired or for supporting advanced configurations.

Each time your computer system goes down, productivity and business opportunities are lost. It is up to you to decide how crucial the product is for your practice and how much downtime can be afforded.

Preventative maintenance consists of actions to prevent downtime from occuring. Types of preventative maintenance include virus scannning and disk scanning/cleaning. Other types of maintenance protect your system from data loss if you do experience downtime. Examples of these include performing system backups so that you can restore lost data in case of an emergency and maintaining a battery-backed power supply (or UPS) to prevent data loss should you experience a power outage.

Each time you purchase a product, you should ask yourself the following questions. Click on a question for more information.

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