Total Cost of Ownership
White Paper by Dean Drako, CEO of Eagle Eye Networks
The PDF version includes additional content; download for more on this subject.
How the cloud helps enterprises in bringing down video security costs
It can be surprising to see the extent to which technology operational costs, many of which are not in plain sight, raise the cost of technology ownership to double (typical for many technologies) and sometimes even quadruple (typical for IT servers) the original purchase price. However, cloud computing has significantly changed the TCO landscape for security video surveillance deployments. Moving the computing and video storage infrastructure into the cloud results in significant economies of scale. Additionally, cloud system reliability, wide-area remote access and strong system cybersecurity surpass what is cost-feasible for typical data center server deployments.
Purchase and Deployment Objectives
The purchase, deployment and operation of security technology has both risks and financial goals, which are reflected in these common purchasing objectives:
- Acquire the best technology value to achieve the desired security risk reduction.
- Avoid being blind-sided by unplanned technology operations and service costs.
Achieving both objectives is the sole purpose of a Total Cost of Ownership (TCO) analysis.
By evaluating all the costs to own and operate video management system servers (as opposed to using purchase price alone), a cloud system can be selected that has a total cost of ownership considerably below a typical on-site system. The savings generally range between 20% and 50% when compared to the costs for hosting the VMS applications in a corporate data center (whether in-house or third-party operated).
A Simple TCO Example
TCO is an analysis meant to uncover all the lifetime costs that follow from owning certain kinds of assets. As a result, TCO is sometimes called “life cycle cost analysis.” TCO attempts to uncover both the obvious costs and the “hidden” costs of ownership over time. Most of the costs involved in automobile ownership are easy to see. For example, a $31,000 automobile can cost over $62,000 to own over 5 years, even taking the trade-in value into account.
Table 1. Edmund’s True Cost to Own® for a $31,252 Automobile
Depreciation, taxes and fees, and financing costs are likely to be comparable for similarly-priced vehicles. However, fuel, insurance and maintenance costs will vary depending on the class, make and model of automobile. These cost vari-ations make a vehicle TCO analysis worth doing. Per-forming this type of analysis on various vehicles will reveal which is truly the best buy.
|Cost Factor||Year 1||Year 2||Year 3||Year 4||Year 5||5-Year Total|
|Taxes & Fees||$2,620||$211||$191||$174||$159||$3,355|
|True Cost to Own||$18,884||$10,767||$10,810||$9,651||$11,892||$62,004|
Table 1 above shows the Edmund’s 5-year True Cost to Own TCO analysis for a $31,252 2014 Dodge Charger SRT8 driven 15,000 miles per year. In this case, the cost to operate and maintain the vehicle doubles the price of the car. It is typical for many types of technologies that operational and maintenance costs are significant, including for electronic security system technologies, which is why TCO analysis is required to see the whole picture.
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